Airbus profit warning knocks more than £11bn off European aerospace stocks

More than £11bn was wiped from European aerospace and defense stocks after a profit warning from Airbus shocked the sector.

Shares in the planemaker fell 9.4 percent after it cut its forecast for the year and disclosed a £760 million charge at its troubled space division.

A continental index of aerospace and defense stocks suffered a drop of almost 4 percent after the upgrade.

Analysts said the profit warning was “surprising” and the downgrades to delivery forecasts had been “a real surprise”.

It dragged down shares of suppliers and competitors, which had been on a roll as air travel recovered from the pandemic and geopolitical tensions caused governments to bolster their defenses.

Shares in Rolls-Royce, whose shares have soared more than 200 percent over the past year, fell as much as 4.9 percent yesterday.

It recovered most of its losses and closed down 1.1 per cent at 466 pence. Babcock’s share price ended the day down more than 3 per cent at 533p.

Shares in London-listed aerospace technology provider Melrose Industries fell 2.3 percent to 567.8 pence.

British defense giant BAE Systems saw its shares take a 1.1 per cent hit, falling to 1,337 pence. Explosives maker Chemring fell 1 percent to 379 pence.

The market capitalization of the Stoxx Europe Total Market Aerospace and Defense index fell from £296 billion to £284 billion, a fall of around 4 per cent.

It came after a shock update in which Airbus said it will build fewer planes this year.

The company, which is based in the Netherlands, will deliver only 770 aircraft instead of the planned 800 due to supply chain problems that have affected engines, aerostructures and cabin equipment.

The company delayed plans to increase production of its best-selling model, the A320neo, by one year to 2027.

And the company’s underlying operating income forecast for the year was cut from between £5.5bn and £5.9bn to £4.6bn.

Free cash flow expectations were reduced from £3.4bn to £2.9bn.

Meanwhile, Airbus said it will take a £760m cut in the first half of the year following a review of its space unit.

Chief Executive Guillaume Faury told analysts: ‘At the moment we are facing headwinds. We have to bite the bullet.’

Analysts at Deutsche Bank said the aerospace giant had issued a “surprise profit warning” as the bank downgraded its stock to “hold”.

Christophe Menard, research analyst at Deutsche Bank, said: “Supply chain remains a wild card at Airbus.

‘We are concerned about the sudden change in the company’s guidance on deliveries. The reduction in the delivery guide is a real surprise. It seems that Airbus does not have full control of the supply chain.