Paris Air Show: After Boeing showstopper, Airbus seeks order bounce

Above, the assembly line for the Boeing 737 MAX aircraft in Renton, Washington. (AP)
Updated 19 June 2019
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Paris Air Show: After Boeing showstopper, Airbus seeks order bounce

  • British Airways owner IAG signs letter of intent to buy 200 of its 737 MAX jets
  • Airbus is looking for up to 200 orders for the A321XLR, which is designed to open up new routes

PARIS: Airbus, reeling from the potential loss of a major customer for its best-selling A320neo as British Airways owner IAG placed a lifeline order for the grounded 737 MAX, prepared to hit back with more orders for its A321XLR on Wednesday.
The planemaker has been negotiating with US airlines investor Bill Franke whose Indigo Partners has also been known to place orders for multiple airlines within its portfolio and could reel it in for the Paris Air Show, industry sources said.
Airbus declined to comment.
After weathering intense scrutiny over safety and its public image, Boeing won a vote of confidence on Tuesday as IAG signed a letter of intent to buy 200 of its 737 MAX jets that have been grounded since March after two deadly crashes.
The surprise order lifted the energy of a previously subdued Paris Airshow, where the talk had been of the possible end of the aerospace cycle, given the issues at both Boeing and Airbus as well as geopolitical and trade tensions around the world.
Australia’s Qantas Airways said on Tuesday it would order 10 Airbus new A321XLR jets and convert a further 26 from existing orders already on the Airbus books.
Airbus is also in talks with leasing company GECAS and has been trying to secure an eye-catching order for the A321XLR from American Airlines, though the world’s largest carrier does not typically make announcements at air shows.
Airbus is looking for up to 200 orders for the A321XLR, which is designed to open up new routes.


Daimler vows to cut costs after one-offs bring loss

Updated 5 min 43 sec ago
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Daimler vows to cut costs after one-offs bring loss

  • Company reduced its sales outlook for Mercedes-Benz cars and said €4.2 billion in one-off expenses hit earnings
  • Daimler pledged to cut costs in response but provided few details
FRANKFURT: Luxury carmaker Daimler said it would intensify cost cuts after legal risks for diesel-related issues and the cost of replacing Takata airbags triggered $1.74 billion (€1.56 billion) loss before interest and taxes in the second quarter.
The company reduced its sales outlook for Mercedes-Benz cars and said €4.2 billion in one-off expenses hit earnings, mainly at the cars and vans divisions, contributing to an operating loss at group level, compared with a €2.6 billion profit in the second quarter last year.
“We can’t help but note that this is the lowest level of money in the bank since the depths of the financial crisis,” Bernstein Research analyst Max Warburton said. “Raising Daimler’s operating performance is not going to be a quick fix.”
Daimler pledged to cut costs in response but provided few details under new Chief Executive Ola Kaellenius, who took up the top job two months ago.
“In general, we are intensifying the group-wide performance programs and reviewing our product portfolio in order to safeguard future success,” Kaellenius said on Wednesday.
Rival Aston Martin also announced cost cuts and its shares tumbled after it lowered its outlook for operating profit on slowing demand, while peer Peugeot bucked the industry downturn with a sharp increase in first-half profit.
Daimler will provide details about potential cost cuts and its strategy on November 14 during its capital markets day.
Earlier this month, the Stuttgart-based carmaker had given an initial outline of earnings in what amounted to its fourth profit warning in 13 months, saying its 2019 group EBIT would be “significantly” lower than last year.
The Stuttgart-based carmaker said it now expects unit sales for Mercedes-Benz Cars to be at the prior-year level, revising its previous forecast of achieving a slight increase, following a sharp slowdown in demand in China.
Daimler said on Tuesday that China’s Beijing Automotive Group Co. Ltd. has bought a 5 percent stake in the company, cementing their long-standing alliance.
Unblocking supplier bottlenecks which have delayed production of Mercedes-Benz GLE and GLS models will help push sales of luxury cars in the second half of 2019, Kaellenius said.
“Daimler is blaming supplier bottlenecks and quality issues pretty much across all divisions for its poor financial performance. These are certainly not external factors outside of management’s control,” analysts at Evercore ISI said.
Daimler made a provision of €2.6 billion to cover diesel-related expenses in the first half of 2019 after German regulator KBA ordered a recall of 60,000 Mercedes-Benz GLK models, claiming the vehicles made use of illegal engine software. Daimler has appealed the KBA ruling.
The carmaker declined to break down in detail how much of the amount was allocated for recalls, updates and potential fines and litigation.
Daimler’s diesel pollution levels are being investigated by prosecutors in Stuttgart, Germany, where it is headquartered, as well as by the US Environmental Protection Agency and the California Air Resources Board.
Pressure to clean up combustion engines has come at a time when the industry has to invest heavily in electric and self-driving vehicles, and cope with slowing growth in China, weak markets in Europe and a rise in global trade tensions.
Passenger car sales slowed 3 percent during the quarter and the return on sales at Mercedes-Benz Cars swung to a negative 3 percent in the quarter, down from 8.4 percent in the year-earlier period.