Capex frozen as Airbus defense unit fears missing 2017 cash goals

According to a memo seen by Reuters, Airbus Defence and Space has frozen capital expenditure and is stressing upon its 34,000-strong workforce to take “drastic measures” to make cash savings. This has come as a result of the European aerospace giant facing the prospect of missing its 2017 cash targets by hundreds of millions of euros.
Airbus has indicated that it expects 2017 group-wide free cashflow to be comparable to that of 2016, before mergers and acquisitions and customer financing. Targets for divisions are not published and, due to the irregular patterns of cashflows in the aerospace industry, Airbus often looks for urgent means to meet targets during the fourth quarter.
One of the principal influencing factors on cash pressures is the problematic A400M military aircraft program, while to provide an effective solution to the current problems, the company intends to set up a ‘Cash Crisis’ team, which should involve all Airbus programs. Until such time as the crisis team is operational, all capital expenditure is being frozen.
Airbus share value fell by as much as 1.6%, though for the year remains up by 30%. In comparison, Boeing shares are up 64%, both results reflecting positive demand for passenger jets.
When asked to comment on the contents of the memo, an Airbus spokesman commented: “We are currently in the traditional year-end race in the commercial and government business,” adding “It is key to remind our troops at this important time of a business year on the importance of meeting our cash objectives. That’s the current ongoing effort at Airbus and it is rather standard procedure to achieve our quarterly and yearly divisional targets at Airbus Defence and Space without deviation.”
On Wednesday, Airbus reminded European governments that the delays in the A400M program would continue to “weigh significantly” on cashflow, particularly in 2017 and 2018.
The program has been squeezed as Germany has held back some 15 percent in cash owed for the transport plane owing to what it sees as systems failing to do what Airbus had promised. Earlier this year the company entered into talks with buyer nations to try to ease the penalties and to get a new agreement on achievable schedules.