Airbus Parent Reports Higher 3rd-Quarter Profit

Airbus parent company EADS said strong demand for its commercial aircraft helped its third-quarter profits increase by a hefty 45 percent.

But the European jet maker warned Thursday that its free cash flow, a measure of cash generated by a business, will be negative-1.5 billion euros ($2 billion) this year because of its investment program into lifting production and development of programs such as the A350 long-range wide body, which is supposed to enter service in the second half of next year.

Previously, the company had said its free cash flow would break even this year, compared with positive-1.5 billion euros last year.

The company said in a statement that net profit for the July-September quarter rose to 436 million euros, up from 301 million euros a year earlier.

EADS, which next year is adopting the “Airbus” name for its overall corporate identity, said its free cash flow is being squeezed because some of its government military customers cut spending amid tightened budgets, and because of unexpected additional costs tied to the A350 and other programs.

Speaking to reporters, Chief Financial Officer Harold Wilhelm said “there’s still a long way to go” on the A350 with some higher costs, but that the program remains on track for entry into service late next year.

Wilhelm also said the free cash flow situation will improve before the end of this year.

EADS still expects its operating profit before one-offs, its preferred earnings gauge, to reach 3.5 billion euros this year, up from 3 billion euros in 2012.

U.S. rival Boeing reclaimed the title of world’s largest airplane maker from Airbus last year, delivering 601 planes in 2012 to Airbus’s 588 deliveries. But last month, Airbus secured its first-ever order from Japan Airlines, a deal that undermines Boeing’s long-held dominance of the Japanese aviation market.

As of the end of October, Boeing had delivered 530 aircraft to Airbus’s 504.

Airbus has the upper hand on aircraft sales, though, booking 1,265 orders through the end of October to Boeing’s 1,102. It expects to deliver 620 aircraft this year, including 25 of its superjumbo A380s.

In a recent interview with The Associated Press, Airbus chief executive Fabrice Bregier said Airbus will regain the lead on deliveries around 2017 or 2018, when the company ramps up production of the A350.

The contest between the two aircraft makers is about more than bragging rights. Boeing forecasts that over the next 20 years, the global demand for new airplanes will exceed 35,000 aircraft valued at $4.8 trillion.

The A380, which seats well over 500 people in a typical cabin configuration, has seen little demand this year, with Airbus booking no new orders so far. The company says the aircraft remains a priority, and is still promising to sell 25 of the jets by the end of this year.