Airbus unit freezes outlays
• Internal memo exhorts staff to take drastic measures to save cash as defence and space division risks missing key cash flow targets
Airbus Defence & Space has frozen capital spending and urged its 34,000 staff to take “drastic measures” to save cash as it faces the prospect of missing 2017 cash targets by hundreds of millions of euros, according to a memo.
Airbus Defence & Space has frozen capital spending and urged its 34,000 staff to take “drastic measures” to save cash as it faces the prospect of missing 2017 cash targets by hundreds of millions of euros, according to a memo.
“With the risk of missing our cash targets by hundreds of millions, we need to do something extraordinary together,” division finance chief Julian Whitehead told an internal forum, according to a summary sent to staff.
Airbus has said it expects 2017 free cash flow to be similar to 2016, before mergers and acquisitions and customer financing. It does not publish cash targets for divisions. The group often faces a dash to meet targets in the fourth quarter because of the bumpy patterns of cash flows in aerospace.
Airbus Defence & Space, which warned of cash pressure from the A400M military aircraft programme, will set up a “Cash Crisis” team to improve the situation by year-end.
Until those plans became clear, all capital expenditure was being frozen, the memo said.
Airbus shares stumbled as much as 1.6% from record highs, making it the worst performer on France’s CAC 40 index in morning trade on Thursday.
Airbus’s stock was still up about 30% since the start of 2017 on buoyant demand for passenger jets, although rival Boeing’s shares are up 64%.
Asked to comment on the memo, an Airbus spokesman said: “We are in the traditional year-end race in the commercial and government business.”
He added: “It is key to remind our troops at this important time of a year on the importance of meeting cash objectives.”
Another person close to the group said the language used in the memo was typical of the purely internal battle cry used by managers at this time of year to focus on reaching targets.
On Wednesday, however, Airbus reminded European governments that the delayed A400M would “weigh significantly” on cash flow in 2017 and 2018, especially.
It has been squeezed as Germany withholds 15% in cash owed for the transport plane because of what it regards as systems failing to do what Airbus had promised. The company earlier in 2017 entered talks with buyer nations to try to ease the penalties and get a new agreement on schedules.
At a group level, cash and profit have further been hampered by delays in delivering A320neo jetliners because of delays in receiving engines from US supplier Pratt & Whitney.
Late deliveries delay payments from airlines, driving up costs and eating up cash for inventory on assembly lines.
Airbus as a whole had €7.9bn of net cash at the end of June, down from €11.1bn at the end of 2016.
Airbus Defence & Space is in the midst of a strategy overhaul that has involved selling its electronics activity and now puts faith in digital services to beat industry growth rates.