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Last week, Airbus (NASDAQOTH: EADSY) reported strong revenue and earnings growth for the first quarter of 2019, as it ramps up production of its popular A320neo-family planes. The European aerospace giant also confirmed its full-year guidance for 2019.
Nevertheless, management poured cold water on the idea that the safety concerns plaguing the Boeing (NYSE: BA) 737 MAX will lead to turbocharged growth for Airbus. First, supply-chain constraints continue to limit Airbus' production despite strong demand from airlines for its jets. Second, Airbus is still struggling to build aircraft efficiently and remains unable to match Boeing's profitability and cash flow.
Airbus sees improvement in the first quarter
During the first quarter, Airbus delivered 162 commercial jets -- up from just 121 a year earlier -- including 126 A320-family aircraft. As a result, revenue surged 24% year over year to 12.5 billion euros ($14.1 billion).
The increase in volume for Airbus' commercial aviation business drove a strong improvement in the company's earnings. (The defense and helicopters units posted relatively stable profitability for the quarter.) Adjusted operating profit reached 549 million euros ($615 million) last quarter, whereas Airbus had barely broken even a year earlier, logging a 14 million-euro ($16 million) adjusted operating profit.
Airbus reported just 62 new aircraft orders last quarter, more than offset by 120 cancellations. However, management indicated that the demand environment remains strong. The big uptick in cancellations was driven by Airbus' decision to discontinue the A380 jumbo jet and the financial woes of Etihad Airways, which had to scale back its order commitments.
Airbus received two sizable orders for its A350-family jets in March. Image source: Airbus.
Production problems aren't going away entirely
In recent years, delays at critical suppliers have repeatedly interfered with Airbus' efforts to boost production of its popular A320-family jets. Fortunately, these supply-chain constraints have started to ease over the past year.
Nevertheless, there is very little slack in the system. Airbus executives said that even though Boeing has temporarily reduced production of the 737 MAX due to the grounding of that aircraft type, this doesn't open up an opportunity to further increase A320-family production. While some suppliers serve both aircraft manufacturers, others don't participate in the Boeing 737 MAX program and are still working flat out to meet their existing commitments to Airbus.