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EADS results: Airbus wholly-owned subsidiary question dominates


Is EADS edging closer to taking total control of Airbus? Speculation that BAE Systems is poised to sell its 20% stake in the commercial aircraft manufacturer grew last week after it emerged from EADS’s annual results that a €3.5 billion ($4.2 billion) value had been put on the UK partner’s share.

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Although EADS chief financial officer Hans Peter Ring was cautious, declaring “it’s not up to us to decide, but we would have to be prepared to pay a significant amount” – BAE’s increasing emphasis on the US defence market means it is likely to be a matter of time before the UK company decides to cash in its Airbus assets in return for money to fund a stateside acquisition or two.

In recent interviews, BAE chief executive Mike Turner has been lukewarm about the company’s commitment to Airbus, saying BAE has no immediate plans to sell but regularly reviews its investments.

The worry for UK industry is that a BAE pull-out could endanger the country’s participation in future Airbus programmes, even though it would not immediately affect Airbus UK locations in Broughton and Filton. The Spanish Airbus arm’s increasing competence in developing composite technology is a particular risk to the UK’s wing business.

“There could be considerable fallout,” says George Burton of UK-based Counterpoint Market Intelligence. “Without a British stake, workshare for Airbus UK could be vulnerable.”

The full-year results announcement in Paris was the first for co-chief executives Tom Enders and Noel Forgeard since they took over nine months ago from Philippe Camus and Rainer Hertrich.

The pair were in upbeat mood, declaring it “the best financial year ever”, with an 8% rise in revenues to €34.2 billion and a 17% increase in earnings before interest and tax to €2.85 billion.

The company predicts that revenues will increase to more than €37 billion this year, and, due to the dollar exchange rate, this is likely to nudge EADS closer to Boeing’s number one position in the market.

Once again, it was Airbus that led the charge for EADS, with revenues in its “best year ever” up almost a tenth to €22.2 billion and a record gross order intake of 1,111 aircraft. Cost savings as a result of the airframer’s Route06 programme offset the effect of the low dollar, the currency in which Airbus sells its aircraft, says EADS.

But other divisions also performed strongly, particularly Eurocopter, which “maintained its global leadership in the civil and parapublic sector” with a 15.3% uplift in revenues to €3.2 billion, on the back of 334 deliveries – nearly a fifth more than in 2004. The division received orders for 401 helicopters, 71% of them from outside its European “home markets”.

The once-ailing Space division continued its road to recovery, making a €58 million profit on revenues slightly up at  €2.7 billion spurred by the delivery of telecommunications satellites and the Ariane 5 production ramp-up.

The Defence & Security Systems division saw revenues grow by 5% to €5.6 billion, mainly as a result of Eurofighter Typhoon and missile deliveries. EADS is a major stakeholder in both Eurofighter and the MBDA European missile house.

Defence overall now represents more than a fifth of the group’s total orderbook of c253 billion and Forgeard predicts defence revenues will reach the symbolic €10 billion figure next year.

EADS also benefited from its “sleeping” 46% share in Dassault Aviation, where strong sales of Falcon business jets boosted its contribution to EADS’s revenues and bottom line.

Although investors appear happy with EADS’s strategy – the price of the one-third of the company’s shares that trade on the London, Madrid and Paris stock exchanges has risen almost €10 over the past year, and closed at €31.2 following publication of the results – some concerns remain over Airbus programmes.

Former Airbus chief executive Forgeard shrugs off those worries, stating that the slow-selling A340-500/600 is a “niche aircraft” and “sells as such”, and admitting that to widen the quadjet’s appeal Airbus would have to make “a number of not minor modifications” to “cope with the fuel burn”.

He insists the first A380 will be delivered to launch operator Singapore Airlines on time, by the end of this year, stating: “It is a real challenge – but we will do it.” And he says 176 orders and commitments for the A350 twinjet “is not that bad six months after the launch”, but that Airbus would be keen to achieve 200 orders “as soon as we can”.

Addressing speculation about a merger with Thales, Forgeard said he remained committed to it. “Yes it’s true I have always thought, and still think, that a link between Thales and EADS would make sense,” he said. But he added: “We do not have any ongoing discussions with Thales’ management.”

HELEN MASSY-BERESFORD / PARIS

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