At last week's EADS 2009 results announcement in Paris, chief executive Louis Gallois got so enthused listing the group's successes in its 10-year life that he momentarily lost his place in the script. "Ah" the veteran French industrialist paused for comic effect before returning to the aspect of the performance most of the media in the room were focusing on, "I forgot about the losses."

Given its unwieldy and politically inspired creation in 2000, the fact that the European giant has enjoyed fairly consistent revenue growth for the past decade has been impressive. Last year's record output at its dominant business, Airbus, was achieved in the face of the woes in the airline sector. But it is the failure to make any contribution from its activities in 2009 that shows how vulnerable EADS is to hitches in its key programmes.

EADS revenue and earings 2004-09 


The EBIT deficit of €322 million ($438 million), which translated into a net loss of €763 million, was the result of a one-off €1.8 billion write-off against the delayed A400M and the effects of the weak dollar against the euro. Revenues were stable at €42.8 billion. Although EADS has sailed close to the red before - in 2006 and 2007 when the A380 crisis hit the bottom line - this is the first time the Franco-German combine has slipped into loss.

EADS is keen to stress the negative EBIT does not reflect the company's underlying performance - before one-off charges EBIT would have been €2.2 billion positive.

The company also expects that, with the 5 March agreement with customer nations to increase the price of the contract by €2 billion and provide an extra €1.5 billion in exchange for a slice of future export sales, the A400M can now continue untroubled on its path to certification and delivery to the seven air forces from 2013.

However, this is twice in a few years that a major programme - for different reasons - has threatened to derail the world's biggest aerospace company. Gallois and Airbus chief executive Tom Enders will hope that the A350 XWB - due for certification in 2013 - does not go the same way as rival Boeing's 787 Dreamliner, where issues with co-ordinating a global network of risk-sharing suppliers to create a complex airliner have led to the US company's biggest programme nightmare in decades.

With the A350 XWB, however, EADS's destiny will entirely be of its own making. Gallois and Enders blame the A400M problems on politicians' insistence on using an all-new European engine and more subtly on their predecessors' willingness to accept the ministerial meddling in the first place. Although EADS will not have its hands tied with the A350, it equally cannot count on taxpayer bail-outs if the programme goes wrong.


The A400M aside, Airbus's businesses all performed solidly. Airbus commercial aircraft revenues (the division now includes the A400M and the former EADS Casa military airlifter activities) at €26.4 million were just slightly down on 2008, although the division's profitability suffered directly as a result of a provision made against the delays in ramping up A380 deliveries and exchange rate effects.

A better return from its services activities helped Eurocopter grow revenues by 2% to €4.6 billion, despite 30 fewer deliveries than the 2008 figure of 588. The space division, Astrium, had its best year in a consolidated European satellite manufacturing and services sector, with revenues up 12% to €4.8 billion.

An internal shake-up that involved moving the Augsburg aero­structures business into Airbus hit Defence & Security revenues, although a ramp-up in Eurofighter deliveries, including to export customers, helped EBIT.

EADS is far from out of the woods. It is continuing its streamlining Power8 plan, even upping the amount it hopes to trim annually from its cost base from €200 million to €350 million by 2012.

Hopes of finally developing a major footprint in North America have also been dashed for now by the decision by partner Northrop Grumman not to rebid the new US Air Force tanker contest. But EADS still has stateside ambitions. The need to store cash for A350 and other development rules out any BAE Systems- or Finmeccanica-style big acquisitions. But this, insists Gallois, "does not mean we will not do medium-size ones".

Source: Flight International