Airbus defence unit freezes capex
Urges staff to take ‘drastic measures’ to save cash as it faces the prospect of missing 2017 cash targets
Airbus Defence and 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 seen by Reuters.
“With the risk of missing our full-year cash targets by hundreds of millions, we need to do something extraordinary together,” divisional finance chief Julian Whitehead told an internal forum, according to a summary distributed to staff.
Airbus has said it expects 2017 group-wide free cash flow to be similar to 2016, before mergers and acquisitions and customer financing. It does not publish cash targets for divisions. Due to the bumpy patterns of cash flows in aerospace, it often faces a dash to meet targets in the fourth quarter.
Airbus Defence & Space, which has warned of continued cash pressures from the troubled A400M military aircraft programme, plans to set up a “Cash Crisis” team to improve the situation by end-year, with all its programmes expected to participate.
Until those plans become clear, all capital expenditure is being frozen with immediate effect across all the division’s activities and across all its subsidiaries, the memo said.
Airbus shares stumbled from record highs and fell as much as 1.6 per cent. They were down 1.3 per cent by 0945 GMT, making the stock the worst performer on France’s benchmark CAC-40 equity index.
Airbus’ stock price remains up around 30 per cent since the start of 2017 on buoyant demand for passenger jets, although rival Boeing’s shares are up 64 per cent.
Asked to comment on the memo, an Airbus spokesman said: “We are currently 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 business year on the importance of meeting our cash objectives. That’s the current ongoing effort at Airbus and it is rather standard procedure to achieve our quarterly and yearly divisional targets at Airbus Defence and Space without deviation.”
A400M delays
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 continue to “weigh significantly” on cash flow in 2017 and 2018.