Airbus share decline 'too dramatic' UBS says

The fall in Airbus's shares is "too dramatic" given the aerospace company's strong products and ability to weather the turbulence caused by Covid-19, UBS analysts said.

The investment bank kept its 'buy' rating on Airbus shares and left its price target unchanged at €100 after the company's first quarter results at which Chief Executive Guillaume Faury said the industry faced its "gravest crisis".

UBS reduced its sales estimates for Airbus by 12% for 2020 to 2024. The bank's analysts reduced their 2020 earnings forecast by 16% based on management comments about limited workforce reductions. Cash burn will be €5bn in the second quarter and €1bn in the third quarter, they estimated.

There could be further widebody production cuts and questions have been raised about why airlines would buy a new plane with fuel prices and demand depressed, UBS said. But carriers will always value carbon efficiency, greater range, reliability, maintenance packages and other benefits that Airbus offers, the analysts said.

Airbus is mostly exposed to narrowbody aircraft which are flexible for operators. There will be demand for planes if China and Asia domestic air travel revives, UBS said.

"Our Chinese analysts estimate that 90%+ of the Chinese people could resume work across all cities and regions in the near-term, supporting the recovery of business travel in the country," UBS analyst Celine Fornaro wrote in a note. "Airbus shares are pricing 10% long-term organic growth decline, which we believe is too dramatic if traffic comes back to 2019 levels sometime around 2023."