Airbus Group lifts A330 output goal as profits meet expectations

[February 24, 2016]  By Tim Hepher and Cyril Altmeyer

LONDON (Reuters) - Airbus Group performed a partial U-turn on plans to cut production of its profitable A330 aircraft on Wednesday, easing the delicate transition to newer models as it posted 2015 profits in line with expectations on Wednesday.

The European planemaker said it now planned to build seven A330 wide-body jets per month from 2017, partially unwinding recent staggered cuts in output to six from 10 a month as it prepares for its new A350 jetliner and an A330 upgrade.

Demand for the current generation of jets such as the 250- to 300-seat A330 faces a broad decline as a new generation of fuel-saving airplanes enters the market.

But Airbus's most profitable wide-body jet has gained some respite due to the collapse in oil prices, which have made some airlines pause investment in newer, more efficient models.

The move to reconsider the decline of one of its two main sources of cash and profits came weeks after Iran provisionally agreed to buy 45 A330 jets as part of a $27 billion deal following the lifting of sanctions, but Airbus said it would have gone ahead anyway because of other deals.

That should be enough to put a floor under production until a revamped version of the A330 enters service at the end of 2017, Chief Executive Tom Enders said.

Rival Boeing <BA.N> says that even with new engines, the upgraded A330neo will be made obsolete by its 787 Dreamliner and even Airbus's own A350.

The A330 uptick contrasted with investor nerves just over a year ago when Airbus unveiled plans to cut output.

But after several years of ballooning orders, many analysts continue to express concerns about the aerospace cycle due to a recent dip in overall demand and concerns over the economy.

Airbus reiterated a cautious outlook for 2015, underlining what many analysts see as a tricky, transitional year between old and new models at the two leading planemakers.

Both companies are offering a combination of all-new aircraft and revamped earlier models.

Shares in Europe's largest aerospace group were down by 2 percent at mid-session, tracking a weaker market.

Airbus said plans for a steep hike in A350 output remained challenging, and confirmed delays to its newly revamped A320neo jet, whose deliveries will be weighted toward the second half of 2016 following problems with Pratt & Whitney engines.

Qatar Airways criticized the engine maker at the Singapore Airshow last week but Enders on Wednesday backed the U.S. company's recently reshuffled management and said "much improved" engines would be delivered from mid-year.

Airbus also signaled lingering risk with its loss-making A400M military transport plane as it negotiates with European nations over recent delays and shortfalls in capability.

Airbus Group said 2015 operating earnings before one-off items rose 2 percent to 4.13 billion euros as revenue gained 6 percent to 64.45 billion. Analysts on average predicted core profit of 4.11 billion on sales of 64.74 billion.

Airbus Group said it expected stable underlying operating profit and cash flow this year.

($1 = 0.9081 euros)

(Additional reporting by Sarah Young; Editing by James Regan and Jason Neely)

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