Airbus hits market turbulence as profits slump

Airbus Group shares went into a sharp descent Thursday after the aeronautics giant revealed a 50-percent plunge in net profits, delays in new commercial plane deliveries and fresh engine problems with its troubled A400M military transport plane.

The European group admitted it faces a testing start to 2016 but stuck by its forecasts for profits for the full year, saying it expects much of the money to be rolling in towards the end of the year.

"2016 turns out to be the challenging year we anticipated," said chief executive Tom Enders.

"In a nutshell, despite these challenges we maintain our 2016 guidance and also our earnings and cash growth story for the coming years," he said in a statement, stressing that Airbus still has strong orders for commercial planes and it expects to ramp up aircraft production.

In comments likely to step up pressure on the aircraft maker, the head of Qatar Airways threatened to cancel an order for Airbus A320neo planes if the European manufacturer fails to address engine issues.

"When we buy an aeroplane, we expect all the terms and conditions and performance guarantees that are in the agreement to be followed by the manufacturer," Akbar al-Baker said in an interview with Dubai-based satellite channel Al-Arabiya.

"This is not the case with the Airbus 320neo and the engine is underperforming," he said, adding he had other options to replace the single-aisle jets.

"If an aircraft manufacturer cannot deliver to us the contractually committed aeroplanes, then we have the right to walk away and order an alternative aeroplane."

- 'Serious challenge' -

Airbus said net profit dived 50 percent to 399 million euros ($453 million) in the first three months of the year.

Sales held steady, unchanged at 12.2 billion euros compared with the same period last year.

The news had investors strapping in their seatbelts for a rough ride, as Airbus stocks dropped 6.0 percent in early trade on the Paris stock exchange, pulling back slightly to 4.8 percent lower in the late afternoon.

Airbus said it was suffering temporary supply chain problems with the narrow-bodied A320. For the A320 neo (new engine option), Airbus said Pratt & Whitney had promised to deliver engines for aircraft delivery from mid-2016, meaning production can accelerate in the second half of the year.

The group also reported supply chain bottlenecks with its A350 XWB long-range, twin-engine jet as it tries to reduce outstanding work and control recurring costs while ramping up production.

"This is increasingly challenging," the group said, nevertheless maintaining its target of rolling out 10 A350s every month by the end of 2018.

Adding to the complexities, Enders said Airbus faced a "serious challenge" for production and customer deliveries of the A400M military transport plane because of a problem discovered in the propeller gearbox.

"It's very frustrating but we'll have to work through this with our engine partners," he said.

Airbus said the final cost of the A400M engine woes, including the technical, commercial and industrial implications, was hard to judge for now but its potential impact on Airbus finances "could be significant".

The group maintained its overall forecast for 650 aircraft deliveries in 2016.

In more upbeat news for the company, Ivory Coast's national airline, Air Côte D'Ivoire, has ordered two A320neo and two A320 aircraft, Airbus said in a statement.

"The agreement makes Air Côte D'Ivoire the first African airline to order the A320neo. The airline's first purchase agreement directly with Airbus also makes Air Côte D'Ivoire a new customer," it said.