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A More Conservative Airbus Can Gain Altitude

If the world finally moves on from Covid-19 this year, the plane maker’s cautious financial guidance could prove easy to beat

A move by Airbus to fly under the radar could be a wise one.

Shares in the European plane maker initially rose Thursday, after it released encouraging financial results for the final quarter. Operating earnings were 11% above the median analyst estimate. Free cash flow, which is even more important for aerospace firms, was almost twice as high as expected for the quarter, and amounted to €3.5 billion, equivalent to $4 billion, for 2021 overall. That echoes a better-than-expected cash performance at Boeing, its American rival.

Yet Airbus stock edged down as European trading got under way. The broader travel sector came under pressure amid fresh jitters about a potential war in Ukraine, but it may also have to do with the company’s somewhat underwhelming guidance. Targets for 2022 include flat free cash flow and the delivery of 720 commercial aircraft.

While these aren’t bad numbers, some investors were expecting more. Airbus managed to surpass its 2021 goal of 600 planes by 11 units, and was delivering 860 planes before the pandemic. Executives sounded cautious when addressing analysts Thursday.

Excerpt from WSJ
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How the U.S. Messed Up Its New 5G Rollout: ‘It Wasn’t Our Finest Hour’

Longstanding disagreements between federal agencies over potential risks to aircraft remained unresolved in the days leading to the 5G debut

The Biden and Trump administrations had years of warnings. But the government failed this week to avoid a collision between U.S. telecom companies and airlines over the rollout of new 5G cellular networks.

That failure, rooted in longstanding disagreements over potential risk and a lack of cooperation by U.S. regulators, led to a last-minute scramble that threatened the cancellation of thousands of flights and raised tensions between two powerful industries.

Since 2015, the Federal Aviation Administration has questioned whether decades-old aviation equipment would be disrupted by new cellular signals. The risk to aircraft from new 5G services has been dismissed by the telecom industry and its regulator.

Yet the FAA, still sifting through a flood of wireless-company data, was altering flight-safety instructions in the days leading up to the 5G rollout. Boeing Co. , meanwhile, began talking last weekend with users of its 777 jets about possibly halting flights into major U.S. airports ahead of the 5G debut. Along with questions about shifting FAA restrictions, that set off days of panicked calls among airline chiefs and White House officials, people familiar with the matter said.

Excerpt from WSJ
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Boeing Adds $450 Million to Air-Taxi Effort

Wisk joint venture with Google co-founder Larry Page is developing pilotless electric aircraft

Boeing Co. said it is investing a further $450 million in its air-taxi joint venture with Google co-founder Larry Page, developing small, pilotless aircraft for short passenger hops in and around cities.

The company’s Silicon Valley-based Wisk venture joins an expanding crowd of electric air vehicles that have attracted billions of dollars in new funding over the past year. Some aim to start service by the middle of the decade, though those efforts hinge on an evolving regulatory framework to ensure passenger safety.

Rival plane makers Airbus SE and Embraer SA are developing their own electric air taxis, alongside other startups that have attracted interest and investment from airlines, private jet operators and aircraft leasing companies. The U.S. Air Force is also involved with developing flying taxis for military use.

Excerpt from WSJ
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A Troubled Boeing Inches Closer to Takeoff

The U.S. plane maker reported wider losses due to problems with its 787 Dreamliner, but also turned cash-flow positive for the first time since 2019

Deliveries of Boeing’s popular 787 Dreamliner slowed to a trickle last year due to a raft of factory defects.

Boeing’s glass still looks half empty, but there are signs of change.

On Wednesday, the plane maker said it lost $4 billion in the fourth quarter—half the size of the hit for the same period of 2020 but much larger than Wall Street analysts were forecasting. Even as Boeing overcame its problems with the 737 MAX, deliveries of the popular 787 Dreamliner slowed to a trickle last year due to a raft of factory defects. This forced the company to record a $3.5 billion charge for compensating customers, plus $285 million in abnormal production costs that are forecast to eventually add up to $2 billion. This is twice what was initially expected.

Yet the company also surprised analysts with a long-awaited milestone: For the first time since 2019, it had positive free cash flow. Boeing’s value in the futures market whipsawed as investors weren’t sure whether to interpret the results as good or bad overall, but they settled clearly on “bad” when the stock market opened.

For valuing aerospace stocks, free cash flow is often preferred to earnings themselves, because calculating the profitability of businesses that depend on hugely costly product launches can be more art than science. In Boeing’s case, extra 787 expenses are having an immediate impact on quarterly earnings, even though the company isn’t spending all the money right away. Cash probably gives a more accurate picture of the underlying business.

Excerpt from WSJ
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