Planemaker returns to the black

European Aeronautic, Defence & Space Co posted a first-quarter profit as its Airbus SAS unit, the world's largest commercial-aircraft maker, delivered more planes.

Net income was 285 million euros, or 35 cents a share, compared with a loss of 10 million euros, or 1 cent, a year earlier, Paris- and Munich-based EADS said in a statement. Sales rose 10 percent to 9.9 billion euros.

Airbus, which supplied 5.2 percent more planes to customers in the quarter, said on Tuesday that the 525-seat A380 faces further postponements on top of two years of delays. The Toulouse, France-based division reported full-year losses in 2006 and 2007 because of late production of the double-decker A380 and redesigns of the planned A350, a model that will compete with Boeing Co's 787 Dreamliner.

"Though many serious challenges have been overcome, there remains much to do in order to secure the significant and lasting improvement in operational performance we are targeting," Chief Executive Officer Louis Gallois said in the statement. "First-quarter results are encouraging in that respect."

EADS has dropped 28 percent in Paris trading this year, compared with a 3 percent decline at Chicago-based Boeing.

Earnings before interest and tax, excluding goodwill and one-time gains or costs, rose more than ninefold to 769 million euros from 88 million euros a year earlier amid improvements at all divisions and a decline in reorganization costs, EADS said. Currency effects hurt Ebit by 360 million euros. EADS reiterated its 2008 forecast of 1.8 billion euros in adjusted Ebit.

Profit has been held back by the decline of the dollar, the currency of plane-industry contracts worldwide, against the euro, in which the company posts most of its costs. The US currency lost 8.2 percent versus the euro in the quarter, the biggest drop in almost four years.

Airbus accounts for two-thirds of EADS's revenue, a proportion the company aims to reduce to 50 percent by 2020 by building up defense work and other operations. Airbus' loss last year widened to 881 million euros from 572 million euros in 2006, causing EADS's first full-year loss in five years, on the cost of delays with the A400 military transport, A380 and A350.

The planemaker's new orders will fall to a four-year low of 750 aircraft in 2008 because of rising fuel and credit costs, Airbus Chief Operating Officer John Leahy said on April 9. Sales contracts totaled a record 1,341 planes last year.

A380 delays

The A380 entered commercial service in October with Singapore Airlines Ltd, which operates four of the planes. Airbus said yesterday that it will provide customers with 12 A380s this year, instead of the 13 targeted, because it can't shift to automated production as quickly as planned. Deliveries will total 21 rather than 25 next year, and 30 to 40 two years from now instead of 42.

Boeing's 210- to 330-seat 787 is scheduled to make its first flight by the end of this year and reach its first customer by the third quarter of 2009, at least 14 months later than planned. Some deliveries will be delayed by about 20 months, the company reiterated on May 3.

The A350 is scheduled to enter service in 2013, competing with Boeing's current 777 model as well as with the 787.

EADS's other businesses include Eurocopter, which makes helicopters, and a military-electronics unit as well as the company's holdings in the MBDA missile joint venture, Eurofighter combat-jet partnership and Arianespace rocket-launch group.

IATA's market forecast

The International Air Transport Association forecast in April that global airline profits this year will total $4.5 billion, 10 percent less than a December estimate because of rising fuel costs and a slowing US economy. The reduction was the third in seven months by the Geneva-based group.

Airbus started a reorganization in late 2006, dubbed Power8, aimed at cutting 5 billion euros in spending before 2010 and achieving 2.1 billion euros in cost cuts after that.

The reorganization plans included eliminating 10,000 jobs and transferring some plane-component factories in France, Germany and the United Kingdom to suppliers in return for their taking part in the A350, including sharing financial risk.

Talks on selling plants to Toulouse-based Latecoere SA and Bremen, Germany-based OHB Technology AG have collapsed in the past two months because of disputes over currencies used in supply contracts.

Agencies

(China Daily 05/15/2008 page17)