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EADS struggles with Airbus losses

EADS faces serious challenges to meet ambitious targets for Eurocopter helicopters and Airbus Military A400M aircraft in 2007 as it seeks to maintain a strong performance in the face of major civil losses at Airbus.
The company reported earnings before interest and taxation (EBIT) of  €399 million ($523 million) in 2006, with strong results across all defence activities overshadowed by a €572 million loss at Airbus. This led to the company as a whole posting a net profit of just €99 million, compared with €1.7 billion a year earlier.

 Strikes could hit deliveries

Airbus chief executive Louis Gallois admits that industrial action by the airframer's employees, angry at the prospect of 10,000 job losses, could disrupt aircraft deliveries. "For the time being we stick to the delivery forecast for 2007, but you know we are vulnerable, and we are more vulnerable because of the very high rate of production," he says.

Revenues grew to €39.4 billion, 15% higher than 2005’s €34.2 billion, with defence revenues hitting €10 billion for the first time, and increasing 30% year-on-year. EADS does not expect an improvement in EBIT in 2007, although it is expected to remain stable.

But co-chief executive Tom Enders says the Eurocopter division is facing its own difficulties due to its record orders. “The ramp-up of production capabilities is a very big challenge,” he says.

And while Airbus’s 2006 results were overshadowed by the fallout from delays to the A380 programme and associated charges, the A400M transport will not escape the Airbus cost-cutting. “Power8 is addressing it,” says Louis Gallois, EADS co-chief executive and Airbus chief executive. Enders admits there could be a short delay in the aircraft’s first flight.

A400M costs shaved €500 million off Airbus’s EBIT for 2006. A380 and A350 costs and the weak US dollar also dented the figure. EADS has delayed a decision on issuing a dividend to shareholders until a board meeting on 8 April.


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