Business-class aircraft seat maker eyes profit growth

French company Zodiac set to implement 'three-stage rocket' recovery plan and vows to solve toilet troubles that led to delays of Airbus A350s.

Zodiac, which has provided seats for Etihad Airways Boeing 787s, is planning to boost earnings. Courtesy Etihad

Zodiac Aerospace said on Tuesday it aimed to return to its historical profit levels by 2019-20 as the aircraft cabins supplier recovers from a series of profit warnings and production setbacks that dragged earnings lower in the past year.

The Paris-based maker of seats, galleys and aircraft emergency equipment forecast stable sales and a 10 to 20 per cent increase in core operating profit for its current financial year after reporting a 14.1 per cent drop in profit for 2015/16.

The chief executive Olivier Zarrouati set out a recovery plan that he described as a “three-stage rocket”, designed first to erase delivery delays and quality problems, then underpin the company’s operational performance and finally restore margins.

The last stage of the plan will involve some restructuring to remove additional costs related to the turnaround, which saw cost overruns increase by €98 million (Dh382.8m) in the past year.

Zodiac said this would bring its operating margins to the historical level of mid-double digits by 2019/20.

However, Mr Zarrouati said it was taking longer than expected to reduce excess costs, while overheads were also above forecasts.

“It is taking a long time because we are transforming industrial operations across the group,” he said.

Zodiac shares fell 3.5 per cent in early trading.

For the BEtihad Business Studio offering on its 787, Zodiac supplied the seats – dovetailed – in a 28-seat 1-2-1 configuration, all with direct aisle access.

“These are more than just business seats – even compared with the luxurious models being regularly introduced as business-class rivalry intensifies among carriers – with the Studios earning their name through offering some 20 per cent more space than the airline’s current seats,” according to Aircraft Interiors International.

Zodiac has approximately halved the number of contractors brought in to resolve a crisis at its Santa Maria seat shells plant in California, where the extent of Zodiac’s recent production problems became apparent last year.

It has also developed new assembly facilities for the shells, which are part of all modern premium aircraft seats.

On another troubled project, Zodiac said it was increasing production of toilets which have delayed deliveries of the Airbus A350, but remained near the beginning of the cost reduction path.

Mr Zarrouati said plans by Rockwell Collins to buy competing cabins supplier B/E Aerospace highlighted the importance of connectivity in modern aircraft cabins.

Although new aeroplane orders have peaked, the market for supplying seats for new jets or replacing seats on old ones is growing, he said.

Zodiac said it had received a letter of intent from an undisclosed airline for its largest ever business-class seats order.

For the financial year that ended in August, core operating profit dropped to €269.6m as the operating margin fell 1.2 percentage points to 5.2 per cent.

* Reuters

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