Airbus Group NV share price surges, first-half profit jumps 10%, drops Skymark superjumbo deal

Toulouse, France-based Airbus Group NV reported on Wednesday a 10%-jump in first-half earnings as the company sold more commercial aircraft, sending shares soaring more than 4%. The earnings report comes only a day after the plane maker announced it scrapped a deal with Skymark Airlines for the delivery of six A380 superjumbos and it would seek to re-market them.

Airbus reported that earnings before interest, tax and one-time items surged to 1.77 billion euros in the first six months, up from 1.61 billion euros from a year earlier, and reaffirmed its annual target of moderate return on sales growth as commercial orders exceed deliveries. Revenue jumped by 6% to 27.2 billion euros, boosted by sales of commercial planes and helicopters, but was trimmed by a 1% decline in the defense and space business.

Second-quarter revenue stood at 14.552 billion euros, compared to forecasts for 14.234 billion, with operating profit at 1.12 billion euros, beating estimates for 940.

Airbus said that its A350 jetliner is on track and should deliver the first unit to Qatar Airlines Ltd by years end. The companys annual new orders forecast of 630 units has already been topped after leaving the Farnborough Air Show earlier this month with a list of 648 purchases.

The plane maker announced at the airshow that it will develop a new version of its most profitable wide-bodied jetliner, the A330, the costs of which are expected to shed 0.7% of the companys 2015 return-on-sale target of 7%-8%. Airbus also said it kept looking for options to sell its 46%-stake in Dassault Aviation, a French plane maker.

Chief Executive Officer Tom Enders said: “The first half of 2014 was all about keeping our main development and series programs on track and implementing our restructuring plans in defense and space,” adding that the Farnborough air show had shown “good commercial order momentum”.

Skymark deal

The upbeat earnings report comes only a day after the Franco-German group announced that it has dropped a deal with the Japanese Skymark Airlines for six A380 superjumbos, highlighting the difficulties Airbus faces in turning the worlds largest passenger jet into a mass-market airliner.

The plane maker did not say how it will re-market the airplanes after the last-minute cancellation left it with two already built planes that were awaiting their final details. Scrapping the deal impedes Airbuss plans to break even with A380 program in 2015, which would require annual sales of 30 units.

Nick Cunningham, managing partner at London-based equity research company Agency Partners said, cited by Bloomberg: “It’s going to be very hard to re-market. Outfitting for a different customer could mean significantly new wiring.”

The two companies have been in talks to ensure that Skymark is able to take delivery of the first two aircraft, but the Japanese airline said that increasing competition and the depreciation of the yen had forced it to alter its plans after preparing for the introduction of the A380 for four years.

Airbus said that it took the step of scrapping the deal after Skymark made it clear that it was not going to fulfill its contractual obligations. The airline said it had been negotiating with Airbus about possible changes to its order since April, but the plane maker was demanding an unreasonably high cancellation fee.

Rolls-Royce Holdings Plc, which had provided the Trent 900 engines fitted into the A380s ordered by Skymark, said the deals termination reduced its order book by 351 million pounds.

Airbus Group NV rose by 3.91% to 45.40 euros per share by 07:12 GMT in Paris, marking a one-year change of +2.54%. The aerospace company is valued at 34.25 billion euros. According to the Financial Times, the 25 analysts offering 12-month price targets for Airbus Group NV have a median target of 60.00 euros, with a high estimate of 70.00 euros and a low estimate of 30.50 euros. The median estimate represents a 37.35% increase from the last close of 43.69 euros.