Boeing’s KC-X protest rains on EADS’ annual results party

As luck would have it Boeing’s announcement of its protest of the KC-X award to Northrop Grumman / EADS came on the eve of EADS’ annual results press conference in Paris. I got in late to Paris last night for the event which kicked off at 07:00 today, so woke up to news of the protest. And I’m blogging from this room in the Westin Hotel, which beats the office.

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There’s some surprise here that Boeing are going ahead. EADS people who were involved in the contest happily admit they were surprised when they won, but then surprised by how comfortably it seemed they had won. Boeing however are saying it’s clear that it was extremely tight and they won on several key points. So either or both are misinterpreting, deliberately or innocently, what the Air Force has told them. Anyway this whole strange affair is now being packed off to the US Government Accountability Office which has got 100 days to make a ruling.

Nevertheless the press conference, attended in person by the best part of 100 media and many more via the webcast, and presided over by French CEO Louis Gallois aided by German CFO Hans-Peter Ring, starts off with a huge slide of a KC-45 refuelling a B-2 just to ram home the point. That’s followed by a Singapore Airlines A380 (third one delivered today as it happens), an EC175 helicopter just launched to great acclaim, plus the Columbus space laboratory and the Automated Transfer Vehicle which was more literally launched two days ago. The crystal-clear message being: we’re doing some things very well indeed.

Which is fair enough, except of course that for some time the Airbus bit of EADS, which accounts for 60% of revenue, hasn’t been doing things very well at all. As a result the rest of the day is heavily given over to another message – which is that most of the problems are fixed and things will only get better. In Gallois’ words: “We have prepared the future and cleaned up part of the past.” And for good measure: “EADS is back. You can see that.”

And, for now anyway, Gallois, ship-steadier extraordinaire, has got a point. The A380 is back on track, “the new governance is bearing fruit” (ie back-stabbing and outright shouting matches are well down on last year), the A350 XWB shows distinct signs of turning into an aeroplane, Eurocopter’s buccaneering dominance of the rotary world continues mostly unabated, all is well in outer space, the KC-X coup de theatre has been sprung, and the A400M military transport is…well, the A400M is la probleme du jour. But with an acknowledged 6-12 month delay it’s no worse than just about every military programme in history, and better than many.

The market has proved pretty underwhelmed by all this and the stock is more or less unmoved – possibly any optimism being tempered by news of the Boeing protest. There is also the huge, immovable obstacle of the weak dollar which will be a drag on EADS for the foreseeable – as Gallois himself continually says. Today he puts it thus: “We need to reduce costs, reduce our breakeven point, and increase our dollar content. I can’t put it any other way.”

To the surprise of even some EADS officials present, Ring, the very model of the rigorous German CFO, is moved to comment on the fact that only Europe takes a “neutral” view of its currency – the Euro. “We have to work to influence that,” he says – driving a small train through years of Germanic wisdom on non-intervention in the currency markets.

So, what do you think? Light at the end of EADS long, dark tunnel? Leave a comment.

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