A380 wing cracks don't spell more financial trouble for costly programme

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Airbus has hit a\nrough patch this year with revelations that cracks are developing in the wings\non its A380 superjumbos, a problem first identified on three Qantas and\nSingapore Airlines aircraft back in January. But while the problem has attracted\nmuch media attention and is being taken seriously by Airbus engineers, the\naccountants are non-plussed.

Yesterday\nin Paris, EADS chief financial officer Hans Peter Ring didn't let the issue\ndetract much from his presentation of 2011 results that show the Franco-German\naerospace giant and its dominant Airbus division racking up satisfactory - if\nnot impressive - revenue and profits growth. Asked about the latest troubles to\ndog a programme that has historically been a severe drag on EADS's earnings,\nRing was clearly pleased to be able to report that fixing the wing cracks will\nfall within the normal warranty cost provision already made for the A380.

So,\nexpect no charges against 2012 operations, which Ring and chief executive Louis\nGallois promise will result in further profitability growth. Last year, EADS\nrevenue gained 7%\nto €49.1 billion and earnings before interest and taxes rose 38% to nearly €1.7\nbillion, taking the profit margin higher by nearly a percentage point to 3.45%.\nAirbus commercial sales grew 10% to €31.2 billion (\$41.1 billion) and\ndivisional EBIT gained 87% to €543 million on the back of a tenth consecutive\nyear of increased production - to 534 deliveries - and a record net order\nintake for 1,419 aircraft.

Resolving the A380\ncracks problem will involve detailed visual inspection of wing-rib feet and an interim repair\nthat relieves stresses believed to have been introduced by the original\nassembly process. A more permanent repair may involve replacing the wing-rib\nfeet - each wing rib has 30-40 of these L-shaped brackets that connect them to the wing skin - with beefier parts of a different alloy, as well as altering the\nassembly process.

The\nproblem needs addressing but is not grounding aircraft; nearly 70 have been\ndelivered and for many it will be adequate to delay inspection until routine\nmaintenance comes due.