After years of cost pressure and sluggish pricing, Airbus is sitting on a backlog that increasingly locks in higher prices, giving it more control over future profits.
Bank of America’s analyst said prices for widebody jets like the A350 have jumped sharply over the past two to three years, helped by renewed demand and stricter pricing discipline.
The smaller A320 family, led by the popular A321, is also seeing steady price gains that will gradually feed into Airbus’s accounts as planes are delivered later this decade.
"We have growing conviction on our mid-teens margin assumptions for Airbus commercial," analyst at BofA said expecting it to be by the end of decade, supported by firmer pricing.
Aircraft prices are typically negotiated years before delivery, with only limited annual inflation adjustments. That left Airbus exposed when costs soared after 2021, squeezing profit margins. But as the backlog of older, cheaper orders is cleared, newer and more expensive contracts will dominate.
BofA expects this shift, combined with indexation and a better mix of models will lift gross margins meaningfully from 2028 onwards.
"After a 10-year downturn in the widebody market, we think the improvement in the pricing of A350/787 in the past two years isn’t at the forefront of investors’ minds"
Stronger pricing matters because Airbus has a rare advantage that is limited competition. Airlines have few alternatives to Airbus and Boeing, and both are exercising greater discipline after a decade of discounting.
That gives Airbus the confidence to raise prices without losing customers, especially for in-demand models like the A321 and A350 freighter.
BofA lifted its price target on Airbus shares to €270 from €244, saying that better pricing should support higher earnings and valuations in the coming years. Investors have already rewarded engine makers for their pricing power. Airbus may be next.
Source :
https://www.investing.com/news/stock-market-news/airbus-backlog-gains-pricing-power-with-bofa-expecting-higher-margins-4261558
