European aerospace giant Airbus on Tuesday (April 30) reported a slump in first-quarter net profit, hit by Germany’s freeze on weapons exports to Saudi Arabia and its own decision to stop building the loss-making A380 super-jumbo.
It said profits were down 86% from the same period in 2018 at 40 million euros. It blamed “adjustments” including “a negative 190 million euros as a consequence of the prolonged suspension of defence export licences to Saudi Arabia by the German government.”
Germany in late March extended by six months an embargo on weapons exports to Riyadh.
It had instituted the ban on arms sales to Saudi Arabia and other countries involved in the Yemen war last October in response to the murder of Saudi journalist Jamal Khashoggi at the Saudi consulate in Istanbul.
But Berlin has since faced protests by EU partners because the ban has impacted joint defence projects such as the Eurofighter and Tornado jets.
Airbus is affected by the freeze under a contract for “border security” equipment, the group’s chief financial officer, Dominik Asam, told. “We now have to watch what is happening in the political environment and how we deal with the customer”, he said.
Airbus on Tuesday also blamed falling profits on “83 million euros relating to the dollar pre-delivery payment mismatch and balance sheet revaluation” and “a negative 61 million euros related to A380 programme cost.”
Airbus announced in February that it would stop building the A380, a double-decker jet which earned plaudits from passengers but failed to win over enough airlines to justify its massive costs.
The programmes future had been in doubt for years as Airbus slowed production, and the company acknowledged last year that the A380 would be scrapped if no new orders came in.
Consolidated revenues increased 24% to 12.5 billion euros “reflecting the higher commercial aircraft deliveries as the production ramp-up continued”, it said in a statement.
“The first quarter underlying financials mainly reflect our commercial aircraft ramp-up and delivery phasing,” said CEO Guillaume Faury.
“The commercial aircraft market remains robust and we continue to see good prospects in the helicopters and defence and space businesses. The new management team is in place and focused on delivering on our commitments.” Faury took over earlier this month, replacing Tom Enders, who stepped down after five years.”
Earnings before interest (EBIT) were down nine percent at 181 million euros. In the first quarter, Airbus recorded 62 gross commercial aircraft orders compared with 68 during the same period in 2018. These included 38 A350 XWBs, the latest of its large aircraft.
Airbus said it plans to deliver between 880 and 890 commercial aircraft in 2019. It added that it is ramping up production of its A320 planes, which are a direct competitor to the 737 MAX planes made by Airbus’ rival aerospace giant Boeing.
The 737 MAX planes have been grounded worldwide as Boeing comes under huge scrutiny after a total of 346 passengers and crew were killed when two of the jets crashed. When asked at a press conference about the troubles of Airbus’ American rival, Faury said that the company had not yet seen any change in its supply chain.