Airbus lifts liquidity to RM142b

The European manufacturer also withheld its dividend and tore up earnings guidance for the year yesterday to contain virus fallout


LONDON • Airbus SE extended credit lines and clamped down on cash outlays to give it access to €30 billion (RM142.08 billion), taking steps to protect liquidity after the coronavirus pandemic pushed its airline customers to halt flights and stop ordering planes.

The European manufacturer also withheld its dividend and tore up earnings guidance for the year yesterday, while pushing governments to support carriers and its vast supplier network. The company itself isn’t at the moment seeking a bailout, but is open to aid as a fall-back, its CEO said.

Airbus is erecting a credit safety net as the virus leaves the aviation industry struggling for viability following a collapse in travel. CEO Guillaume Faury said the company entered the crisis in better shape than rivals, and held out the prospect of boosting market share if it survives intact, especially in the narrow-body plane sector where it has left Boeing Co trailing.

Airlines are pushing back against taking existing deliveries, let alone purchasing extra jets. The CEO said Airbus plans to continue production for the moment, but the wide-body market in particular will be depressed and that “operational scenarios” could be activated depending on the spread and duration of the virus. Meanwhile, the company is looking at possibilities for storing finished aircraft, according to Faury, who said there should be a return to a higher number of handovers sometime in the second half, while side-stepping questions on whether build rates will be cut in the near term.

As part of the drive to boost liquidity, or cash available, by 50%, Airbus canned a shareholder dividend that would have cost it €1.4 billion and has converted a credit facility of about €5 billion into a new line amounting to €15 billion euros.

The company, which has an existing €3 billion credit and a further €12 billion in financial assets, will also suspend a top-up in pension funding.

Jefferies International Ltd analyst Sandy Morris said the measures were as anticipated and provide the “belt” of efforts to stabilise Airbus, while suggesting the company will still likely need “the braces” of government support.

Airbus fell into line with most other businesses in dropping outlook guidance. The group had aimed to hand over about 880 jets this year, up from 863 in 2019, which was already a record, and had targeted free cashflow of €4 billion, a €500 million increase.

Airbus moved to shore up its finances without immediate recourse to state support as arch-rival Boeing edges closer to a government bailout. The US company was in crisis even before the outbreak, with its 737 Max plane grounded for a year after two fatal crashes, leading to a dearth in orders and billions of dollars in charges.

Airbus could still be among the first firms to receive French state support, according to people familiar with the matter, and the company said it “highly welcomes” governmental efforts to stabilise the industry. Both the French and the German states already hold stakes in the manufacturer.

Faury said managers are “very actively” speaking with airline customers, and that the wide-body jet market in particular may be badly impacted as the pandemic hurts demand. At the same time an extensive single-aisle backlog should help protect the business. — Bloomberg