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Airbus shares have been doing well over the past year. At the time of writing they were trading at EUR 89.91. Not bad given that a year ago they were underneath 70. Investors in Airbus shares have seen some decent growth in 2017, and particularly since September.



But the party may be coming to an end. Just as the UK car market has seen sales stall, so aircraft sales may also about the meet a similar crisis which will eventually feed into profits figures for Airbus and see selling of Airbus shares in 2018.

Airbus is refreshingly being transparent about all this and not resting on its laurels.

Is the Middle East going to absorb any more Airbuses?

Two years ago The Armchair Trader visited the massive Airbus plant in Toulouse, France. At the time we could not help noticing how many of the aircraft on the production line were accounted for by orders from a small number of Middle East airlines. Just how many more planes like this can Airbus sell, we asked? There has to be a limit, even when you factor in the growth of carriers in the emerging world.

In October last year Airbus CEO Tom Enders asked for the support of his 130,000 staff as the company faced fraud and corruption investigations. But at the end of the day a huge, multinational company like Airbus is not going to be taken down by a fraud investigation. What will make shareholders more worried is if the business stops selling aeroplanes. That is far, far more serious.

Airbus posted record aircraft deliveries in 2017, with 217 airliners, but it has warned that it is going to cut production of its flagship A380 double decker airliner. One of the reasons behind this is the cost of running such giants. The smaller, more economical A320 has become the workhouse for airlines across Europe and the Middle East, but will it be enough to support Airbus’ share price?

Emirates failure symptomatic of an airliner glut in the Gulf?

Airbus failed to secure an order for 36 A320s at the Dubai Air Show from local airline Emirates. John Leahy, the head of sales at Airbus, has admitted that, as The Armchair Trader suspected, the Gulf market is critical for the sale of A380s. Without the Emirates deal, Airbus has to scale back production of the airline.

Airbus is also wedded to the policy of not selling so-called ‘white tails’ – i.e. building a plane and then trying to sell it to airlines.

Smaller planes are still selling, so it is not the end of the world for Airbus by any means. Budget airline Indigo Partners has just arranged to buy 430 aircraft. Airbus has been increasing its production for 15 years running as the skies above us get busier and busier. But our concerns from Toulouse back in 2015 seem to be coming true.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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