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by Darius Anucauskas

Jumbo Weight Removed from Airbus Wings

This morning, the Airbus SE (EPA: AIR) came out with a statement saying that they are discarding the production of their largest long-haul aircraft, the Airbus A380 Superjumbo. The news comes after the company started seeing a drop in sales, as airline orders started falling due to a few reasons. The main buyers of such aircrafts were cash-rich airlines, which can afford to pay a 445 million-dollar (US) price tag on a plane. Or at least, they could afford to lease it. But given that many big airline companies have to compete in price-wars with other big and medium-size airlines, it has become increasingly difficult to fill-up the whole plane each time, as it can carry around 530 passengers onboard, depending on the interior style and layout. Every non-filled seat on such a plane becomes a very costly problem for the people-carrying firm. Also, considering the fact that not all airports are able to land such a monster on their runways, this limits the number of routes this plane can do. In addition to that, the increasing concern of the global ecological problem had also forced the companies to re-think their business strategies to come in-line with the eco-regulations, which are getting stricter. This plane isn’t the most economical, even though 12 years ago, when the Airbus began the production of the A380, it was believed that it might reduce the airline company costs, because it could fit more passengers inside.

Let’s not forget another possible reason why the production of the A380 aircraft could have been discontinued. It could also be due to the growing political instability inside the European Union, as we know that there are four major European countries, France, Germany, Great Britain and Spain, which play a key part in building the plane. Given the ongoing problems around Brexit and what consequences it may bring, this uncertainty might have played a part in the decision to stop the A380 project. Let’s point out that the UK contributed to the project by building the wings of the giant plane.

Looking at the company’s stock from the technical side, we can see that today, AIR opened with a huge gap to the upside, almost reaching its all-time high, near the 111.12 barrier, which was tested on July 26th last year. In our view, this might have been driven by better than expected company’s fourth quarter results and the fact that Airbus SE stopped the loss-making A380 project. Since the stock’s strong reversal on January 3rd, it continues to climb higher, trading above a short-term upside support line taken from the daily close of that day. From the short-term perspective, we believe the share price could slide a bit lower to fill that huge gap, or even test the aforementioned upside line. If it remains intact, investors could see this as good opportunity to step in and drive the stock back up to its recent highs. Maybe even to test the all-time high figure again.

But, if investors will see the news as a potential worry sign, this could turn out ugly for AIR. A break of that upside support line and a price-drop below the 102.70 mark could force the stock to slide even further. This is when the share price may test the 99.46 obstacle, a break of which could lead towards the 96.90 support zone, marked near the highs of January 25th and December 3rd.

Airbus 4hour


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