Airbus

IThe business

Airbus is three businesses sold under one name. The big one builds commercial aircraft: it had €52.6B of revenue in 2025, 72% of the group.³ The second, Airbus Defence and Space, makes military aircraft such as the A400M and the A330 tanker, the Eurofighter with partners, and satellites; it had €13.4B.³ The third makes helicopters, €9.0B and 392 delivered.³ Together, in 2025: revenue of €73.4B, 6% more than in 2024, EBIT Adjusted of €7.1B, net income of €5.2B and free cash flow before customer financing of €4.6B.³ About 165,000 people worked there at the end of 2025 and 171,000 at the end of September 2026.³⁴

Two plain things first. Airbus is a Dutch company, listed in Paris, Frankfurt and Spain, with the French, German and Spanish states owning 26% between them.⁶ And it reports in euros while selling its aircraft in dollars, so the euro-dollar rate is part of its profit. All figures on this page are in euros, written €, because that is how Airbus reports and where the shares trade. The few American comparisons, Boeing and the engine makers, are in US dollars and marked US$.

The aircraft business

Airbus delivered 793 aircraft in 2025: 93 A220s, 607 A320 Family, 36 A330s and 57 A350s.³ In the first nine months of 2026 it delivered 547, against 507 a year earlier: 68 A220s, 428 A320 Family, 13 A330s and 38 A350s.⁴ The A320 Family is 78% of units, which is why one engine supplier matters so much.¹⁶ The company says it will deliver about 870 in 2026, the chief executive put it on the October call at 870 give or take 20, and it needs 323 in the last three months to get there.⁴⁸ I come back to that in Financials.

The backlog is the stock of firm orders. It was 8,754 aircraft at the end of 2025 and 9,310 at 30 September 2026, which is 10.7 years of this year’s deliveries.³⁴ Orders were strong in 2026: 1,174 gross in nine months against 610, and 1,105 net after 69 cancellations.⁴ The A320 Family backlog was 7,467 aircraft at the end of June and about 75% of it is the larger A321.¹⁷ The chief executive said on the October call that around 500 A321XLRs, the long-range version, were in the backlog; that figure comes from the edited call transcript and I have not seen it in a filing.⁸

Each programme has a rate in aircraft a month, and the whole story is the rate. The A320 Family is the heart of it. The company aimed for 75 a month in 2027 as late as February 2025.²⁵ In February 2026 it said that Pratt & Whitney had “failed to commit” to the number of engines ordered, and moved the target to 70 to 75 by the end of 2027, settling at 75 after.³ At 75 the A320 Family would make 900 aircraft a year. Add the A220 at 13, the A330 at 5 and the A350 at 12 and the plan is 105 aircraft a month, or about 1,260 a year at full rate; the company’s own 2029 marker is more than 1,100 deliveries and revenue above €100B.⁴¹³ That arithmetic is mine. The 2025 result of 793 is 63% of it.

The market it sells into

Airbus’s 2026 Global Market Forecast, as presented on 21 July, projects 42,060 new passenger aircraft by 2045 and passenger traffic growth of 4% a year, and a services market of more than 49,000 aircraft in service by 2044.²⁶ A forecast made by the seller is a sales document, so I read it as the company’s view and not a fact. What I can check is the demand it already has. The backlog is 9,310 and Boeing’s is over 6,300.⁴⁷ Airlines are not short of orders; they are short of aircraft. In the Report of the Board of Directors the company describes post-COVID deliveries as “significantly lower” than the industry had planned.⁶

Services, defence and helicopters

Services. Services were 12% of the commercial aircraft revenue in the first nine months of 2026, about €4.4B on my arithmetic.¹⁶ The company wants commercial aircraft services at US$10B of revenue in 2030, from about US$5B in 2025, and says it will buy to get there; it has agreed to buy Unical, a seller of used serviceable parts, through its Satair unit.²⁶¹³⁶ It also says the business will move into double-digit profitability.¹³ I find this the easiest part to like, because the installed base is about 15,000 aircraft that need parts for decades.¹³ It is also the part with the least detail: the company does not publish a services profit.

Defence and Space. This division made €13.4B in 2025 and an EBIT Adjusted of €798M, after a loss of €566M in 2024 that had €1.3B of charges on space programmes.³ Order intake was a record €17.7B in 2025 and €11.5B in nine months of 2026, 70% more than a year before.³⁴ In nine months EBIT Adjusted was €672M on €9.3B of revenue, 7.2%.¹⁶ The target for 2029 is about €1.3B.²⁶ The company, Thales and Leonardo have a memorandum to combine their space activities, with the aim of operating from 2027; the antitrust review had not finished on 28 October.⁶²⁶⁸ The division also carries the A400M transport, which cost the group charges of €2.2B in 2016, €1.3B in 2017, €0.4B in 2018 and €1.2B in 2019.^18192021

Helicopters. Revenue was €9.0B in 2025, up 13%, EBIT Adjusted €925M, and the order book is 1,122 helicopters at September 2026, up from 981 a year earlier.³⁴ Military is 52% of sales and services 43%.²⁶ In nine months of 2026 EBIT Adjusted fell to €445M, a margin of 7.9% against 8.8%, which the company blames on mix.¹⁶ The 2029 target is about €1.2B.²⁶

The state of play now

The third quarter was weaker than the first two. Revenue fell 2% to €17.5B and EBIT Adjusted fell 9% to €1.77B, because fewer aircraft were delivered in the quarter and the mix was less favourable, and because of the former Spirit AeroSystems work packages.⁴ Airbus delivered 196 aircraft in the third quarter, after a record 237 in the second, which took the first half to 351.⁸¹⁷²⁷ Free cash flow before customer financing for nine months was negative €1.27B, mostly inventory, which rose from €41.7B to €51.4B, and the company repeats that the year-end rally will bring it to about €4.5B.⁴²⁸ Net cash fell to €7.0B from €12.2B.⁴ The company announced on 21 July a target of €12B to €13B of EBIT Adjusted in 2029 and a €5B share buyback over three years; on 28 October the chief financial officer said the plan was unchanged and to “stay tuned” on timing.⁹⁸ A smaller buyback, up to 4.1M shares for employee plans, runs until 6 November.²⁹ The price on 3 November is €193.32.¹

IIThe moat

The usual case is simple. Making a large airliner takes certification, a supply chain of thousands of firms, tooling and a decade of capital, so only two Western companies do it. That is true, with two cautions. The first is that Airbus itself no longer uses the word duopoly. Its 2025 Report of the Board of Directors says COMAC delivered the first C919 in December 2022, that the C919 is a direct competitor to the A320neo, and that “the period of a duopoly in the mainline commercial aircraft market has ended”; it expects the real pressure in the 2030s.⁶ The second is that a franchise has to be tested in a bad year. For Airbus there are two bad years to look at.

In 2020 deliveries fell from 863 to 566, 34% fewer; EBIT Adjusted fell from €6.9B to €1.7B; free cash flow before M&A and customer financing went from plus €3.5B to minus €6.9B; and net cash fell from €12.5B to €4.3B in a year.²¹¹⁰ The company still made an EBIT Adjusted of €1.7B, and the backlog at the end of 2020 was 7,184 aircraft, 4% under 2019, so customers did not walk away; by the end of 2023 it was 8,598.²¹¹⁰²⁴ That is the strongest evidence of a franchise. But it also lost €1.1B on COVID-19 charges and booked a €1.2B restructuring plan, and it paid no dividend for 2020.¹⁰²² The second bad year is 2019, when the aircraft side made €6.4B of EBIT Adjusted and the group still booked €3.6B of penalties for agreements with authorities and a €1.2B charge on the A400M.²¹ The company’s strength sits in the aircraft; its weakness has been what it builds around them.

What does protect it

• A product people have waited years for. The backlog of 9,310 aircraft is 10.7 years of 2026 deliveries. Boeing’s backlog of over 6,300 is about ten years of its 2025 deliveries of 600, so both makers are sold out for a decade, and for both the limit is output, not demand.⁴⁷³⁰ An airline that wants A320s in 2030 has to have ordered them already.
• A product that is hard to leave. The company says it designs for commonality in airframes, systems, cockpits and handling across its families, and that the A320neo versions share over 95% of their airframe with the A320ceo.⁶ Airlines pay to avoid mixing fleets.
• Customers pay in advance. Contract liabilities, mostly deposits and progress payments, were €61.4B at 30 September 2026, up from €58.6B at the end of 2025, set against inventories of €51.4B.²⁸ I count the deposits as a strength while orders grow and as a risk if they stop. In my bear case a part of them unwinds as cash out.
• A second business that does not move with the first. Defence orders were a record, and the three state shareholders, France 10.83%, Germany 10.82% and Spain 4.08%, have tied their money to the company’s survival.⁶ That helped in 2020.
• Dollars hedged for years. The company holds US$74.4B of forwards and collars at an average of $1.22 per euro, and about 60% of its dollar revenue is matched by dollar purchases.¹⁶ The profit is exposed to the dollar, but not this year.

Where it is thin

The main thing is that Airbus does not control its output. It needs engines from two companies, Pratt & Whitney (RTX) and CFM (GE Aerospace and Safran), and in October the chief executive said the Pratt engines remain the pacing item and the company is not building unfinished aircraft in advance.⁸ It also needs fuselage sections, seats and interior parts. The 2025 Report names a number of the problems: a 2025 quality problem with fuselage panels, a software anomaly in flight controls late in the year, and the work packages taken over from Spirit AeroSystems, where, in the chief executive’s words on 28 October, Section 15 of the A350 is on the critical path.⁶⁸ I give engines their own section, next. On the same call the company also reported two quality issues, a surface-protection deviation on stringers in the A321 and an inspection finding on a horizontal tail plane of the A330, saying neither is expected to hurt 2026 deliveries.⁸

The second thin spot is how much Airbus can earn per aircraft. Commercial aircraft EBIT Adjusted margin was 10.4% in 2025 and 9.2% in nine months of 2026.³¹⁶ I would expect a manufacturer with a franchise to earn more than that at full rate, and the company says it will: it expects commercial EBIT Adjusted to rise from €5.5B in 2025 to about €10B in 2029.²⁶ That is the thing to track, not the backlog.

IIIThe competitive advantage

The question here is where the profit goes. Airbus is the aircraft maker, but between the airline and the engine there are other claimants. A new A320neo costs the airline a price for the airframe and a price for two engines, and the engines come with a service contract that can last 20 years. The engine makers have worked out how to earn on the service, and Airbus sits in the middle with a franchise and a lower margin.

The numbers in the table are not like for like. They are close enough to read. GE Aerospace earned a 22.5% operating margin in the third quarter, and said that its commercial services backlog is above US$170B.¹¹ Pratt & Whitney earned 10.5% on an adjusted basis, a reported 6.6%, and its original-equipment sales fell 5% while its aftermarket sales grew 21%, driven by the geared turbofan engine.¹² That is what leverage looks like. When an engine maker ships fewer engines it does not lose much; the aftermarket on engines already in service pays. When an aircraft maker is short of engines it cannot finish aircraft, and cannot deliver, and cannot collect the final payment. That is why I read Airbus’s 2026 as engine-capped. In February 2026 it wrote that Pratt & Whitney “failure to commit to the number of engines ordered” was reducing this year’s guidance and the ramp-up.³ In October it said the delivery profile for 2026 and 2027 was built on the engines the suppliers told it to expect at the start of the year, and that it does not build aircraft it cannot finish.⁸

The engine makers have a reason to behave as they do. They have been fixing durability problems in a large fleet. RTX’s own filing lists an accelerated removal and inspection of a significant part of the PW1100G geared turbofan fleet caused by a rare condition in powder metal as a risk, and Pratt & Whitney booked a US$363M charge in the quarter for a customer bankruptcy.¹² My reading is that engines already in service compete with new ones for the same parts and shop time. I cannot see the engine contracts, which are private, and so I cannot say who bears the cost of a missed engine. What I can see is the result: Airbus’s 2026 deliveries are lower than its industrial system could make, as the chief financial officer said in July.¹³

Where Airbus is ahead

Mix. The A321 is about 75% of the A320 Family backlog, the A321XLR is working as a route opener (the company says half its routes are new), and the ten final assembly lines for the single-aisle are all capable of building the A321.¹⁷⁶¹³ The larger aircraft earns more. The chief financial officer named the A321 share as a reason the A320 margin will widen at full rate.¹³

Pricing. Airbus does not publish prices and I cannot see them. A proxy is commercial revenue per aircraft delivered: €63.5M in 2019, €66.3M in 2025 and €67.0M in nine months of 2026, which mixes price, the mix of models, services and the dollar, so it proves little C (calculated).²¹³⁴ What management says is more useful. Asked on 21 July whether aircraft ordered before COVID, at lower prices, are still being delivered, the head of commercial aircraft said that what was sold after COVID is being delivered in 2026 and 2027 and that what is sold now helps the years after 2030; the company’s own slide on the 2029 profit bridge lists “past pricing materialising” as a driver.¹³²⁶ The same call is edited and machine-made, so I treat the comment as indicative.

Wide-bodies. Airbus has the A350 and the A330neo against a Boeing that is still working on the 777X and the 787 at 8 a month.⁷ The company says both programmes broke even after COVID in 2022, that the A350 will more than double deliveries by 2029, and that the A350’s best margins come after 2029 because of launch-customer contracts and the learning cost of the freighter.¹³ It also says demand could support more than rate 12.¹³

Boeing. Boeing is recovering, and I do not want to understate it. It delivered 600 aircraft in 2025 against 348 in 2024 and 475 in nine months of 2026 against 440; the 737-7 and 737-10 won certification and the 737 is heading to 47 a month.³⁰⁷ But the commercial airplane unit lost US$1.58B on operations in nine months and its backlog is 6,300 aircraft against Airbus’s 9,310.⁷ If Boeing gets to 47 a month and a stable margin, Airbus loses some of the pricing power a pair of firms enjoys. I do not model that in the base case, but I do in the scenarios.

Tariffs

The US has put tariffs on aircraft parts in the past. In 2025 the EU and the US reached an aerospace deal, which the company calls “zero-for-zero”, and which it says largely protected its US deliveries; EBIT Adjusted for 2025 was still “partially offset by the impact of tariffs”.⁶³ The 2026 guidance “includes the impact of currently applicable tariffs”.⁴ Airbus is claiming back tariffs it has paid, and on the July call it said it had booked no benefit yet.¹⁷ I cannot judge the legal outcome of that, or the odds of a new policy.

IVManagement

Guillaume Faury has been chief executive and a director since 2019; the shareholders re-elected him in 2025 for a term to 2028.⁶ Thomas Toepfer is chief financial officer. Lars Wagner runs the commercial aircraft business, a role he took at the beginning of 2026 according to the July transcript, Michael Schoellhorn runs Defence and Space and Matthieu Louvot Helicopters.⁶¹³ René Obermann is chair; his term runs to 2027.⁶ A shareholders’ agreement from 2013 ties the French, German and Spanish holders together, and France and Germany each aim to keep close to 12% of the voting rights.⁶ That is not a free market for control. My reading is that a bid for Airbus would need those governments to agree.

How they are paid, and what that pays them to do

The chief executive’s base salary was €1.56M in 2025, up 5% and the first rise since 2022.⁶ His short-term bonus has a target of 150% of salary, capped at 200% of that target. For 2025 he received €2.925M: half on company targets (EBIT 20%, free cash flow 20%, sustainability 10%, scored at 123% in all) and half on personal goals, scored at 127%.⁶ The long-term award is performance shares: in 2025 he was granted 14,404 shares worth €2.34M at grant, 150% of salary, vesting in May 2029 on average earnings per share (35%), cumulative free cash flow (35%) and sustainability (30%).⁶ The 2022 grant vested at 122%: three-year average earnings per share were €5.59 against a target of €5.03 and three-year free cash flow €12.7B against €11.0B.⁶ His pay is 28% fixed and 72% variable, and about 69 times the average employee’s.⁶

Three things stand out. The bonus table defines EBIT as the IFRS figure, not EBIT Adjusted, so the adjustments cost him money, which is a good sign.⁶ Cash and earnings per share carry 70% of the long-term award, so a manager is paid to deliver aircraft and cash in the year, which is also what a year-end delivery rally does, since final payments arrive at delivery. And the personal part of the bonus, half of it, was scored at 127% in a year when deliveries missed the opening plan by 3%; the board points to the response to the panel and flight-control issues, which I cannot check.⁶ Nothing here looks excessive. It is a plan built for steady delivery, and the choice that matters most, the next aircraft programme, is not in it except as the cash it costs.

His own money

Mr Faury owned 55,880 shares on 31 December 2025, which at €193.32 is about €10.8M, 6.9 times his base salary, against a guideline of 200%.⁶¹ He chose not to join the 2025 employee share plan, although he could have.⁶ The holding is smaller than a founder’s and larger than most hired chiefs. I cannot see how he came by them.

What they did with the capital

A decade is long enough to judge. From 2016 to 2025 Airbus produced €25.9B of free cash flow before customer financing and €26.1B of net income, which is a cash conversion of 1.0, and its net cash went from €11.1B to €12.2B.¹⁸³ It paid regular and special dividends of €7.2B in the last four years and in July said it would return around 60% of free cash flow in 2026 to 2029, with a €5B buyback over three years and a payout ratio of 30% to 50%.¹³²⁶¹⁴ The dividend per share went from €1.35 for 2016 to €3.20 for 2025.¹⁸³ It has also had a decade of charges, and they bear on the question of how reliable the word “Adjusted” is. The ones I can name: the A400M transport, €5.1B in four years; €3.6B of penalties in 2019 under agreements with authorities; the A380, about €1.0B in 2018 to 2020; a €1.2B restructuring plan in 2020; and about €1.3B on space programmes in 2024.^18192021103 That is about €12B, or 47% of the free cash flow the business produced in the same years C (calculated). I count it as a record of poor judgement on programmes and contracts, done mostly before this team’s current plan, and I note that it is the kind of event my model does not predict.

The record on shares is mixed. The issued count went from 772.9M at the end of 2016 to 792.3M at the end of 2025, up 2.5%, almost all employee issues of about two million shares a year; the last cancellation was in 2016, when 14.1M shares were cancelled.¹⁴ In 2025 Airbus bought 4.77M of its own shares for €916M to cover employee plans and cancelled none.⁶ I treat that as stock pay paid in cash, and it is in my owner cash. On 28 October the chief financial officer would not announce a start.⁸ The company also said the buyback is “a targeted tactical move” and not a permanent annual commitment.¹³ If the shares are cancelled it would be the first reduction of the count since 2016.

The recent purchases are small next to the programme decisions. Airbus took over the Spirit AeroSystems work packages in December 2025 to secure A220 and A350 supply; the chief financial officer says the EBIT cost in 2026 is in the low hundreds of millions and the cash cost in the high hundreds, because of inventory and investment.⁶⁸ Airbus took over work that its biggest rival also had to deal with, to control supply it could no longer trust. That is a sound reason, and it moves risk from a supplier to the company. The first nine months show €235M of integration cost, and the chief executive called the integration challenging.⁴⁸

VFinancials

Five things in Airbus’s statements do not mean what they first seem to. The headline profit, EBIT Adjusted, leaves out items that were 26% of it over ten years, shown below. Revenue for 2016 and 2017 is before IFRS 15, the accounting rule that changed how the company counts long contracts, and 2017 revenue was restated down from €66.8B to €59.0B. Free cash flow has had three names in ten years, “before M&A and customer financing”, “before customer financing” and plain “free cash flow”, and the company later restated 2021 and 2022. Deliveries come late in the year, so a nine-month figure is not a quarter of anything. And a good part of any year’s cash is a movement in deposits and inventory, not profit.^1819206

With those cautions the picture is of a business whose EBIT Adjusted rose 76% to 2019, fell 75% in 2020 and has since rebuilt. Revenue was €66.6B in 2016 and €73.4B in 2025, up 10% in nine years while the delivery count went from 688 to 793.¹⁸³ EBIT Adjusted was €4.0B in 2016, €6.9B in 2019, €1.7B in 2020 and €7.1B in 2025, a margin of 5.9%, 9.9%, 3.4% and 9.7% C (calculated).^1821103 Net income was a loss in both 2019 and 2020 and totalled €26.1B in ten years.²¹¹⁰³

The year-end rally

Airbus builds its year backwards. The first nine months of 2026 delivered 547 aircraft; the guidance of about 870 needs 323 in the last three, 108 a month, against a best month of 89 in June and 286 in the fourth quarter of 2025.⁴¹⁵ The chief executive said on 28 October that the delivery profile was “back-end loaded” again.⁸ This is how the cash works too. In nine months free cash flow before customer financing was a negative €1.27B and the guidance for the year is about positive €4.5B, so the last quarter has to bring in €5.8B, mostly customers’ final payments on aircraft they take.⁴ In 2025 the pattern was the same: negative €0.9B in nine months and positive €4.6B for the year.⁴³ It has worked. It also means the year is not safe until December, and each aircraft held back by a seat or an engine takes its final payment out of the quarter. My base takes €4.4B of free cash flow for 2026, slightly under the guidance, and my bear €4.3B.

What an owner can really take out

Free cash flow is not what is left for owners. It is before pension contributions, which were €505M in 2024 and €272M in 2025, before the cost of the shares Airbus buys to hand to employees, which was a net €565M in 2025, and before lease payments.⁵⁶ After those, owner cash was €3.4B in 2025, 66% of net income of €5.2B C (calculated). That year’s net income had a €268M financial result, mostly gains in the value of investments, which is not cash.³ The gap between earnings and owner cash is the point of this section: the price is on the earnings.

Over the longer run the picture is better. Free cash flow before customer financing summed to €22.1B in 2021 to 2025 against net income of €21.7B, close to the company’s “cash conversion of around 1”, but the company itself says that was helped by working capital.²²³⁶¹³ In 2024 working capital added €1.3B and in 2025 €0.1B.⁶ In 2026 it is a big outflow so far. The July plan says working capital will be “neutral” over 2026 to 2029 and that conversion will stay around 1.¹³ I do not give it full credit. I assume 90% to 95% of net income in my base case and 100% in my bull.

Tax, the dollar and the hedge

The tax rate is about 27% on the core business and 25% effective in nine months of 2026, which included a French surtax of about €0.2B a year.⁸¹⁶ Cash tax paid was €965M in 2025, 15% of pre-tax profit, below the expense of €1.39B.⁵ I raise the cash rate to the effective rate in my cases. The dollar matters more. Airbus sells in dollars, and about 60% of its dollar revenue is matched by dollar costs, so the exposure is the other 40%. Its hedge book on 30 September 2026 was US$74.4B at an average blended rate of $1.22, against the ECB rate of $1.1179 on 3 November.¹⁶³¹ The rate in the 2029 target is also $1.22, and the company says that each cent is worth about €250M of EBIT by 2029.⁹⁸ At the spot rate, that is, in theory, 10 cents or €2.5B a year more than the target assumes; against that, it was $1.14 at September and the hedges are placed years ahead, so the rate Airbus actually gets moves slowly.¹⁶ David Perry of JPMorgan said on the October call that at today’s dollar his model put 2029 above the company’s €12B to €13B range; the chief financial officer answered that $1.22 is a working assumption.⁸ That transcript is machine-edited, so read it as the gist.

The balance sheet

The balance sheet is strong. Net cash was €7.0B at 30 September 2026, with gross cash of €21.9B, financing liabilities of €13.8B (including €2.4B of leases at the end of 2025) and a credit facility of €8.0B, for liquidity of about €30B.⁴¹⁶²⁸⁵ Net cash was €12.2B at the end of 2025 and it fell by €5.1B, because of the €2.5B dividend, the negative nine-month cash flow and the purchase of Unical, slightly offset by the dollar.⁴⁸²⁸ September is the seasonal low. Pensions are not a worry: provisions of €1.06B are smaller than the €1.4B surplus in some UK and Canadian plans.²⁸ The company’s stated policy is to keep net cash at levels like recent years, so I do not treat all of it as spare.¹³

Two lines on that balance sheet are bigger than the net cash. Inventories were €51.4B, up €9.7B in nine months, “mostly driven by work in progress” for the ramp-up.²⁸ Contract liabilities were €61.4B. The chief financial officer said the inventory is what he wants for the ramp, not excess, and that once the A320 is stable at rate 75 there could be a chance to release some.⁸ Against that, a stop in orders or deliveries would make the deposits and the inventory move the other way. That is why the bear case in Valuation takes €3B of cash out in two years.

The price in numbers

On those numbers Airbus is valued at 19.6 times last-12-month EBIT Adjusted, 24.8 times reported earnings and a free cash flow yield of 2.8%, and a dividend yield of 1.7%. The 12-month free cash flow figure includes the nine-month outflow; the full-year guidance would be a yield of 2.9%. The shares closed 2025 at €198.40 and reached a closing high of €220.20 on 13 January 2026, then fell to €159.18 on 30 March and have recovered to €193.32; they are 12% under the high.⁶¹ The share has risen 3.7 times since 3 November 2016, about 14% a year before dividends, in a decade that included a 65% fall in under two months to March 2020.¹ I don’t know what drove the fall in early 2026 and I don’t want to guess.

VIValuation

First, how this goes badly wrong

Before any numbers, I ask what would hurt an owner most. I count three ways.

The aircraft cannot be finished. Airbus sells every aircraft it can make; what it cannot control is how many it can finish. The A320 Family needs engines from two suppliers, and one has not committed to the number ordered. The A350 needs Section 15, from a supplier that Airbus had to take over. If these keep deliveries near 900 for years while the company spends on the ramp it has planned, the owner pays for output that does not come. My bear case holds deliveries at 940 a year from 2030 and the commercial margin at 10%, and it is worth €89.³⁸

A shock to demand, with the deposits running the other way. In 2020 deliveries fell 34%, free cash flow before M&A and customer financing was negative €6.9B and net cash fell by €8.2B.²¹¹⁰ Today the company holds €51.4B of inventory and €61.4B of customer deposits.²⁸ If deliveries stopped growing, the deposits would not keep coming in while the inventory kept going out. My bear takes €3B of working capital out over 2028 and 2029. A 2020 repeat would be worse.

I pay a full price for a good result. The shares sit at 19.6 times last-12-month EBIT Adjusted, 24.8 times earnings, and a free cash flow yield of 2.8%. The company’s own 2029 target is baked in. A business at a high multiple is exposed to two things at once: a shortfall in earnings and a lower multiple. That is not about the quality of Airbus. It is about what an owner pays for it.

What an owner can really take out

Owner cash in 2025 was €3.4B, 2.3% of today’s market value of €153B, against net income of €5.2B, a gap of a third.⁵ My base case has owner cash of €5.4B in the fourth quarter of 2026, €4.5B in 2027, €7.0B in 2029 and €9.1B in 2036 E (estimate). At the current price, 2029 owner cash is a 4.6% yield on cost. The company’s own plan is for free cash flow to match net income, which would be about €9.8B in my bull. I take a little less in my base because capital spending, €4.0B in 2025, is set to rise moderately as the ramp and the Spirit sites need it, and I deduct the cost of shares for staff as a cash cost, which the company does not.¹³⁵

What I can’t judge

I cannot see the engine allocation. Pratt & Whitney and CFM tell Airbus how many engines to expect; the contract terms are private, and I do not know who pays for a missed delivery. I cannot say whether Boeing reaches 47 a month and a stable margin, or how soon COMAC sells outside China. I cannot read prices: Airbus does not publish them, and the pre-COVID share of the backlog is not disclosed. I cannot say what the next aircraft will cost: the company has not decided on an A220 stretch or an A350 stretch, wants to launch a next-generation single-aisle aircraft towards the end of the decade, and says R&D spending is trending to about €5B a year.⁸¹³ I cannot say where the dollar goes. For these reasons I show a ladder of deliveries and not one number.

How the cases are built

I build each case year by year in euros, by division. Commercial revenue is aircraft delivered times revenue per aircraft, starting at €60.3M, plus services revenue; the starting figures are set so that 2026 gives about €80B of group revenue and about €7.4B to €7.5B of EBIT Adjusted, close to the guidance. Commercial aircraft earn a margin that rises with the ramp, as the company says it will: services and fixed-cost absorption at full rate, then the A350 and past pricing after 2029. Defence and Space and Helicopters each have their own revenue and margin. From the sum I take adjustments for the Spirit integration (€100M, €250M and €100M in 2026 to 2028), a financial result of €100M and a tax rate of 26%, to reach net income.⁴⁸ Free cash flow before customer financing is the company’s own guide for 2026 (€4.3B to €4.5B, of which only the fourth quarter counts, since I take net cash at 30 September) and later a share of net income: 80% to 85% in the bear, 90% to 95% in the base and 100% in the bull, which is the company’s “around 1”. From that I deduct €300M for lease principal, €300M for pension contributions and the net cost of employee shares, €450M in 2026 and rising 3% a year.⁵ I discount at 8.5%, the ECB’s 10-year AAA euro yield of 3.33% plus 5.2 points, the same rate I use for ASML and LVMH,³² I stop in 2036 and then grow the last year’s owner cash by 2.0%, 2.5% or 3.0%. Net cash is taken after the pension provision and minority interests.

Three comparisons help. My base 2026 EBIT Adjusted is €7.4B, against guidance of about €7.5B. In 2029 my base reaches €11.4B, which is 5% under the bottom of the company’s €12B to €13B and 9% under the middle; my bull reaches €13.1B, a little above the top. I take less than the company because it began each of the last two years with a delivery target it then missed, around 800 and 766 delivered in 2024, around 820 and 793 delivered in 2025, and because it has already moved the A320 rate target once; I also put the dollar at the $1.22 the company uses, not the spot rate.²⁴²⁵³ My base then grows 3.6% a year to €14.6B in 2036, with deliveries levelling at 1,090 and the commercial margin at 13.1%.

In plain words, the price needs 2029 EBIT Adjusted of about €13.2B, a little above the top of the company’s target range of €12B to €13B, and then growth beyond. It could come from 1,172 aircraft a year in 2029, 1,172 against a company marker of “more than 1,100”, or from commercial margins 2.5 points above my base in every year. It also corresponds to a discount rate of 7.6% on my base cash flows, 0.9 points under the 8.5% I ask for. None of that is silly in isolation. Together they say the market has already priced the company’s plan in full, with a little to spare.

The margin of safety, and the price against the range

My margin-of-safety price is €117. It is 70% of my base value, my rule where the results depend on a cycle and on a few suppliers. At that price an owner would have a 30% cushion against being wrong about deliveries, margins and the engine makers, and the price would be 31% above my bear. It would be about 10.2 times my base EBIT Adjusted for 2027. The shares last closed at or below €117 on 17 March 2023, and their lowest close in 2025 was €133.06 on 22 April, after the tariff announcement.¹ At €193.32 there is no margin of safety. The price is 16% above my base, 13% below my bull, and 2.2 times my bear. My weighted value, with 25% on the bear, 50% on the base and 25% on the bull, is €162.

The price reflects a real debate, and the case for the market being right needs naming. It says that Airbus has the longest backlog in its history, that the aircraft business will make €10B in 2029 and has not yet shown the pricing it has already signed, that the A350 and services have more to give after 2029, that a lower dollar than the plan’s $1.22 gives free upside, and that a company returning 60% of its free cash flow while net cash holds deserves a lower return than the 8.5% I ask for. At 8.0% my base value is €181, close to the price. The case against says that deliveries are bounded by suppliers, that the nine-month cash flow is negative, that adjustments have taken 26% of EBIT Adjusted over ten years, that Boeing is recovering, and that the stock already carries the target. I give the second side a little more weight and I would not be surprised to see the first win for a while.

The next best use of the same euro

The euro 10-year AAA yield is 3.33%.³² My base return from €193.32, to October 2036, is 6.2% a year, so 2.8 points more than that, and 2.3 points short of the 8.5% I ask for E (estimate). The nearest cases on this site are GE Vernova, a backlog-driven maker whose base returns 5.9% a year, ASML at 7.4% and LVMH at 8.2%.³³³⁴³⁵ Airbus sits close to GE Vernova and below the other two. The return of 6.2% differs from the 7.6% above because that is the rate at which my base cash flows equal the price, while this return assumes the value I put on the business in 2036. Airbus is a very good business, and the price is a separate question. A good business at a price that needs the top of the plan is a poorer purchase than the same business at €117; I give neither a grade.

The bull case needs many things at once, so I multiply them out. Deliveries of 1,110 in 2029 (about 30% likely, given the last two years), engines arriving for rate 75 in 2028 (50%), the A350 at 12 a month on time (50%), a commercial margin near 13% in 2029 (40%) and no 2020-type shock in ten years (60%). Together that is about 2% if they are independent. They are not, since an engine fix helps three of the five, so I call it 6% to 10%, not 25% E (estimate). My 25% weight on the bull is generous on that arithmetic.

Where this could be in 5 and 10 years

For the base to be right at five years, deliveries have to be near 1,085, commercial EBIT Adjusted near 13%, and group EBIT Adjusted about €13.0B in 2031; the value is then €187 a share, below today’s price, because five years of cash have gone out and the rest has grown. At ten years the base reaches €210. In the bear, EBIT Adjusted stays near €8B to €9B and the value is €104; in the bull it is €17.5B in 2036 and the value €295. The four inputs that drive it are deliveries, the commercial margin, cash conversion and the 8.5% rate. These are estimates of value, not forecasts of the share price. The market price can sit above or below value for years, and in the last ten years the shares ranged from €49 to €220.¹

VIIThe case for the price

What most people miss

Three things cut in Airbus’s favour. First, customers are lending it money: contract liabilities, mostly deposits on aircraft not yet delivered, were €61.4B at 30 September 2026, 40% of the market value, up €2.8B in nine months while inventories rose €9.7B.²⁸ Second, the dollar. The plan assumes $1.22 per euro in 2029, the ECB rate on 3 November was $1.1179, and the company says each cent is worth about €250M a year by 2029, so ten cents is about €2.5B, a fifth of the target.⁹³¹⁸ Third, the A321 is about 75% of the A320 Family backlog, and the chief financial officer names that mix as a margin driver at full rate.¹⁷¹³

The bull case

Airbus is sold out for a decade, the supply chain is improving, all four programmes are being ramped, and profit steps up when the rates stabilise. Management put numbers on it on 21 July 2026: EBIT Adjusted of €12B to €13B in 2029, from €7.1B in 2025, with about €10B from commercial aircraft, €1.3B from Defence and Space and €1.2B from Helicopters, cash conversion of about 1 and a €5B buyback over three years.⁹²⁶ Thomas Toepfer, the chief financial officer, said the plan returns around 60% of free cash flow in 2026 to 2029; Lars Wagner, who runs commercial aircraft, said services are planned to reach US$10B in 2030.¹³²⁶ On the 28 October call David Perry of JPMorgan said that at today’s dollar his model gave a 2029 EBIT above the company’s range; I note it as one named view, from a machine-edited transcript.⁸ I found no named fund manager whose published view on Airbus I could verify.

Against reality

If Airbus hits its rates and its 2029 target, the price is possible. At €12.5B in 2029, the middle of the target, and growth after, my model gives about €184 a share, a little under the price. The year is behind on cash: free cash flow before customer financing is negative €1.27B against a guided €4.5B, and 323 aircraft have to be delivered in the fourth quarter against 286 a year earlier.⁴ My base takes €11.4B in 2029, 5% under the bottom of the range; the price needs €13.2B. The gap is the gap between a plan with a haircut and a plan met in full, plus a little. Today’s last-12-month EBIT Adjusted is paid for at 19.6 times; at €12.5B the same enterprise value is 11.7 times, so a buyer at the price is paying for the target in advance. My odds for the bull are in Valuation: about 2% if the five conditions are independent, perhaps 6% to 10% with the overlap E (estimate).

What a 10x would take. Ten times €193.32 is €1,933, a market value of about €1,526B. At 25 times earnings that needs about €61B of net income, 12 times the €5.2B of 2025 C (calculated). At a net margin of 10%, above anything the group has reported (7.1% in 2025), that is revenue of about €610B, 8 times today’s and about four times the 2025 revenue of Airbus and Boeing combined (€73.4B and US$89.5B).³³⁰ In ten years it takes 26% a year. The shares rose about 14% a year over the last ten, from €52.08 to €193.32, and that decade included a recovery from a 65% fall in 2020 that a company this size cannot repeat.¹ I have not run a study of tenfold moves, but for a company already worth €150B it would be among the rarest events in markets. Tenfold from here is close to impossible, and I would not build anything on it.

Where I come down

What moved me was the order book and the dollar: a decade of backlog, and a hedge book at $1.22 against a spot rate near $1.12. What did not move me was the price, since my cash flows reach it only if Airbus hits the top half of its own target, and its last two opening delivery plans were missed. What would raise my values is rate 75 on the A320 in 2028, the A350 at rate 12 on time and a commercial margin near 13% by 2029; each extra 100 aircraft a year from 2029 is worth about €17 a share.

VIIIRisks, and what would change my view

The three ways this goes badly wrong are at the start of Valuation. These are the rest, and a test of each.

• Engines. Pratt & Whitney has been described by Airbus as the pacing item and as having failed to commit to the engines ordered. A change in what it commits would move deliveries in 2027 and 2028 by tens of aircraft, and my ladder shows what each 100 aircraft are worth.³⁸
• Quality. On 28 October the company named two new issues, a surface-protection deviation on a stringer in the A321 and an inspection finding on an A330 tail plane, and said neither is expected to hit 2026 deliveries. The 2025 Report recalls a fuselage panel non-conformity and a flight-control software anomaly.⁸⁶ The company launched a programme to reduce non-quality by 50% by 2027.²⁶
• Competition. Boeing is delivering 475 aircraft in nine months against 440, with the 737-7 and -10 certified and the 737 heading to 47 a month. COMAC delivers the C919, which Airbus calls a direct competitor to the A320neo, and expects to matter in the 2030s.⁷⁶
• Oil, travel and conflict. In July the company said passenger traffic declined slightly from the Middle East conflict and higher oil prices, with no cancellations or deferral requests; in October it called traffic resilient with volatile jet fuel prices.¹⁷⁸ Net cancellations in nine months were 69 aircraft of 1,174 gross.⁴
• Tariffs and trade. The aerospace deal between the EU and the US is why this is not a bigger line. A change would raise costs, and the risk factors list weaker demand and deferrals as consequences.⁶
• Space and defence. The combination of the space activities with Thales and Leonardo is not signed and the antitrust review is open; the A400M has cost €5.1B of charges in four years; European defence budgets have helped orders.^818192021
• Control. France, Germany and Spain own 26% between them, and the shareholders’ agreement of 2013 ties them together.⁶ The governance record includes €3.6B of penalties in 2019.²¹

What a bad year looks like in the model

Two surprises. A weaker euro is worth €29 a share, more than a 2020-style shock costs (€8), which says how much of this value is the dollar and how little of it the company controls. And a delay that is made up later costs almost nothing: two years of 40 fewer aircraft, recovered afterwards and with €0.4B a year of extra cost, take about €1 off the base. What matters is anything permanent. Deliveries stuck at 925 a year for ten years take €28 off the value, and a pricing slowdown €26. The risk is not a bad quarter. It is a bad decade.