Airbus SE (AIR) Earnings Call Transcript & Summary

Good day, everyone, and thanks for holding. This is the Airbus H1 2025 Earnings Release Conference call, and you're joined by me, Sharon, your operator. I want to point out that throughout the presentation, everyone will be in listen-only mode, and this call is being recorded. Once the presentation wraps up, 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 Hélène Le Gorgeu. Please go ahead.

Thanks, Sharon, and good evening everyone. This is the conference call for Airbus's H1 2025 earnings release. Guillaume Faury, our CEO, and Thomas Toepfer, our CFO, will present our results and take your questions. We expect this call to run about an hour. That includes Q&A, which we'll hold after the presentation. There's also a webcast of this call. You can reach it 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. The supporting information package went up on our website earlier today. It contains the slides we'll now walk you through, along with the financial statements. During this call we'll be making forward looking statements. I'd ask you to refer to our safe harbor statement, which appears in the presentation slide and applies to this call as well. Please read it carefully. Now over to you, Guillaume.

Thank you, Hélène, and good day, ladies and gentlemen, and thanks for being with us today for our H1 2025 results call. It's a pleasure to be in Amsterdam alongside Thomas and Hélène. First, let me say it was genuinely a pleasure to see so many of you last month in Paris for our business update. That was indeed a chance to bring you up to speed on how we're doing in what I'd describe as an environment that's increasingly complex and changing quickly. We gave you an update in particular on the commercial aircraft ramp-up, and on the European defence side, Bruno and Mike, the CEOs of our two divisions, Airbus Defense and Space and Helicopters. Bruno and Mike made clear how our diversified products and solutions portfolio can contribute, and will contribute, to closing the so-called capability gap since we met. Since then, NATO confirmed a budget increase at the Hague summit, and that represents an important step forward in that direction. On global trade, we've taken note of the agreements between the United States and the European Union that will return our industry to the tariff-free environment we've enjoyed since 1979 and which has contributed so much to the success of our industry.

A stable, predictable trading landscape matters greatly for a global aerospace sector that is so tightly integrated. Before I turn to the H1 results, allow me to note the robust commercial momentum we saw once more during the first half across every business, particularly through the very busy Paris Air Show, along with the strides taken in transforming our Defense and Space division. On deliveries, we handed over 306 commercial aircraft in H1, and as we indicated at Q1, the delivery pattern is weighted toward the back end. In fact, our first-half output tracked our plan, yet the lack of engines left us with 60 gliders at the close of June. So 60 aircraft were fully built but missing their engines. That shows up in our H1 financials, with EBIT adjusted at EUR 2.2 billion and free cash flow before customer financing at -EUR 1.6 billion. Against that backdrop, our 2025 guidance stays the same. As a reminder, it excludes the effect of tariffs, and I will return to that point later. Let's now examine our commercial environment, beginning with commercial aircraft.

Our newest GMS, meaning Global Market forecast, verifies that the industry's fundamentals are still solid, with a continued growth path across the coming 20 years. We're seeing robust demand for our aircraft, powered by growth as well as fleet replacements, since airlines are turning toward latest generation aircraft that deliver roughly a 25% gain in fuel burn efficiency. That momentum showed up in full force at the Paris Air Show, where we disclosed over 2,240 orders and commitments, among them ones from new customers. In H1 2025 we logged 494 gross orders, so nearly 500. For the A220, we logged 40 gross orders, and we're glad to include LOT Polish Airlines as a new customer, with their first Airbus order forming part of its fleet modernization. Turning to the A320 family, we logged 291 gross orders. That lifts our backlog to 7,185 A320 family aircraft, of which roughly three, four, about 75% are for the A321. Now on to the wide bodies. For the A330, we logged 71 gross orders, confirming the strong demand for these highly versatile aircraft. For the A350, we logged 92 gross orders, underscoring this product's continuing commercial momentum. That lifts our wide body backlog above 1,000 aircraft. Net orders came to 402 aircraft, including 92 cancellations, which were mostly anticipated and already embedded in our backlog valuation, the financial backlog valuation as of December 2024.

At the close of June 2025, our backlog measured in units rose to 8,754 aircraft — let me repeat that, 8,754 aircraft. Turning to Helicopters, during the first half we recorded 171 net orders, versus 233 in H1 2024, and those 171 are distributed quite evenly across the portfolio. Not long ago we announced an order from Greece covering eight firefighting H215s, and we additionally signed a contract with Norwegian Air Ambulance for as many as eight H145s. On the defense front, this quarter brought several key milestones, most notably the French Framework agreement for the VSR700. That is an uncrewed aerial system — in other words, a drone. Together with our partner Leonardo, we kicked off studies aimed at defining the long-term evolution of the NH90, what we call Block 2. Meanwhile, on the NH90, the first two Spanish Navy helicopters have been handed over. We also recently marked the H160M — that's the military version of the H160 — with the first flight, the maiden flight of this militarized H160 variant. A few words on drones, since our strategy is clear: offer customers a complete product range. Bruno and Mike presented this, as you recall, at the business update. The Australian startup Droneforge signed an agreement to purchase 17 Flexrotor uncrewed aerial vehicles.

This marks the biggest single order ever placed for the Flexrotor, and watching this product ramp up makes me extremely happy. The Flexrotor really is a key piece, completely woven into our broader strategy for pushing forward crewed uncrewed timing capabilities. These are all new terms we must learn, since so much is happening on that front, and we keep witnessing positive momentum, especially in the military markets. We stay focused on locking in fresh business opportunities in both of our home countries, as well as on export markets at Helicopters. Turning to Defence and Space. Order intake came to EUR 5.1 billion in the first half. Before going through the quarter's main orders, let me begin by calling out the agreement we reached with OKAR on the A400M to bring forward seven deliveries for France and Spain, thereby boosting visibility on production for the program even further. Under these agreements, Airbus and OKAR alike will examine the program's industrial status annually, which gives the A400M production setup stability so it can pursue the platform's evolution and open and hopefully secure export opportunities. Still on the A400M, we booked a contract to equip 23 German Air Force A400Ms with a protection system against infrared seeking missiles, which further enhances the aircraft's capability.

On top of that, NATO placed an order for two more MRTT aircraft, which lifts the multinational MRTT fleet to 12. That gives NATO stronger capabilities in refueling, strategic airlift and medical evacuation. Now on Eurofighter: we welcome the MOU that Turkey and the U.K. signed for procuring Eurofighters. That's a very positive development. As a key partner in the Eurofighter consortium, Airbus stays committed to backing the program and its users, contributing to European defence cooperation. That's what we do — making sure our allies have world leading capabilities. Moving now to Space Systems. As you know, we are right now in the middle of a turnaround plan, a transformation plan aimed at restoring competitiveness, and I'm pleased with the progress the teams have made — really pleased with what they're doing. Our new Airbus Defence and Space organization has now gone live and will support this further. This strategic change, announced last October, ensures better end-to-end responsibility and accountability across our three businesses and optimizes our cost structure — benefits we are already seeing today. On the other front, Airbus has been chosen as prime contractor for developing and manufacturing two new Earth observation radar satellites, the so-called PAZ-2, further reinforcing Spain's sovereign space capability.

We're also quite happy about the recent launch of the newest generation of optical CO3D dual-use satellites, which draw on what we've learned from OneWeb in constellation production. With these satellites, we'll be able to offer an advanced 3D map of Earth's landmass, giving both government and commercial users high-resolution observation with frequent revisit. At the same time, as you're aware, we're holding talks with Leonardo and Thales about a possible consolidation of our satellite activities. Due diligence is still underway, and we remain convinced — I remain convinced — that this might be a significant step forward, one that would allow for a unified and competitive European space player to be created. Now Thomas is going to walk you through our financials. Thomas?

Certainly — thanks a lot, Guillaume. And hello everyone, appreciate you being on the call. I'm on page six of the deck now, and as Guillaume mentioned, I'll walk you fairly quickly through how we performed financially. As the slide shows, revenues for H1 2025 rose to EUR 29.6 billion, an increase of 3% year-on-year, driven mainly by a larger contribution from our divisions and stronger services volumes across our businesses, though partly offset by a lower number of commercial aircraft deliveries. Turning to R&D, on the right-hand side you can see that our expenses came to EUR 1.4 billion in H1, which is below the H1 2024 level and in line with the lead initiative. On that point, let me remind you that R&D expenses for 2025 are expected to rise only marginally, with a back end loaded profile. Now let's move to EBITDA adjusted on page seven. EBIT adjusted for H1 2025 climbed to EUR 2.2 billion, up from EUR 1.4 billion in H1 2024. As you know, of course, in H1 2024 we booked EUR 989 million of charges in our space business, and those of course did not recur. The reduced volume of commercial aircraft deliveries, together with a less favorable mix, is reflected in our profitability, and it is partly offset by a more favorable hedge rate as well as lower R&D expenses.

That figure also mirrors a better showing in Defence and Space. Turning now to the EBIT adjustments, negative during the first half of 2025, which you'll find on the right-hand side of the page. They comprised, first, a -EUR 391 million hit from the dollar working capital mismatch and balance sheet revaluation, largely reflecting the mechanical effect stemming from the gap between transaction date and delivery date, of which EUR 378 million landed in Q2. It also includes -EUR 105 million tied to the Airbus Defence and Space restructuring, booked in Q1. Third, it includes -EUR 57 million linked to stabilizing certain Spirit AeroSystems work packages, mostly recorded in Q2, and lastly -EUR 34 million of other costs, compliance and M&A among them, of which -EUR 10 million came in Q2. All of this brings our H1 2025 EBIT reported to positive EUR 1.6 billion. As you can see as well, the financial result was positive EUR 490 million, mainly reflecting revaluation of certain equity investments and revaluation of financial instruments, partly offset by the evolution of the U.S. dollar. The tax rate on the core business remains around 27%.

The effective tax rate for H1 came in at 31.5%, and that includes the tax effects from revaluation of some equity investments plus a net deferred tax asset impairment. We continue to anticipate that the French spare tax will have an impact of roughly EUR 300 million in 2025, on both the P&L and cash sides. During H1, we booked the portion tied to 2024 along with the portion that matches the first half of 2025, and taken together, all of that produced net income of EUR 1.5 billion, with reported earnings per share of EUR 1.93. Adjusted EPS for H1 2025 was EUR 2.15, calculated on an average of EUR 789 million shares. With that covered, let's move to the next page and review our coverage of U.S. dollar exposure. As you can see, during H1 2025, $9.1 billion of forwards matured, with the related EBIT impact and euro conversions realized at a blended rate of $1.18, compared with $1.21 in H1 2024. Also in H1 2025, we put in place $7.7 billion of new coverage at a blended rate of $1.14. Consequently, our total U.S. dollar coverage portfolio, measured in U.S. dollars, sits at $81.4 billion at an average blended rate of $1.21, versus $82.8 billion at a blended rate of $1.21 as of the end of 2024.

Turning to page 9, let's take a closer look at free cash flow. In the first half of the year, free cash flow before customer financing came in at -EUR 1.6 billion. The change in working capital was the main driver of that outflow. In particular, it reflects the inventory buildup we planned in order to support the ramp-up across our businesses, and naturally the elevated level of gliders that Guillaume mentioned. Lastly, it also takes in a phasing effect between cash receipts and payments. The A400M had a negative impact on our free cash flow in the first half of 2025, since the deliveries are loaded toward the back end. We still anticipate that it will be broadly neutral from a free cash flow standpoint for the full year of 2025. As you can see on the slide as well, our H1 2025 CapEx amounted to EUR 1.3 billion. As we said during the business update, we expect it to keep rising in 2025 to support our industrial ramp-up. On that basis, free cash flow stood at -EUR 1.6 billion, with almost no effect from customer financing. On that point, the aircraft financing environment continues to be strong and competitive, and we expect ample liquidity to finance our 2025 deliveries.

We're continuing to watch very carefully what effect tariffs might have. Taking all of that into account, and as the slide shows, net cash came in at EUR 7 billion at the close of June, which also mirrors the dividend payout and the softer dollar conditions. Even so, our liquidity is still quite robust, at roughly EUR 30 billion. On that note, I'll turn things back over to Guillaume.

Thank you, Thomas. Turning to the businesses, beginning with commercial aircraft: during the first half we handed over 306 aircraft to 65 customers, and broken down by family on narrowbodies, that was 41 A220s and 232 A320s, including 143 A321s, which works out to 62% of A321 deliveries within the A320 family. On the A320, nothing has changed. We keep ramping up toward a rate of 75 A320s per month in 2027. After the first XLR — or XLR — came out of the Hamburg file, we delivered the first one from Toulouse in June of this year. Bringing XLR capabilities into the existing files forms part of our global strategy to boost flexibility and capacity across the whole production system. It's all about resilience. We're also delighted that Qantas Airways became the launch operator for the A321XLR in Asia PAC, following delivery of its first aircraft in June. We delivered 33 widebodies in the first half, comprising 12 A330s and 21 A350s. On the A330, we are presently stabilizing at a monthly production rate of four. To satisfy customer demand, we now aim to hit rate five in 2029, and that marks a change from previous calls. As I said earlier, particular supply chain difficulties, notably involving Spirit AeroSystems, are placing pressure on the ramp-up of both the A350 and the A220.

Regarding the A350 and the target rate, nothing has changed. Our goal remains rate 12 for 2028, and for the A220 as well, there is no change. We are still progressing toward a monthly production rate of 14 in 2026, next year. Overall, apart from engines on the A320 family, our output matched the plan. The difficulties this year remain the same, particularly the ongoing pressures on engines for the A320, which left us with 60 gliders at the close of the first half of this year. At the end of June, the count stood at 60 gliders. We anticipated a peak during the summer, and before things return to normal, we keep working closely with our engine partners so we can recover during the second half of the year and meet our 2025 commitments. I am relying on them. Engine partners, if you are listening to me, I am truly relying on you. Now let's turn to the financials for the commercial aircraft business. Revenues fell 2% year-on-year, largely driven by the reduced number of deliveries. Given those gliders, EBIT adjusted came in lower at EUR 1.7 billion in the first half, with fewer deliveries and an unfavorable mix, along with the excess workforce, being offset by a favorable hedge rate and reduced R&D expenses.

Airbus is making solid headway when it comes to acquiring and stabilizing the Spirit AeroSystems work packages. The expected closing date has now moved into Q4 because regulatory approvals are still ongoing, but every party involved is devoting the effort required to the closing process and to getting operationally ready for what I'd describe as day one. Turning to Helicopters, we handed over 138 units in H1, which is 14 above the figure for the first half of 2024. Revenue rose roughly 16% to EUR 3.7 billion, a reflection of strong results from programs and services alike. EBIT adjusted climbed to EUR 249 million, reflecting growth in services and higher deliveries, though the mix was less favorable. Let's wrap up our review with Airbus Defence and Space. Revenue was up 17% year-on-year to EUR 5.8 billion, pushed by greater volumes across every business line. EBITDA adjusted came in at EUR 265 million, helped by higher volumes and better profitability across all businesses, including our two main joint ventures. Regarding the A400M program, we are in positive, forward-looking talks with the launch nations and OKAR. A notable marker of this was the agreements reached in June with OKAR to bring forward seven deliveries for France and Spain and to give us further visibility into production for the program.

Given the uncertainty around aircraft order levels, Airbus keeps evaluating what effect this could have on the program's manufacturing activities. The risks concerning qualification of technical capabilities and the related costs are still stable. Now turning to our guidance, which is unchanged and serves as the basis for this year's guidance: the company is assuming no further disruptions to global trade or the world economy, to air traffic, to the supply chain, to the company's internal operations, or to its capacity to deliver products and services. Tariff effects on the company's business remain excluded from the guidance, and we are, quite clearly, watching cautiously as the recently concluded agreements between the United States and the European Union on tariffs are implemented. The guidance incorporates the impact of integrating certain Spirit AeroSystems work packages, based on preliminary estimates, and now assumes, as I mentioned earlier, a closing in the fourth quarter of this year — and on that basis the company is targeting for 2025, first, roughly 820 commercial aircraft deliveries; second, an EBIT adjusted of approximately EUR 7 billion; and third, a free cash flow before customer financing of approximately EUR 4.5 billion. The expected effect of integrating certain Spirit AeroSystems work packages on the company's guidance stays in line with earlier estimates.

To wrap up, here are the main priorities we laid out during the business update. Clearly, we're concentrating on ramping up across every business, while leaning — and I like saying this again — on the company's core pillars that support all that we do: safety, quality, integrity, compliance and security. Those are our five core pillars. Regarding the commercial aircraft ramp-up, we keep collaborating closely with suppliers and are actively getting ready to integrate the Spirit AeroSystems work packages. In Defence and Space, we're continuing to carry out our turnaround plan to bring competitiveness back to the division, and we're pursuing workforce adaptation in line with the agreement reached with our social partners, while examining various scenarios to build scale in the European space business — in particular the one involving consolidation with Thales and Leonardo. Lastly, European Defence sits at an inflection point. We're working with Airbus Defence and Space and Airbus Helicopters to help close the capability gap that Europe needs to close. Back to you, Hélène. I believe we're at the Q&A.

Sure, Guillaume, many thanks. We're moving into the Q&A portion now. Kindly state your name and your firm. Please keep to two questions per turn when you ask. Sub questions count toward that. And as always, do keep in mind speaking plainly and at a measured pace so that everyone on the line, us included, can follow what you're asking. Sharon, go ahead and walk the participants through how it works.

Thank you. We're moving into the question-and-answer portion now. To pose a question, just hit star one one on your phone's keypad. Our first question is up, and it's from Chloé Lemarié at Jefferies. Go ahead, please.

Yes, good evening, Guillaume, Thomas and Hélène. I have two questions. The first concerns Defence and Space. Your year-on-year performance in Q2 essentially reflects the entire effect of the EUR 1 billion charge you took last year. The consistent message has been that just two-thirds of those charges was nonrecurring. How should we view the impact of that charge not repeating from last year versus the underlying margin improvement in the division? The second is about Spirit, with the closing kind of pushed out to Q4. Does that in any way affect your plan for Section 15 production improvements, and does it still support the stable delivery target for the A350? Thank you.

Thanks, Chloé. Over to you, Thomas.

Yes, Chloé. Yes, allow me to respond to that. To begin with, yes, your point is correct. We stated that reversing two-thirds of the charges taken in 2024 would be the right approach — two-thirds of the 989. Should you make that adjustment, you'll see that Airbus Defense and Space in fact delivered a very pleasing performance when set against the underlying operational performance in 2024. What we take from that is that we're on a good track, and we genuinely see solid momentum in the business, with the transformation program in full swing and, in particular, the restructuring in space proceeding as expected. We're very pleased with it. I think the short message is: yes, we do believe the underlying performance of Airbus Defense and Space was strong in H1. On your second question, Spirit. It is true that the closing is shifting, but the underlying impact on both the 2025 financials should be negligible. Second, we believe we are working well enough with Spirit to also ensure that the Section 15 — which of course is critical for the A350 ramp-up next year and the year after — is on track. As we see it, no change to our expectations for next year.

That's very clear. Thank you.

Thanks. The next question is from Benjamin Heelan at Bank of America. Go ahead, please.

Good evening, everyone, and thanks for that question. Guillaume, I believe during some earlier remarks you may have said something to the media regarding delays involving Pratt & Whitney. So I was hoping you could shed some light on that for us. Has this become a new problem since the air show? I don't recall any discussion of it at your investor day. Turning to CFM, deliveries clearly remain fairly slow, as we observe on the A320 side. Could you give us some insight there? How do you expect things to develop at CFM, and how confident are you that you're on a better path with respect to CFM LEAP 1A deliveries? Thank you.

Thank you, Ben. So the Pratt & Whitney situation — if I even call it a situation — the gap here is a new one. Once again, the bulk of the engines we're short of are CFM engines on the 60 gliders. It's primarily a CFM matter. Some Pratt engines are indeed absent. That mostly stems from the strike. They experienced disruptions and turbulence in the flow. We've felt the impact, and we anticipate recovery by the close of this year. As for CFM, which again accounts for the lion's share of the engines we're missing, things are getting better. You're aware there were two problems back to back. CFM ran into two problems back to back. The first was at GE early in the year, which held up deliveries of their core to Safran. Then Safran had a strike lasting a long seven weeks or eight weeks, which significantly delayed a big number of deliveries. That's now behind them. They're ramping up. Ideally, we'd want them ramping up more quickly, so we're carrying some risk. Their plan aligns with what we need. It will be very backloaded. Being in that backloaded position isn't something we like, since it raises the risk of falling short.

As of today — and I've already brought up Pratt & Whitney — the plan that CFM has laid out lines up with what we require in order to reach zero gliders by the close of this year and to deliver in line with our guidance. I won't try to hide that. It won't be easy, and the weighting sits later in the period than we would prefer.

That’s very clear. Thank you.

Thanks. We’ll take the next question from Ross Law at Morgan Stanley. Please go ahead.

Hello, everyone, and thanks a lot for taking my questions. I have two, please. First, just on gliders: you said there were 60 at the close of H1 — what does that figure stand at today, and where do you expect it to reach before it begins to come down? My second question concerns the risk of a possible strike at your wings plants in the U.K. Could you perhaps update us on where things stand there, on the discussions that are ongoing, and on how we ought to think about the potential impact going forward? Thank you.

My answers are going to be somewhat disappointing. I don't know the figure for the gliders at this moment, and it shifts daily since we're delivering and receiving engines, and I don't believe it's worth addressing on a monthly basis or even within a month. As a direction, it's flattening out at present and is expected to decline after the summer, then go to zero by the end of this year. Regarding the U.K. strike, I was talking about it with my Head of HR earlier today. I don't have a clear picture of what the implications are. The team is working on it, and obviously we want to reach a resolution, and we believe that's achievable.

Alright, thank you so much.

Thanks. Christophe Menard from Deutsche Bank is our next questioner. Go ahead, please.

Yes, good afternoon, and thanks for taking my question. I had one about deliveries and how they're phased across Q3 and Q4. Realistically, how many planes can you deliver each month or each quarter? I mean, do you also face some kind of capacity bottleneck when it comes to administration or first flight? My second question was more about your strategy in UAVs. There was an agreement, or an announcement, involving Kratos. What's your strategy there? I mean, we heard at Paris Air Show that you were also partnering with, I think, quantum. Do you take a partnership approach in that field, or do you intend to develop your own solutions? Thank you very much.

Appreciate the questions. Regarding deliveries, there isn't a bottleneck there. Occasionally — take the extreme case of a missing document or a financing issue — we've got aircraft that are ready, technically accepted, and then you're waiting for something to get resolved, and you end up with a big bunch of deliveries. Production flow is constrained. Delivery flow can rise and fall. From what I recall, since becoming CEO, I believe we hit a peak of roughly 137 or 138 deliveries in a single December — possibly, by the way, in 2018 or 2019. So as you can see, we're able to go well past 100. That's deliveries. Obviously, it doesn't mean we're straining to produce at that rate. This year will be heavily backloaded. We're expecting a very strong Q4, and so a Q3 that leaves us in that backloaded position for Q4. On Kratos and the drones, our strategy is one of speed — meaning we do, we buy, we cooperate, and we invest. The agreements we've signed with Kratos to explore the possibility of using their platform are part of this opportunity, or this strategy, of leveraging opportunities to reach the market much faster — putting our mission packages on existing platforms when we lack the platform and are waiting for it to be developed, or signing a long-term agreement for the availability of platforms supplied by others.

If you were there at the Paris Air Show, you've seen that we now have a really comprehensive lineup of UAVs, of drones, with shared ground systems and communication systems. We're working on a strategy for going to market with a broad, competitive lineup of UAVs.

Thanks a lot.