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COMMENTARY

Airbus is building gliders while Boeing floats on cash

Berlin

WHAT'S the difference between Boeing Co and Airbus  SE? One builds commercial aircraft, the other makes "gliders" (a pejorative term for passenger jets without engines.) Airbus shipped just 121 aircraft during the first quarter, the least since 2011, notes Benjamin Katz from Bloomberg News last week.

That's also one third fewer than Boeing managed in the same period. The main problem is that Airbus has built a bunch of planes that haven't received their engines yet. Dozens of A320neo aircraft are sitting on the tarmac in Hamburg and Toulouse awaiting functioning turbines from Pratt & Whitney and CFM International, which have suffered delays and technical glitches.

 Naturally, airlines don't pay up until their planes are finished. And with Airbus's inventories rising, it's consuming cash. Sorry, but plus ça change and all that. To be sure, Airbus boss Tom Enders can't control when his suppliers deliver engines and he says they should catch up by the end of the year.

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The company pulled out all the stops to hit its delivery target last year. And Airbus is also still ramping up production of its A350 widebody jet, whereas Boeing's 787 programme is at a more mature stage. Still, this scramble to get finished planes out of the hangar before the end of the year is becoming a tiresome habit and in cash terms this so-called duopoly with Boeing is looking very one-sided. 

Airbus's production difficulties caused it to burn though an astonishing 3.8 billion euros (S$6.1 billion) of cash in the first quarter. Boeing had about US$2.7 billion of free cash flow during the same period, according to Bloomberg data. A five-year comparison makes even grimmer reading from an Airbus perspective.

By my calculation, Boeing has generated US$39 billion of cash since Jan 1, 2013, about 13 times more than Airbus. Hence Boeing has returned US$44 billion of cash to shareholders via dividends and share repurchases in the past five years, about nine times what Airbus has managed.

The eternal hope is that as those Airbus gliders eventually become fully-fledged planes, the manufacturer will crank up production and the cash will start to pour in. Analysts project that Airbus's free cash flow could hit almost US$7 billion in 2020. But with Boeing already firing on all cylinders, Airbus investors may wonder whether it's worth the wait. BLOOMBERG GADFLY