Investing.com -- Fitch Ratings has upgraded the Long-Term Issuer Default Rating (IDR) and senior unsecured debt ratings of Airbus SE (OTC: EADSY ) to ’A’ from ’A-’, with a stable outlook on the Long-Term IDR. The Short-Term IDR is affirmed at ’F1’, as reported on May 23, 2025.
The upgrade is based on Fitch’s expectation of an improvement in Airbus’s operating profitability and free cash flow (FCF) generation in the short to medium term. This improvement is anticipated to further solidify Airbus’s financial profile. The company’s strong business profile also supports the rating.
Airbus’s IDR and stable outlook underscore its leading market positions in commercial aerospace, including helicopters and certain defense sectors, despite some concentration in specific platforms. The company benefits from a wide geographical and customer base, as well as a substantial backlog of commercial aircraft orders, providing good revenue visibility over the medium term. Airbus’s robust capital structure and historically significant net cash position further enhance the group’s financial flexibility.
Airbus has shown a consistent improvement in profitability, elevating its Fitch-defined EBITDA margin to 10.8% in 2024, up from 9.6% in 2023, despite industry-wide supply chain challenges. This trend is expected to continue, driven by increased commercial aircraft deliveries and capacity utilization. Fitch’s forecast is based on a gradual resolution of current supply chain bottlenecks by 2026 and assumes a slower growth rate of aircraft deliveries than what management projects.
Airbus has also demonstrated solid FCF generation, surpassing Fitch’s expectations in 2024. The company is expected to maintain positive FCF, despite higher dividend payments, including an additional dividend of over EUR700 million annually. With normalized capex and no significant working capital fluctuations, Fitch expects Airbus’s FCF to be over 3.5% of revenues from 2026.
Airbus maintains a strong capital structure with a forecast gradual improvement in EBITDA leverage. The company’s net leverage has historically been supported by a substantial net cash position, reinforcing financial stability. This robust capital structure is expected to continue supporting Airbus’s strategic initiatives and operational resilience.
The demand for commercial aircraft remained strong in 2024, with Airbus continuing to enhance its order backlog, which reached 8,726 units by the end of 1Q25, predominantly for single-aisle A320 and A220 models. The company holds a substantial lead over its closest competitor, The Boeing Company (NYSE: BA ), in backlog size and projected deliveries over 2025-2028. Cancellations have remained below single-digit percentages over the past three years, while Airbus’s book-to-bill ratio consistently exceeds 1x. This trend is anticipated to continue over the short-to-medium term.
Airbus is expected to continue modest increases in deliveries of over 790 units in 2025, up from 766 in 2024. This factor is key to driving profitability improvements and enhancing FCF generation. Airbus’s A320 and A220 models are expected to continue to account for about 80% of deliveries. Aircraft delivery volume is forecasted to return to pre-pandemic levels in 2026, exceed 860 units in 2026, and reach about 950 units in 2027.
Fitch believes that possible tariff increases would have a moderate impact on the company’s performance, as Airbus is expected to be able to mitigate the impact on its costs. The company has good geographical diversification, with 24% of revenues in 2024 derived from the North American region. Its diverse sales and large order book should support the company’s ability to optimize deliveries.
Airbus’s business profile remains very strong, anchored by its dominant status in an advanced technology sector, marked by high entry barriers, particularly in the production of large commercial aircraft and helicopters. It also benefits from diversification by geography, customer base, and product. Airbus has a significant presence in the more stable defense market (about 25% of revenue), which contributes to more predictable cash flow compared to the commercial sector.
Airbus has a less diverse revenue mix than Boeing, with a lower share of defense and service revenue. This leads to a high concentration of revenue from its long-established and successful A320 family program, which is a risk in case of production or operational issues. However, this is not viewed as a constraint on the rating due to the program’s long-established success and operational reliability.
Boeing (BBB-/Negative) is a direct competitor. However, Boeing has faced execution and management challenges in recent years, resulting in a weaker financial profile than Airbus. Moreover, issues with its 737MAX in 2024 have affected Boeing’s delivery capacity and cash flow. Historically, Boeing has had stronger FCF generation than Airbus, and this is forecasted to improve from 2026. Airbus’s capital structure is much stronger, while Boeing’s EBITDA leverage is forecasted to be above 10x by the end of 2025.
Boeing’s business profile is slightly stronger than Airbus’s due to a more diverse revenue mix and a higher share of defense and service revenue. Nevertheless, the companies are equally strong in size, market position, and geographic and customer diversification. Airbus has a stronger presence in the commercial single-aisle aircraft segment, which is recovering more quickly from the pandemic than the widebody segment, to which Boeing has higher exposure.
Fitch’s key assumptions for Airbus include a modest rise of deliveries at around 3% for 2025 improving to around 9% yoy in 2026-2027, primarily in single-aisle aircrafts, total aircraft deliveries returning to 2019 levels in 2026, and EBITDA margin gradually improving to around 12.5% in 2028 due to higher deliveries. No material fluctuation in working capital-cash flows is expected, which should remain broadly stable on advance payments from customers for new orders. Capex is anticipated to be about EUR3.7 billion a year in 2025, declining slightly to around EUR3.6 billion in 2027-2028. Dividend payments are expected to remain at about 35% of net income with additional dividends of EUR790 million. Small bolt-on acquisitions of EUR130-150 million a year are expected during 2025-2028.
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