Airbus hit record delivery targets of 863 jets and increased revenue by 11% in 2019, so why has the world’s largest airline manufacturer’s stock been falling?
Airbus (EPA: AIR) announced its earnings report for the fiscal year 2019 yesterday, adding to the stock’s volatility over the past two days. The stock fell 2% in after-hours trading Wednesday night in anticipation of earnings, opening Thursday at $133.60. After an initial spike of over 3% Thursday morning, the stock proceeded to fall more than 1% below its opening price and has continued its descent today. So, why all this confusion amongst investors?
Airbus posted a loss of almost $1.5 billion for 2019, down from a profit of $3.1 billion in 2018. The loss was primarily attributed to a settlement of $3.6 billion paid to U.S., French, and British authorities over an investigation into a corruption scandal that rocked the EU aviation giant back in 2016. This was the company’s first recorded loss in 10 years and sent the stock falling. However, in what I know is a ludicrous statement even before I say it, aside from losing nearly $1.5 billion, it was actually a pretty good year for Airbus.
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Can Airbus capitalize on Boeing’s woe?
As Boeing (NYSE: BA) grounded the 737 Max after two fatal crashes in 2019, Airbus has taken the lead in the aviation duopoly. It delivered a record number of units and topped $70 billion in revenue for the year. It is looking to carry this momentum forward into 2020 and capitalizes on Boeing’s grounded airliner, setting itself a target of 880 aircraft deliveries and looking to increase the monthly production of the A320neo, Airbus’ alternative to the 737 max, from 63 to 67 by 2023.
Due to the nature of the airline industry, order contracts extend years in advance, meaning Airbus may struggle to take full advantage of the weak position Boeing has found itself in. However, it did overtake the U.S.’s largest private employer as the world’s largest aircraft manufacturer last year. With the 737 max grounded until at least the second half of the year, and Boeing delivering just 13 planes this January — its lowest number in years — Airbus has the opportunity to cement its position at the top of the aviation industry. Ramping up its production targets looks to be the first step in Airbus’ strive for dominance.
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