Airbus Taxis to a Better Slot

Superjumbo A380 Expected to Stop Losing Money Next Year

Airbus Group ’s superjumbo A380 is finally en route to the break-even point, potentially reducing drag on the aerospace manufacturer’s results and stock.

Long an albatross around Airbus’s commercial-aerospace division, the 525-seater A380 is projected to stop losing money next year, the company said Friday when presenting third-quarter results. This should clear the way for the commercial division, which accounts for about two-thirds of the company’s profit, to more fully benefit from any uplift from its more promising fleet of aircraft: the A320, A330 and A350.

Losses from the A380, which launched in 2007, continued in the most-recent period. The company delivered nine of them in the quarter compared with four a year earlier. The delivery of a higher number of the lossmaking planes contributed to a 41% year-over-year drop in net profit for the third quarter. But it also sped the A380’s path to break-even. Production improvements for the A380 pushed operating income up by 14%, or about a fifth higher than expected, according to Investec.

Another positive: the progress of the fuel-efficient, long-range A350, which is the company’s largest development program currently. The plane completed its maiden flight on schedule in the third quarter with the first delivery to be made this year.

The transition of Airbus’s A320 to the new-engine A320neo should also improve profitability. And the A320neo sold out until 2020, according to UBS .

It isn’t all blue skies. The A380 could still fall back into the red. And Boeing’s 777X, which is being pitted against the A380 aims to offer a more fuel-efficient alternative when it enters the fray about 2020. So to stay competitive, Airbus needs to upgrade its existing engine, which will dent cash flow.

As well, reaching break-even doesn’t mean the A380 is going to suddenly be profitable—that isn’t expected until the end of the decade at best, when second-hand planes also begin to enter the market.

At the moment, though, the stock reflects a good deal of the uncertainty. The shares are down about 8% this year, while the Stoxx Europe 600 is up around 2%. Trading at about 5.7 times 2015 earnings before interest, tax, depreciation and amortization, the stock remains at a sizeable discount to Boeing at 8.7 times, according to FactSet.

So while Airbus isn’t ready to soar, it should be leveling out.