Airbus SE (AIR) Earnings Call Transcript & Summary

Good day, everyone, and thanks for holding. This is Sharon, your operator for the Airbus Q1 2025 Results Release Conference Call, and you're welcome to it. I'd like to point out that everyone will be listen-only throughout the presentation, and this call is being recorded. Following the presentation, there will be a chance for you to ask questions. Right now, I'll hand things over to your hosts, Guillaume Faury, Thomas Toepfer, and Helene Le Gorgeu. Please go ahead.

Thanks, Sharon, and good evening, everyone. You're joining the Airbus Q1 2025 results release conference call. Our CEO, Guillaume Faury, and our CFO, Thomas Toepfer, will present the results and take your questions. The call is scheduled to run about an hour, including Q&A, which we'll hold after the presentation. There's also a webcast of this call, reachable through our homepage by clicking the dedicated banner. A playback will be available on our website, though we don't offer a dedicated phone replay service. Earlier today, the supporting information package went up on our website. It contains the slides we'll walk you through now, plus the financial statements. During this call, we'll be making forward-looking statements. I'd ask you to refer to the safe harbor statements appearing on the presentation slide, which apply to this call as well. Please read them carefully. And now, Guillaume, over to you.

Thanks, Helene, and good day everyone. Appreciate your time today—as mentioned before, this is our Q1 2025 results call. Thomas and I are in Amsterdam to walk you through what we delivered. The operating environment keeps shifting quickly, especially around global trade uncertainty, which brings added complexity, along with the geopolitical changes reshaping European defence—so essentially tariffs on one side and the European defence situation on the other. On the global tariff picture, there's uncertainty about how measures will be implemented, how far they'll reach, and how long they'll last. As things stand right now, our direct financial exposure is concentrated mainly in higher costs for sub assemblies brought into our final assembly lines in the U.S. and China—with the caveat, which we may come back to later, that on the Chinese side things continue to evolve. As our assessments move forward, we're finding ways to adjust and soften the impact by drawing on our industrial footprint and our robust, diversified backlog. Turning to defence, we back the recent push to strengthen the European defence industry and make it more competitive. This step change demands a substantial rise in spending, in particular to close capability gaps and safeguard European strategic autonomy.

We’re working with governments to tackle the European priorities, with both of our defence-related divisions involved—specifically Airbus Defence and Space and Airbus Helicopters. Against that backdrop, the Q1 results demonstrate the progress we’re making on our priorities throughout the business. In particular, we keep advancing our ramp-up, and we delivered 136 aircraft in Q1 this year. Given the specific supply chain issues we flagged at the full year, we still expect the delivery profile to be back-end loaded. Our EBIT adjusted came in at €0.6 billion, reflecting especially the commercial aircraft deliveries and the strong performance in Defence and Space. Our free cash flow before customer financing was negative €0.3 billion, reflecting the planned inventory buildup and the commercial momentum across businesses. Our full year 2025 guidance remains unchanged. It excludes tariffs, and we’ll return to that later. We’ll also give more color on the signed definitive agreement with Spirit AeroSystems, which we just announced. We’re pleased to have reached this milestone, which helps secure stability for our ramp-up. Let’s now turn to our commercial environment, starting with commercial aircraft. In Q1, global air traffic kept growing, especially with an acceleration in international passenger traffic.

Naturally, we're keeping a close eye on tariffs and the present macroenvironment and how they might affect air traffic and our customers. Should these conditions persist and/or worsen, the company's resilience would be supported by our strong and diversified backlog. In this quarter, we booked 280 gross orders, and on the narrow-bodies side, 233 gross orders were booked. For widebodies, we recorded 47 gross orders, which underpin the continued momentum behind our widebody family and lift the backlog to a record level. Net orders came to 204 aircraft following 76 cancellations, which were largely anticipated and already embedded in our backlog valuation as of year-end 2024. At the end of March 2025, our backlog in units rose to 8,726 aircraft. Turning to helicopters, we booked 100 net orders in Q1, versus 63 in Q1 last year, and those 100 were well spread across the portfolio. Once again we're very pleased with the trust our customers place in our products and services, as seen at VERTICON 2025, the former HELI-EXPO in the U.S. At this year's event, we announced 60 pre firm orders and 55 commitments from customers worldwide across a variety of our platforms. And at the show, we also introduced the H140, our newest multi-mission helicopter, which received its first orders and commitments there.

The H140 establishes a fresh benchmark among light twin-engine helicopters when it comes to performance, cost effectiveness, and comfort for passengers and crew. Its cabin is roomier than the prior model's, with a layout that has been optimized plus a broad array of innovations. Entry into service is scheduled for 2028, starting with the emergency medical services segment, with other variants to follow afterward. Positive momentum persists, as we see it, in the helicopter markets both civil and military. And we stay focused on locking in fresh business opportunities in our home countries as well as on export markets. Before I turn to Defence and Space, I want to note that earlier this month the H160 obtained certification from the Civil Aviation Administration of China, the CAAC, which clears the way for deliveries in China to start. Last, in Defence and Space, we opened the year with strong order intake of €2.6 billion for Q1. Good momentum continues across the division's various businesses, particularly in air power, both platforms and services. In the quarter, we also unveiled a contract with the so-called Direction Generale de l'Armement, the DGA, the French DGA, covering a new definition study for the French Navy's future maritime patrol aircraft, the MPA.

The program is built around the A321XLR. This contract is meant to get us ready for the development and production launch of the program at the end of 2026. On Connected Intelligence, we were awarded the Stage 3 contract for the naval force's IP network, again from the Direction Generale de l'Armement, to upgrade and maintain the French Navy's network and communication systems. We also signed a contract with Rheinmetall and — a blackned GmbH to support the German Bundeswehr's digitalization of land-based operations. And when it comes to space, we've been awarded the Oberon contract to design and build two Synthetic Aperture Radar satellites for the U.K. Ministry of Defence, providing high resolution, all weather, day and night Intelligence, Surveillance and Reconnaissance, so-called ISR capabilities to the British and Allied defence forces. Last but not least, we're pleased with the success of Ariane 6's first commercial mission, which placed in orbit the Airbus-built CSO-3. It's an earth observation satellite for the French Armed Forces. The priority is now to secure the Ariane 6 ramp-up. And with this, now I will hand over to Thomas that will take you through our financials.

Thanks a lot, Guillaume, and good morning, ladies and gentlemen. Appreciate your time on today's call. I've moved to Page 6 of the presentation, where I'd like to walk you through the financial results. As the slide shows, revenues for Q1 2025 rose to €13.5 billion, an increase of 6% year-on-year, driven largely by a bigger contribution from our divisions, record services volumes throughout our businesses, and a more favorable FX environment. Over on the right-hand side, you'll see that R&D expenses came in at €0.7 billion in Q1 '25, only a touch below Q1 2024 and in line with what we communicated in the full year 2024 disclosure. The LEAD initiative shows up in the lower R&D expenses for Q1 2025. I'd also like to remind everyone that R&D expenses should rise only marginally in 2025, with the profile weighted toward the back end. Let's move to Page 7 and turn to EBIT adjusted. EBIT adjusted for Q1 2025 was €0.6 billion, flat versus Q1 2024. And the somewhat lower volume of commercial aircraft deliveries is, of course, reflected in our profitability, particularly given a situation of excess staffing.

I should also point out that we're still hiring to support the ramp-up, though at a somewhat slower pace than in 2024. The result likewise reflects a more favorable hedge rate and stronger performance in Defence and Space. Turning now to the EBIT adjustments, which were negative in Q1 2025 — you'll find them at the upper right-hand side of the page. As you can see, they included a negative €13 million impact from the dollar working capital mismatch and balance sheet revaluation, plus a negative €105 million tied to the Airbus Defence and Space workforce adaptation plan. While we're still finalizing that plan, progress on redeployment measures and dialogue with the social partners let us record a restructuring provision. Lastly, it includes negative €33 million of other costs, covering compliance as well as M&A. That brings us to Q1 2025 EBIT reported, which stands at €0.5 billion positive. Just to round it up, as you can see, our financial results were €621 million, mainly reflecting the revaluation of certain equity investments, partially offset by the evolution of the U.S.

That dollar figure and the writedown of financial instruments. On the core business, the tax rate remains roughly 27%. The effective tax rate, though, comes in at 32%, and that includes the tax effect from revaluing certain equity investments plus a net deferred tax asset impairment. We continue to anticipate that the French surtax will have an impact of roughly €300 million in 2025, affecting both P&L and cash. In Q1 2025, we booked the portion tied to 2024 along with the portion for the first quarter of 2025. Putting all of that together, net income comes to €0.8 billion, with reported earnings per share of €1.01, and our Q1 2025 adjusted EPS was €0.67, calculated on an average of 787 million shares. That brings me to our coverage of U.S. dollar exposure, which is on Page 8. During Q1 2025, $4 billion of forwards matured, with the related EBIT impact and euro conversions realized at a blended rate of $1.19, compared with $1.23 in Q1 2024. Also in Q1 2025, we put in place $3.3 billion of new coverage at a blended rate of $1.10. Consequently, our total U.S.

Our dollar coverage portfolio in U.S. dollars is now at $82.1 billion, with an average blended rate of $1.21, versus $82.8 billion at $1.21 at the close of 2024. As we noted in the full year 2024 disclosure, this quarter we adjusted the portfolio by carrying out some rollovers to reflect the 2025 delivery target and delivery profile, which, as you know, we expect to be back-end loaded. If we turn to Page 9, let's discuss cash evolution. First, taking a more detailed look at free cash flow: as you can see, free cash flow before customer financing came in at negative €4.3 billion in Q1, mainly reflecting the level of profitability, which of course converts into cash, along with the planned inventory buildup supporting our ramp-up across our businesses. On the positive side, though, it also includes favorable phasing of receipts and payments, helped by strong commercial momentum across all our businesses, which produced very strong cash collection. The A400M was broadly neutral from a cash flow standpoint. CapEx in Q1 2025 was negative €0.6 billion. And to support our ramp-up, we expect CapEx to rise slightly in 2025.

That puts free cash flow at negative €0.3 billion, and customer financing had almost no effect on it. That said, conditions for aircraft financing are still strong and competitive, so we anticipate enough liquidity to fund our 2025 deliveries, and we continue watching tariff effects closely. By the end of March, net cash came to €11 billion, while liquidity is still roughly €35 billion. With that, I'll turn things back over to Guillaume.

Happy to do that, Thomas. Let's go through the businesses one by one, beginning with commercial aircraft. During Q1 2025, we handed over 136 aircraft to 49 customers. Breaking that down by family, in narrow-bodies we delivered 17 A220s and 106 A320 family aircraft, and 65 of those are A321s, which works out to 61% of deliveries for the family. On the A320, we keep ramping up toward a rate of 75 aircraft per month in 2027. We delivered 13 widebodies, including four A330s and nine A350s. And on the A330, we are now stabilizing at a monthly production rate of around 4. Specific supply chain challenges, notably with Spirit AeroSystems, are currently putting pressure on the ramp-up of the A350 and the A220. On the A350, we continue to target the rate 12 in 2028. And on the A220, we continue towards the monthly production rate of 14 aircraft in 2026. In a nutshell, we delivered in line with our plan and consistently with the specific supply chain issues highlighted at the full year. These issues have not changed, notably the persisting tensions on engines for narrow-body for A320 with CFM resulting in 17 gliders or aircraft finished but without engines, so-called gliders, 17 of them at the end of the first quarter.

This condition is going to persist through the summer, and we'll probably see more gliders because of the missing CFM engines. The upshot is a fairly soft delivery figure for H1, and then it should normalize during the second half of the year so that we can support the full year guidance. Let's now turn to the financials for our commercial aircraft business. Revenue was up 4% year-on-year, largely driven by the more favorable foreign exchange environment, partly offset by a slightly lower delivery count. EBIT adjusted came in stable at €0.5 billion in Q1, 2025, as fewer deliveries and the excess workforce were offset by a favorable head rate and reduced R&D expenses. Moving to helicopters on Page 12. We delivered 51 helicopters in Q1 this year, broadly stable versus the first quarter of last year. Revenue rose around 10% to €1.6 billion, reflecting a solid performance from programs and services growth. Consequently, EBIT adjusted came to €78 million. Let's wrap up our review with Defence and Space. Revenue grew 11% year-on-year to €2.7 billion, driven by higher volumes across all business lines. EBIT adjusted reached €77 million, supported by higher volumes and improved profitability, mainly on the Air Power Services and Connected Intelligence, CI.

Regarding the A400M program, we're still having productive conversations with the Launch Nations and OCCAR about the production plan. Given the uncertainty around how many aircraft will be ordered, Airbus is continuing to evaluate what that could mean for the program's manufacturing activities. Risks tied to qualifying technical capabilities, along with the related costs, are holding steady. And before we get to the 2025 guidance, Thomas will walk you through the definitive agreements we just signed with Spirit AeroSystems in more detail.

Yes, gladly. I’ll just point to the headway achieved regarding the purchase of specific Spirit AeroSystems operations. Airbus has now signed a definitive agreement to acquire these work packages, which are essential to our commercial aircraft production increases. And consistent with the initial term sheet, the deal covers manufacturing of the A350 fuselage section in Kinston, North Carolina in the United States and in Saint-Nazaire, France. It covers the A321 and A220 components in Casablanca, Morocco. It covers the A220 wings in Belfast, Northern Ireland, along with the A220 pylons in Wichita in the United States. Now, under the definitive agreement, it also covers manufacturing of the A220 mid-fuselage in Belfast, Northern Ireland, unless Spirit AeroSystems finds an appropriate purchaser for the portion of the site where those operations sit. And Airbus will additionally take on production of wing components for the A320 and A350 in Prestwick, Scotland. As for Subang in Malaysia, Spirit Aerosystems plans to sell that site to a third-party owner agreed by both sides. The compensation figure has been modified to mirror this updated transaction parameter, consistent with the terms of the binding term sheet agreement that we announced on July 1 last year.

Also, Spirit AeroSystems is going to pay Airbus $439 million in compensation, with some closing adjustments that are standard for a deal like this. So through this acquisition, Airbus is looking to secure supply stability for its commercial aircraft program in a way that's more sustainable going forward, operationally as well as financially. And the financial effect of this definitive agreement lines up with the preliminary estimate for EBIT adjusted and free cash flow that was part of the Airbus 2025 guidance we put out on February 20 in 2025. Let me also remind you that in 2026 and 2027, we still anticipate a low-triple-digit negative impact on our EBIT adjusted and as much as a mid-triple-digit negative impact on free cash flow before customer financing each year. Airbus has additionally signed another memorandum of agreement with Spirit AeroSystems, through which Airbus has committed to extending non-interest bearing lines of credit totaling $200 million, to be used in support of the Airbus programs inside Spirit. And every party is now fully committed to closing the transaction for the transfer of operations plan in Q3, 2025, subject of course to regulatory and other customary approvals. So we're really pleased to have hit this important milestone, and our teams are now moving into final preparation for day one to ensure activities transfer smoothly.

And with that, Guillaume is going to walk you through the guidance we're providing.

Thanks, Thomas. Now moving to our guidance, and that's unchanged. For the foundation of its 2025 guidance, the company leaves out the effect of tariffs on its business, and I'll return to that shortly. The 2025 guidance from the company incorporates the impact from integrating certain Spirit AeroSystems work packages, which Thomas just discussed, and that's based on preliminary estimates plus an assumed closing during the third quarter of 2025. The company presumes no further disruption to global trade of the world economy, to air traffic, to the supply chain, to the company's internal operation, or to its capacity to deliver products and services. And with that as the basis, the company aims in 2025 to reach roughly 820 commercial aircraft deliveries, an EBIT adjusted of approximately €7 billion, and a free cash flow before customer financing of about €4.5 billion. The expected effect of integrating certain Spirit AeroSystems work packages on the company's guidance stays consistent with earlier estimates, as Thomas said. Now turning to tariffs. Regarding how the new tariffs are being implemented, well, let me begin by sharing and noting just how volatile the nature, the quantum, and the timing of these tariffs are, and it is literally shifting day by day.

As of today, what we're directly exposed to is mostly the economic effect of tariffs on the movement of sub-assemblies among our various sites. Within our industrial footprint, 2 of the 8 FALs currently running — and very soon 10 FALs — could be affected by tariffs applied to imports of major components. As for Tianjin in China, tariffs apply only to imports from the U.S. — or rather, they did apply, since the present understanding is that this has now been lifted. We're looking into what exactly that lifting involves. And given the recent announcements, the effect right now may be fairly limited — in fact it could be near nil, should the information about Tianjin be confirmed. With respect to our U.S. mobile plant, every import is subject to tariffs, and what we mean here is chiefly European imports into the U.S., which today face 10% tariffs. We're making use of regulatory mechanisms for Mexico and Canada — the so-called USMC exemption, when it comes, as I mentioned, particularly to imports from Canada, where we have the A220 — along with the so-called U.S. goods returns and our use of the free trade zone, while also optimizing how our logistics flows are organized, and that lever matters a great deal.

We lean on our sturdy industrial setup and our solid, diversified backlog to give us flexibility that partly offsets the effects of tariffs. And as you can imagine, understanding, assessing, and then deciding how to do this takes a great deal of work. Let me say again that our guidance leaves out tariff effects, since at that stage there was no stable, precise, and determined scenario. The direct effect could probably be kept within the current framework, provided that framework were to endure through the end of the year. As for tariffs' indirect effect, Airbus is monitoring closely and proactively how they might affect air traffic, our customers, and the supply chain as time goes on. And up to now, we have seen no shift in our supply chain performance, up to now. Voila, we will carry on with our key priorities, which have not changed. And with those priorities in mind, we keep navigating the present context. While we stay focused on serving customers and ramping up across all our programs, we will keep relying on the company's core pillars, which underpin everything we do.

Safety, quality, integrity, compliance—and in today's world, security—remain at the forefront of everything we do. On commercial aircraft, we're continuing to shape our industrial system and to manage a deep, independent supply chain in an environment that is complex and fast-changing, if not very fast-changing. The recent agreement with Spirit AeroSystems marks a key milestone toward further stabilizing and improving operations on both the A350 and the A220 programs. Our efforts will now go toward preparing the integration of the Spirit AeroSystems work packages covered by this agreement. In Defence and Space, we're continuing to execute our turnaround plan to restore competitiveness in the divisions and to pursue workforce adaptation in close collaboration with our social partners, while examining different scenarios for creating scale in the European space business. Finally, we noted at the outset the geopolitical shift and how important it is for Europe to strengthen its defence capabilities. That will demand both a consolidation of demand and further industrial cooperation to create scale and speed. Airbus is committed to European defence and strategic autonomy. We stand ready—and indeed we already do—to support our government customers with our strong portfolio of products and solutions.

So with that, let's move on to the Q&A, and I'll look to you, Helene.

We're going to begin the question-and-answer portion now. When you ask a question, please state your name and your company. Kindly keep it to 2 questions per turn, sub questions included. And as always, do remember to speak slowly and clearly so that everyone on the call, ourselves especially, can follow what you're asking. So, Sharon, please go ahead and walk the participants through the procedure.

We're going to take your first question now. Please hold for a moment. Your first question is from Benjamin Heelan at Bank of America. Go ahead, please.

Yes, good evening, guys. Thanks for the question and for the detail on the tariff scheme. On the first question, could you discuss the supply chain and how it has responded to the tariffs?

Hi, Ben. Yeah, I’d say reactions differ as widely as the supplier count itself, since each of them—and we too—faces a unique set of circumstances regarding how tariffs hit us, based on the industrial footprint each one has. Now, one thing we all share is that we’re putting in serious effort to evaluate where things stand, to make sure the supply chain is likewise working to figure out the timeline ahead of us, particularly by pinpointing inventories and buffer stock. And clearly, we’re in a fairly solid position on that front, thanks to the multiple times we’ve reshaped our ramp-up plans. After that, it’s all about mitigation. It’s about logistical flow. It’s about grasping the mechanisms within the various rules and regulations that could be used to soften—if not dramatically soften—the tariff impact, and also talking with authorities to share what’s happening and explain it. And as you’ve seen, China made a decision very recently to remove the tariffs on civil aerospace goods coming from the U.S.—that comes as a result of engagement in China by many stakeholders, ourselves included. So that’s the work in progress. And obviously, the situation is highly dynamic.

Still, what I observe is a supply chain that is quite active and proactive, one that is committed to keeping up deliveries, to ramp-up, to perform amid an environment challenged by this new situation. You will recall that at Airbus, we faced a situation involving tariffs across the Atlantic roughly 5 years ago, against the backdrop of the WTO dispute. So we understand that it is all about managing the situation, keeping a cool head and working hard to find solutions, and that is the mindset of the supply chain at the moment.

Thanks, Gim. And to build on what you said earlier about tariffs' direct effect being manageable within the existing framework — should we take that to mean from both an earnings standpoint and a cash flow one? And as you look at it, where does the greater risk sit: on cash, or on earnings? How should we frame that for 2025? Thank you.

I'll lean on Thomas, perhaps to add some color, but maybe the first point is that the guidance stays as it is and leaves tariffs out. And we continue working on evaluating something that's a moving picture. That gives a bit of color on what we're seeing as of today. But even the as-of-today piece is shifting, because we assume the number of conditions for China, and that has already been changing in the meantime. So it needs to be taken with a lot of prudence, and it's an indication of what we think, what we estimate it could look like, again, also under the assumption that it would last until the end of the year. And that's probably a bold assumption given the speed at which things are moving and changing. But Thomas...

Yes.

Is there anyone who would like to offer additional remarks?

No, no. On that point—first, yes, when we mention our ability to mitigate the effects, we mean the financial impact on results or free cash flow. Of course, the two are more or less aligned. As Guillaume said, this rests on the assumption that, essentially, the framework we have today—with the 90-day break and then potentially the reinstatement of the old framework—will remain relatively stable. And in our assessment, when we say it can be contained, we mean the financial impact would fall within the normal, let's say, boundaries of what we'd describe as an around swing in our results. That's what we currently see for the environment. But again, the situation may change by the day. Still, we wanted to give you some color on what the current situation looks like from our perspective.

Alright, that's very clear. Thank you.

Thanks. The next question is from David Perry at JPMorgan. Your line is open.

Yes, hello. Good evening, Guillaume and Thomas. So I have two questions. The first concerns FX. We have seen — sorry — the dollar getting somewhat weaker. Many economists believe it may weaken further; we shall see. But are you considering any particular steps to counter that headwind, or possible headwind? The second question: you have spoken at length about tariffs — regarding the cost of items you purchase that come into your FALs, and the actions you will take on that front. Clearly, the other dimension involves the aircraft you sell to airlines. And I know you have consistently stated that the airline must bear the tariffs. You have been extremely clear on that point. We have heard some airlines indicate they are unwilling to pay the tariff. Could you comment on that? Any insight from your discussions with the airlines? And how do you view your pricing power when it comes to adding tariff surcharges? Thank you.