Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Airbus reporting earnings today, beating estimates with us ADR is
Speaker 2: up almost four percent.
Speaker 3: It's commercial on.
Speaker 2: Helicopter divisions drove that beat despite higher costs, and it's
Speaker 2: space unit which racked up almost one billion dollars in
Speaker 2: charges in the first half. Joining us now for more
Speaker 2: on this is Gimfouri, CEO of Airbus GM. Thank you
Speaker 2: so much. I know it's quite late where you are,
Speaker 2: so thank you for joining us. I just want to
Speaker 2: start on the space issue and get to that root
Speaker 2: cause you mentioned one entrant in the marketplace really mess
Speaker 2: things up. Can you give me more color into what
Speaker 2: that is.
Speaker 4: So we have programs which are under our long term
Speaker 4: estimate that completions, and we have underestimated the risks that
Speaker 4: we have embarked when we signed a contract or when
Speaker 4: we launched the programs. So we have had to record
Speaker 4: charges in our space program earlier this year. Actually, we
Speaker 4: inform the market in June of our channel and that's
Speaker 4: where we are in space.
Speaker 3: So we have launch a turn around the programs.
Speaker 4: We are focusing on those programs but also turning around
Speaker 4: the business itself. So that's an important activity. For me
Speaker 4: this year and for my team to focus on the
Speaker 4: recovery of space and against the backdrop of challenging business
Speaker 4: environments in space.
Speaker 2: So no color into what that new mentionrant is, is there.
Speaker 3: Exactly? Okay, just one.
Speaker 2: More point on this. As you look at the different
Speaker 2: options for that part of the business, how long is
Speaker 2: that's going to take until you find the right solution.
Speaker 3: As I said, it's several programs.
Speaker 4: Some of them will be fixed in the couple of
Speaker 4: months or quarters to come. One of those programs is
Speaker 4: the longer one is over almost a decade, implicating in
Speaker 4: investment in development, industrialization, production, and then deliveries of satellites.
Speaker 4: And this this will take by.
Speaker 3: Far more time to be fixed.
Speaker 4: We will have a better understanding of the lever of
Speaker 4: charges and the impairment that we need to take on
Speaker 4: this particular forum by the.
Speaker 3: End of this year.
Speaker 1: All right, del I do want to talk about the
Speaker 1: commercial side of this business. You have issues over there though,
Speaker 1: I think issues that any of your competitors would love,
Speaker 1: and that's a lot of demand, but you're still dealing
Speaker 1: with a lot of supply chain issues that is limiting
Speaker 1: what you can actually deliver. When do you think those
Speaker 1: supply chain issues will be sorted out.
Speaker 4: Actually, we are in a phase of steep ramp up.
Speaker 4: As you rightly said, we have a lot of demand. Actually,
Speaker 4: we have a backlog of roughly eight five hundred planes
Speaker 4: and there is a lot of demand for short term deliveries.
Speaker 4: So we're trying to find the right speed of romp up.
Speaker 4: That is a compromise between a very strong demand and
Speaker 4: contractual obligations that we have taken and the ability of
Speaker 4: the supply chain to deliver on that. Unfortunately, we have
Speaker 4: to adapt to the weaker link of the chain to
Speaker 4: the slower ones, and it's not always the same. In
Speaker 4: twenty twenty two, we had plenty of difficulties with small
Speaker 4: and mid sized suppliers, plenty of different reasons.
Speaker 3: That's behind us now.
Speaker 4: We had a successful twenty twenty three and this year, unfortunately,
Speaker 4: we're hit by suppliers that are delivering systems that arrive
Speaker 4: late in the final assembly line, so we have limited
Speaker 4: ability to react to their own difficulties. So we are
Speaker 4: now focused on fixing those issues before we can continue
Speaker 4: to ramp up efficiently, up fully for twenty five and
Speaker 4: twenty six. So that's a bit of a case by
Speaker 4: case situation to be.
Speaker 1: Managed with regards to those suppliers that are either coming
Speaker 1: in later or just not meeting the obligations, and somewhere
Speaker 1: or another are you getting cost or price concessions as
Speaker 1: a part of that.
Speaker 4: We have contractual arrangement with them, and they don't deliver
Speaker 4: on time, they're obviously under the risk of liquidated damages.
Speaker 4: Now we are also open to finding other ways.
Speaker 3: Of dealing with the situation when that makes sense for us.
Speaker 4: But indeed they are penalized when they are not able
Speaker 4: to deliver on time and when they lead to us
Speaker 4: being not able to deliver to our airline customers that
Speaker 4: really need the planes.
Speaker 3: So that's the situation we're in.
Speaker 4: We prefer to get part some times than being compensated, obviously,
Speaker 4: but when it is the case, that's.
Speaker 3: What it is.
Speaker 2: Yeah, what is your level of competence that you can
Speaker 2: monitor all the supply chain in real time and that
Speaker 2: there won't be more surprises like the Leap engine that
Speaker 2: come down.
Speaker 3: It's a big challenge.
Speaker 4: We can't be monitoring one ordred percent of the supply
Speaker 4: chain with the same degree of depth and of energy
Speaker 4: of focus of teams, So we have organized during COVID
Speaker 4: what we call watch towers, where we are where we
Speaker 4: are reviewing, where we're scanning, sessing all of our suppliers
Speaker 4: based on risk. We determine the one that are the
Speaker 4: most likely to cause issues and problems, the weaker ones,
Speaker 4: and then we're.
Speaker 3: Focusing our efforts on those ones. Now, when it's.
Speaker 4: About engine makers, for instance, that are late at the moment,
Speaker 4: they have themselves very deep supply chain, They are very structured.
Speaker 3: And they are in a complex business.
Speaker 4: So we cannot do the business of engine makers as
Speaker 4: we are on aircraft OEM.
Speaker 3: But you're trying to yet to alleviate.
Speaker 4: The consequences, to mitigate the consequences of their own difficulties.
Speaker 4: But we can't be monitoring the whole supply chain ourselves.
Speaker 2: Let's go to the defense side of the business per
Speaker 2: a moment and talk about supplying demand there, because it
Speaker 2: feels like the path of this resistance is going to
Speaker 2: be more European spending on defense no matter who wins
Speaker 2: the White House in the United States in November, Can
Speaker 2: you take more orders for your defense areas right now?
Speaker 4: Yes, we can. Indeed, Europe is in a different situation
Speaker 4: since February twenty twenty two with the attack of Russia
Speaker 4: and Ukraine.
Speaker 3: That's a very different.
Speaker 4: Environment when it comes to security, when it comes to defense,
Speaker 4: and indeed the European countries, most of the European countries,
Speaker 4: have decided to spend more money for security and defense
Speaker 4: and we can take more orders. Actually, we have seen
Speaker 4: an increase of the order intake in twenty twenty three
Speaker 4: compared to previous years, and we have a good start
Speaker 4: in the.
Speaker 3: Year twenty twenty four.
Speaker 4: So that's a different situation than compared to commercial. We
Speaker 4: have available slots and capacity and we can take more orders.
Speaker 1: Indeed, do you think you're going to see more business
Speaker 1: on the defense side, that is from non European nations.
Speaker 4: We have a good flow of business from export countries.
Speaker 4: That's very important for Airbus. We are mainly living from
Speaker 4: export orders and contracts.
Speaker 3: It's the case as well in defense.
Speaker 4: Now we have up and downs from one year to
Speaker 4: the other one and I would see the main array
Speaker 4: of growth for defense business coming from European countries more
Speaker 4: than from the rest of the world. But there will
Speaker 4: be also some good export contracts.
Speaker 3: Here and there.
Speaker 4: So that's basically the situation other stable on export and
Speaker 4: significant growth for our own countries.
Speaker 1: How much discussion have you had with world leaders or
Speaker 1: at least their representatives of these world leaders, who of
Speaker 1: course are contending with the issue of how to deal
Speaker 1: with some of these military contracts and at the same
Speaker 1: time keep some of that sensitive information that goes into
Speaker 1: that sensitive technology away from there would be AVER series
Speaker 1: or their perceived AVER series. What are those discussions like, Yeah,
Speaker 1: we have.
Speaker 4: A constant dialogue with our governmental customers, the European countries
Speaker 4: but as well countries outside of Europe on how to
Speaker 4: do business, what kind of information can be exchanged, the
Speaker 4: confidentiality of activities. And we are also under the regime
Speaker 4: of export licenses that are very important in our industry,
Speaker 4: and we can only export with the approval of the
Speaker 4: countries from where we are exporting, and that's very much
Speaker 4: related to the nature of the relationship they have with
Speaker 4: the countries we want to export to. So that's a
Speaker 4: complex construct. It's not unique to Airbus. We are working
Speaker 4: under the same regime those days. With the quite tense
Speaker 4: geopolitical situation around the world, that's something that is taking
Speaker 4: more time, more effort, and.
Speaker 3: That that's gained in terms of importance. Yeah, before I
Speaker 3: let you go.
Speaker 2: When we keep hearing from airlines and their earnings, it's
Speaker 2: all about capacity. They've got to take out capacity. They
Speaker 2: have to take out capacity. At some point do they
Speaker 2: go to you and say, Hey, just kidding, we don't
Speaker 2: need those plans. They have to take out capacity.
Speaker 4: Our airline customers are facing strong demand themselves, so indeed
Speaker 4: they want planes. They want planes as much as we
Speaker 4: can deliver, but we are limited by our supply chain
Speaker 4: issues and constraints. It's not specific to our bus as
Speaker 4: you know. So we are working hand in hand to
Speaker 4: trying to find the best way to satisfy their needs.
Speaker 4: And then there's no general statement. It's a case by
Speaker 4: case discussion, depending on the priorities, the ability to deliver
Speaker 4: the particular situation that comes with this airline on that
Speaker 4: airline in the US.
Speaker 3: In your in Asia. Each and every situation is different.
Speaker 1: Hey, gairl we only have about thirty seconds, but I
Speaker 1: do want to just get your thoughts on the interest
Speaker 1: rate environment. We've got a big FED meeting here in
Speaker 1: the United States, and there's been a lot of speculation
Speaker 1: about whether other global central banks will start to cut
Speaker 1: rate in a meaningful way this year. Does that affect
Speaker 1: you or at least affect your outlook?
Speaker 3: It has an impact. It's a moderate impact for us.
Speaker 3: But we've been in a.
Speaker 4: Rather complex environment in terms of inflesh, in terms of
Speaker 4: interest rates, and that makes the life of companies more difficult.
Speaker 4: We need to be able to anticipate, we need certainty
Speaker 4: and visibility. But having the rates going down is going
Speaker 4: to be a positive news for us.
Speaker 3: And obviously this is something we are monitoring.
Speaker 1: All right, Gio, I really appreciate you taking time for us. Gianbari,
Speaker 1: there is the Airbus CEO