ANDREW DOYLE / MUNICH

Manufacturer promises decisive action to reach break-even in struggling division by 2004, after it falls deeper into red

EADS is throwing its weight behind efforts to accelerate the restructuring of Europe's space industry in a bid to turn around mounting losses at its Space division.

Hit by the collapse of the commercial satellite market and a series of technical failures culminating in the loss of the inaugural Ariane 5 ECA in December, the unit slipped deeper into the red in 2002, prompting EADS to pledge "drastic action" to reach break-even by 2004.

EADS co-chief executive Philippe Camus, speaking in Munich after the release of the company's 2002 results, said acquisition of full control of Astrium from minority shareholder BAE Systems in January had given it a "free hand to streamline and reorganise that division". However, closer integration of Arianespace's fragmented, multinational structure has become "more necessary than ever", he says.

With a 28% stake EADS is the largest shareholder in Arianespace behind French space agency CNES, which has just under a third.

Another 1,700 jobs are to be axed at the Space division, in addition to the 1,600 losses announced last year, and measures aimed at shaving €285 million ($315 million) from the division's costs in 2003 are being implemented.

"We see that a lot of cost reduction needs to be achieved to have a competitive Ariane 5 launcher," says Camus. "We are also considering that we need to reinforce Arianespace's financial structure. As an industrial shareholder we are ready to do what we have to do but we would like to discuss this issue with the governments involved, especially France."

A better than expected profitable performance by Defence and Civil Systems and strong damage limitation measures at the Airbus division to cope with falling airliner deliveries and financing exposure at United Airlines and US Airways helped EADS to "preserve underlying health and meet all its financial targets", says co-chief executive Rainer Hertrich. Group revenues fell slightly to c29.9 billion in 2002, compared with c30.8 billion a year earlier, while earnings before interest and tax (EBIT) were down 18% to c1.4 billion.

nA quarter of the 1,600-strong workforce at the French space agency-operated Kourou launch site in French Guiana are to be axed in a cost-cutting move. There were 12 Ariane 4 and 5 commercial launches from Kourou in 2002, but only six are set for 2003 after the Ariane 5 ECA failure in December 2002, and as a result of the downturn in the space business. CNES is also planning to delay several projects suffering from up to 30% cost overruns.

Source: Flight International