Airbus CEO: The Conclusion of Defense Electronics Business Sale is Imminent

Airbus CEO Tom Enders has confirmed that the sale of Airbus’ defense electronics business is nearing its conclusion and could be finalized in a matter of days. Speaking at the annual results briefing in London, Enders stated, “We are in the final stages of making the decision regarding defense electronics, and it should not take months, but hopefully just days or weeks.”

The defense electronics division includes various products such as radars and a range of sensors. Plans to include a border security business in the sale were abandoned last week due to sensitivities related to ongoing projects in the Middle East, particularly a problematic deal in Saudi Arabia. Enders explained that retaining the border control business temporarily was a practical decision, as it was proving overly complex to include it in the sale process of the broader defense electronics activities.

Airbus had initially put some of its defense-related businesses up for sale as part of a business review in 2014, with a focus on returning to core programs in military aircraft and space sectors. Other divestments included the company’s stake in naval systems provider Atlas Elektronik. At the time of the announcement, the combined businesses had revenues of approximately €2 billion ($2.2 billion). The identity of the potential buyer for the defense electronics division remains unknown.

A German newspaper, Handelsblatt, had previously reported that the German government had approved the sale to US groups Carlyle and KKR, but this report was later denied by government sources.

Enders made these comments about the defense electronics business as Airbus, Europe’s largest aerospace company, revealed its 2015 performance figures, which showed a 6 percent increase in group revenues to €64 billion, largely driven by growth in the commercial airliner sector. Airbus Defence & Space revenues remained stable at €13.08 billion for the previous year compared to €13.025 billion. Notably, the 2015 figures included a €500 million deconsolidation of launcher revenues due to the creation of the Airbus Safran Launchers joint venture.

Enders expressed frustration at the slow progress in gaining regulatory approval for the space launcher joint venture.

Order intake for defense and space activities experienced a notable 18 percent increase, reaching €14.4 billion when compared to the previous year. One of the driving factors behind this substantial backlog growth was the surge in orders for A330 tanker/transport aircraft.

In terms of revenue distribution within Airbus Defense & Space, services now take the lead, constituting 74 percent, while platforms, which include the likes of Typhoon, the C295 transport, and the A400M, accounted for only 26 percent of revenues last year.

Interestingly, during the presentation of the results, there was not a single mention of the Typhoon combat jet by Enders or other senior executives, despite Airbus being a partner with BAE Systems and Finmeccanica in the combat jet program.

Enders chose to center his focus on the challenges faced by the A400M airlifter program, expressing his dissatisfaction with the number of deliveries made in the previous year. He expressed optimism about a substantial increase in deliveries for the current year, stating, “We delivered 11 aircraft in 2015, a level of delivery that falls short of our expectations. We had originally planned for more. We anticipate a stronger ramp-up in 2016.”

The Airbus CEO mentioned an expectation of more than 20 deliveries for 2016, but the exact number would depend on discussions with customers concerning their national requirements and specifications.