Airbus says major projects on track, eyes higher output

Each month, Airbus currently produces 42 of the narrow-body jets, which compete with the Boeing 737.

It plans to make a transition to an upgraded A320neo version between 2016 and 2018, after which it will consider further output increases, Airbus Group CEO Tom Enders told shareholders.

The A320neo project is on track, as is the A350, the company's latest wide-body jet which is due to be delivered as scheduled later this year, Enders told the annual meeting of Europe's largest aerospace group.

However, he said the A350 was entering a "red hot phase," in which efforts to ramp up production coincide with last-minute changes stemming from round-the-clock flight testing.

Two A350s for the first customer, Qatar Airways, are currently in final assembly.

Airbus Group pledged to bolster efforts to stabilize its free cash-flow, traditionally a volatile item that is subject to inflows of customer deposits for new jet orders on the positive side and to R&D and inventory build-up on the downside.

Enders said the company had some "challenging years ahead" in 2014 and 2015 before it could produce significant free cash-flow. For this year, it again forecasts free cash-flow breakeven.

Airbus and U.S. rival Boeing have both signalled they would take a break from pioneering but risky new projects while returning more cash to shareholders.

Company officials deflected a query from a shareholder on whether the dividend was enough, given the shift in emphasis towards incremental investments.

Airbus Group is raising the dividend to 75 cents from 60 cents, but the payout ratio is unchanged at 40 percent.

Airbus Finance Director Harald Wilhelm said the company needed to set aside money for increases in working capital to allow it to lift production of its new A350 jet from just two in the last quarter of this year to 10 a month in 2018.

Airbus Group does not plan any major merger activity, Enders said, referring to deals worth at least 1 billion euros, but does hope to raise some money from disposals linked to a restructuring of its defence and space activities.

Shareholders were asked to approve a watershed in the 14-year-old company's history, voting to change its legal name to Airbus Group, in line with the trade name already in use since the start of the year.

The company was founded as EADS from a merger of French, German and Spanish assets in 2000. Recent corporate governance changes have curbed the influence of the French and German governments, which own stakes of 11 percent each.

"I have seen a sea change. We were something in between a joint venture and a listed company," Chairman Denis Ranque said.

(Reporting by Tim Hepher; Editing by Andrew Callus and Jane Baird)