The Emirates Group, which runs Emirates airline, may rescue the hopes that Europe’s largest aircraft manufacturer, European Aeronautic, Defence & Space Co. (EPA:EAD), had for its poorly selling superjumbo Airbus A380.
EADS reported higher third-quarter profit Thursday and said it expects more aircraft orders and deliveries going into next year, but if 2015 slots for the A380 go unsold, EADS’s cash flow would decrease and Airbus might have to slash production of the double-decker, 525-seat jets. Airbus needs to decide output for the A380 soon, because parts for the world’s largest passenger plane have to be ordered up to two years in advance.
Emirates is the largest A380 buyer, having placed 90 of the 259 orders to date. Emirates has said it would like to buy as many as 30 more as soon as it can find capacity in Dubai. Airbus is trying to finalize another tentative order from Doric Lease Corp. for 20 of the jets, according to Reuters. Out of 115 total deliveries, 18 A380s were turned over to customers in 2013, four of them in October.
"A380 activity has been slow to materialise, but I can assure you that it remains a priority to sell 2015 open slots and beyond," EADS’s Finance Director Harald Wilhelm told Reuters.
EADS said Thursday that it now expects a negative free cash flow of 1.5 billion euros ($2 billion) for 2013 compared with a previous expectation posted in February that EADS would break even on cash flow in 2013. The announcement comes while Airbus is testing its A350 jets ahead of deliveries planned for the second half of 2014.
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Wilhelm said tighter budgets among several unidentified government customers have caused about one third of the smaller than expected cashflow. EADS produces space and defense equipment in addition to airplanes.
Sales of smaller commercial jets, which are cheaper to fuel and easier to fill to capacity, have remained strong. Airbus now expects more than 1,200 commercial jet orders and as many as 620 deliveries in 2013, compared with a previous forecast of 1,000 orders and 600 to 610 deliveries this year. By October’s end, Airbus had completed 1,265 orders, and EADS factored "lower A380 deliveries" into the estimate.
If the A380s do not sell, the result “would not be a financial disaster,” Wilhelm said, though EADS would then likely miss its goal of breaking even on the jet.
EADS reported a 22 percent increase in its nine-month operating profit to 2.3 billion euros.