Airbus pared back wide-body jet production after burning through an added €4.4 billion euros (Dh19bn/$5.2 bn) in the second quarter, retrenching further to safeguard cash while it waits out a collapse in demand for new aircraft.
The world’s biggest planemaker will now aim to produce five A350 aircraft a month rather than the six it targeted in April, it said in a statement Thursday. The company booked €900 million of Covid-19 related charges against earnings and said a future restructuring provision could total €1.6bn.
Airbus delivered 74 planes in the quarter, when global fleets were largely grounded, less than one-third of the year-ago tally. With travel set to remain below last year’s levels until 2024, the company nonetheless said it aimed to stanch cash outflows in the second half of the year.
“The impact of the Covid-19 pandemic on our financials is now very visible,” chief executive officer Guillaume Faury said in the release. “We have calibrated the business to face the new market environment.”
Cash burn for the quarter matched the level for the first three months, excluding a one-off payment to settle bribery claims, as the virus prevented delivery of 145 aircraft. Mr Faury said the the ambition now is to be cash neutral in the second half, before customer financing and any spending on acquisitions.
Airbus, which has logged just 25 orders since the end of January, posted an adjusted loss of €1.31bn for the first half before interest and tax, including the charge, compared with a €2.19bn profit a year earlier.
Revenue plunged almost 40 per cent, with the decline exacerbated by a three-week shutdown of assembly lines as the company took steps to guard against the virus and assessed the situation.
The update comes after rival Boeing announced a raft of new measures Wednesday to preserve cash and adapt to the shrunken market. The US company, which reported a $2.4bn quarterly loss, delayed the debut of its new 777X model, cut build rates for existing planes, said it will end production of the 747 jumbo, and mooted the shutdown of one of two plants that build the 787 Dreamliner.
Investors had braced for an awful quarter after Boeing delivered just 20 commercial jets in the three-month period, down from 149 a year earlier.
Boeing’s bill for the 737 Max flying ban was already approaching $20bn before the pandemic struck. The company took another accounting charge in the quarter to reflect the $551m it expects to pay customers for lost flying and other considerations.
Boeing had previously announced a 10 per cent workforce reduction, or approximately 16,000 jobs. The total cut will still be about one-tenth of employees since Boeing is hiring for its defense and space business.
Airbus’s ratcheting down of wide-body rates reflects scarce demand for the large aircraft that are used in long-haul services. The European planemaker left its other production rates unchanged, after slashing output to 40 planes a month for its popular A320 family in April. At the time, A350 output was trimmed by about 40 per cent to 6 per month, while the slower-selling A330 was cut back to two a month.
The company is embarking on the biggest restructuring in its history with plans to cut 15,000 jobs in the commercial aerospace division. Faury has meanwhile extended credit lines and clamped down on expenses to give access to €30bn to manage the pandemic.
Airbus said the UK Serious Fraud Office has requisitioned its GPT Special Project Management arm, to appear in court over a corruption-related charge.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Test squad: Azhar Ali (captain), Abid Ali, Asad Shafiq, Babar Azam, Haris Sohail, Imam-ul-Haq, Imran Khan, Iftikhar Ahmed, Kashif Bhatti, Mohammad Abbas, Mohammad Rizwan(wicketkeeper), Musa Khan, Naseem Shah, Shaheen Afridi, Shan Masood, Yasir Shah
Twenty20 squad: Babar Azam (captain), Asif Ali, Fakhar Zaman, Haris Sohail, Iftikhar Ahmed, Imad Wasim, Imam-ul-Haq, Khushdil Shah, Mohammad Amir, Mohammad Hasnain, Mohammad Irfan, Mohammad Rizwan (wicketkeeper), Musa Khan, Shadab Khan, Usman Qadir, Wahab Riaz
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
Pakistan squad
Sarfraz (c), Zaman, Imam, Masood, Azam, Malik, Asif, Sohail, Shadab, Nawaz, Ashraf, Hasan, Amir, Junaid, Shinwari and Afridi
