Airbus parent EADS returned to profit in 2010 and bagged a slew of new aircraft orders, pushing its shares up even as airlines fretted about surging oil prices. Slightly better than expected 2010 results marked a sharp reversal from a year ago, when Europe's largest aerospace company was pushed into the red by a crisis over military aircraft delays and saw only lacklustre prospects for recovery.
But a $31 billion slew of commercial airplane orders in the past 36 hours, about half of which will benefit Airbus with the rest scooped up by rival Boeing, highlighted growth in emerging markets which planemakers see as a recession cure. "The commercial market has seen an impressive rebound, especially in the growth-hungry emerging markets," Finance Director Hans Peter Ring said.
EADS shares were up 2 percent at 20.234 euros by 1353 GMT, the top gainers on the French benchmark CAC40 index, after earlier rising as much as 4.2 percent. That was despite an increase in oil prices that saw Qantas Airways and Singapore Airlines raising fuel surcharges, while Cathay Pacific warned growing energy costs could hurt its profits.
"Oil prices provide a short-term pressure for airlines, but in the long term they provide pressure to renew their fleets," EADS Chief Executive Louis Gallois said. Brent crude oil prices rose 79 cents on Wednesday to just under $114 a barrel. EADS said it would need to monitor developments in North Africa, oil prices and currencies.
Russia's Aeroflot and Cathay Pacific wrote cheques for Airbus or Boeing jets on Wednesday, extending a flow of deals that included a provisional 100-jet order for a fuel-saving Airbus model from leasing giant ILFC on Tuesday. Downpayments from airlines handed Franco-German-led EADS a record cashpile of 12 billion euros at the end of 2010.
From a financial point of view, with cash generating next to no return compared with the cost of equity or debt, analysts say the trove of cash makes little financial sense. "It seems like a large number to be sitting on," Societe Generale's Zafar Khan told company leaders in a conference call. EADS officials said one reason for the 2 billion cash increase in the past year was a rebound in financial markets, which had dampened the need for Airbus to finance its clients.