Increased Demand in Military Aviation: Airbus Experiences a Spike in Arms Division Orders
In an interview with the Financial Times, Airbus Chief Financial Officer (CFO) Thomas Toepfer reveals a bullish outlook for the company's Defense and Space division. "We're hit by a wave of defense spending," Toepfer says, highlighting the rise in orders from European NATO nations.
Airbus' Defense and Space division is benefitting from increased interest in their products, with defense ministries querying delivery timelines. Despite this positive momentum, the impact on Airbus' revenue is yet to match that of ammunition manufacturers. However, the division's revenue is expected to climb over time, gradually surpassing previous years. In 2024, the division generated revenues of 12 billion euros, accounting for 18% of the company's total income. The division's order intake amounted to 16.7 billion euros, increasing by 6%.
Toepfer expects the division's margins to move towards the mid to high single-digit range in the medium term. By 2028, the adjusted earnings before interest and taxes (EBIT) of the division are hoped to surpass the 1 billion euro mark. In 2024, the division experienced losses of 566 million euros due to the A400M military transporter’s burden and satellite depreciation. Toepfer hints at potential collaborations with Thales and Leonardo, stating that talks are going well and a decision is expected by the end of the year.
The European space sector, according to Toepfer, is plagued by fragmentation, which impacts competitiveness. He suggests that Europe might need to reconsider its defense business platforms in the long run for efficiency. However, he doubts that a second attempt at a planned merger with BAE Systems, which failed 13 years ago, is feasible.
Despite high geopolitical risks, Toepfer remains optimistic about the outlook for the current year. The US tariffs' impact is considered "manageable," provided no further disruptions occur. With increased aircraft deliveries, Airbus aims to boost the adjusted group EBIT by 30% to 7 billion euros. The A400M program is expected to be cash-neutral for the first time in 2025, Toepfer reveals.
While the exact adjusted EBIT figure for Airbus' Defense and Space division by 2028 remains undisclosed, the division's revenue and profitability are expected to significantly improve. Given typical aerospace defense industry margin targets and Airbus' growth trends, it is reasonable to infer that Airbus aims for mid-teens operating margin percentage levels, similar to peers like Safran, although precise adjusted EBIT numbers by 2028 are not publicly disclosed in available data.
Read the full interview with Thomas Toepfer
[Sources: 1, 2, 3]
The Defense and Space division of Airbus is experiencing a surge in interest from defense ministries, with revenues expected to climb over time and surpass previous years' figures. This growth is aimed at gradually moving the division's margins towards the mid to high single-digit range in the medium term, with the adjusted earnings before interest and taxes (EBIT) of the division hoped to surpass the 1 billion euro mark by 2028.
In the European space sector, there is a need for reconsideration of defense business platforms in the long run for efficiency, but Toepfer doubts the feasibility of a second attempt at a merger with BAE Systems, which failed 13 years ago. Potential collaborations with Thales and Leonardo are underway, with a decision expected by the end of the year.
