Airbus has hit a rough patch this year with revelations that cracks are developing in the wings on its A380 superjumbos, a problem first identified on three Qantas and Singapore Airlines aircraft back in January. But while the problem has attracted much media attention and is being taken seriously by Airbus engineers, the accountants are non-plussed.
Yesterday in Paris, EADS chief financial officer Hans Peter Ring didn't let the issue detract much from his presentation of 2011 results that show the Franco-German aerospace giant and its dominant Airbus division racking up satisfactory - if not impressive - revenue and profits growth. Asked about the latest troubles to dog a programme that has historically been a severe drag on EADS's earnings, Ring was clearly pleased to be able to report that fixing the wing cracks will fall within the normal warranty cost provision already made for the A380.
So, expect no charges against 2012 operations, which Ring and chief executive Louis Gallois promise will result in further profitability growth. Last year, EADS revenue gained 7% to €49.1 billion and earnings before interest and taxes rose 38% to nearly €1.7 billion, taking the profit margin higher by nearly a percentage point to 3.45%. Airbus commercial sales grew 10% to €31.2 billion ($41.1 billion) and divisional EBIT gained 87% to €543 million on the back of a tenth consecutive year of increased production - to 534 deliveries - and a record net order intake for 1,419 aircraft.
Resolving the A380 cracks problem will involve detailed visual inspection of wing-rib feet and an interim repair that relieves stresses believed to have been introduced by the original assembly process. A more permanent repair may involve replacing the wing-rib feet - 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 assembly process.
The problem needs addressing but is not grounding aircraft; nearly 70 have been delivered and for many it will be adequate to delay inspection until routine maintenance comes due.