Stocks
by Zviad Maisuradze on May 25, 2020

Airbus Group (AIR) Stock Rises 8% as Company Experts Arrive in Pakistan

The shares of Airbus Group (AIR) have risen by more than 8%, to €58.64 per share. The move came as an 11-men strong team from the company arrive to assist the investigation of the 22 May crash of flight PK-8303. The plane itself was manufactured by the Airbus, it had 99 passengers on board and crushed only minutes before landing. Unfortunately, only 2 individuals survived the accident. The team will interview the survivors and also eyewitnesses, as well as inspect the scene, in order to determined what was the reason for the crash.

The eventual outcome of this investigation can have a significant impact on the company’s future sales. If it turned out to be a technical failure, this can seriously damage the reputation of the firm. On the other hand, in case of Pilot error, Airbus might be absolved of most of the responsibility of the accident.

In 2019, the company had annual revenue of €70,478 million. this was a 10.6% higher number, than back in 2018. The firm also employed around 135,000 people. During the year, the company delivered 863 commercial aircraft ad 332 helicopters. Finally, the airline paid an annual dividend of €1.35 per share. In fact, the firm steadily increases its payouts to shareholders since 2011, however, with recent crises in the industry, it is unlikely to continue.

The first-quarter results, underlined the scale of challenges, faced by the management. According to the report, the number of net commercial aircraft orders were 290. This was 58 less than back in 2018. During the same period, the revenue fell to €10.6 billion, which was €1.9 billion lower than in the previous year. Finally, the company reported a net loss of €481 million during the quarter. In response the company did withdraw its dividend proposal.

How Far Airbus Shares Have Fallen?

                                                                                                                                                                                                source: cnbc.com

Airbus shares were in the long term uptrend during the last couple of years, steadily rising up to €130 by February 2020. Like so many other stocks, it fell victim to the March stock market crash, dropping al the way down to €50. As governments across the world started listing restrictions, Airbus shares started to rebound. However, it goes without saying that the stock still remains far away from February highs.

The stock has a beta of 1.88. This points at the fact, that this security is nearly twice as volatile as Euronext 100 index. So if the management could stabilize the situation and eventually turn things around, the stock has the potential to recover faster than most of its peers.

At the moment the loss per share of the company stands at €0.61. The free cash flow dropping all the way down to minus €8,501 million. Despite those enormous challenges, the company did not ask for a government bailout loan. Instead the management focused on raising the capital on the financial markets. According to the Washington Post, the firm recently issued the debt securities ranging from 3 to 40 years, with the average interest rate at 5.35%.

Perhaps looking at the example of Lufthansa, where the government took over 20% of the company and two board seats in exchange for the bailout, the Airbus leadership might have decided to avoid taking similar steps to preserve their independence.

By Zviad Maisuradze

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