Airbus plunges into first loss in its history

9th March 2007, Comments 0 comments

MUNICH, Germany, March 9, 2007 (AFP) - European plane maker Airbus plunged into its first-ever operating loss in 2006 and will be in the red again this year because of delays and restructuring, parent company EADS said on Friday.

MUNICH, Germany, March 9, 2007 (AFP) - European plane maker Airbus plunged into its first-ever operating loss in 2006 and will be in the red again this year because of delays and restructuring, parent company EADS said on Friday.

The announcement underlines how far the aircraft manufacturer, a symbol of European industrial cooperation and technology, has fallen in such a short space of time.

Despite delivering a record 434 aircraft last year, EADS said Airbus made an operating loss of 572 million euros (752 million dollars) -- compared with an operating profit of 2.3 billion euros in 2005.

"Airbus will display another substantial loss in 2007," EADS said, pointing to more gloom ahead owing to an array of costly initiatives and a worsening business environment.

The main costs in 2007 would arise from a controversial restructuring programme announced by Airbus last week, overruns from its much-delayed A380 superjumbo project, and charges from the launch of its mid-range A350 XWB.

EADS, which has helicopter, space and defence assets as well as Airbus, reported an 86-percent fall in its operating profit to 399 million euros from 2.852 billion euros in 2005.

Net profit plummeted to 99 million euros compared to a year-earlier net profit of 1.676 billion euros, while sales rose to 39.434 billion euros from 34.206 billion in 2005.

EADS said that increased research and development costs and a fall of the dollar against the euro would also undercut the company.

The price of shares in EADS, which has fallen by about a quarter in 12 months, showed a loss of 2.95 percent to 22.99 euros on a broadly weaker Paris stock exchange in early trading.

The scale of the losses at Airbus appeared to take analysts by surprise. They had predicted a loss of 436.7 million euros on average, according to a poll by Thomson Financial.

The Airbus results contrasted sharply with those of chief rival Boeing, which made a comeback last year after spending five years behind its European rival in the battle for new orders.

In January, Boeing reported a 14-percent rise in net profit for 2006 to 2.21 billion dollars (1.68 billion euros) on annual revenues which rose 15 percent to a record 61.5 billion dollars.

The results from Airbus underlined the depths of the problems at Airbus, which Airbus chief executive Louis Gallois has stressed repeatedly in the teeth of political and trade union resistance to restructuring.

Gallois, who is also co-chief executive of EADS, said again on Friday that EADS would need to raise fresh capital at some point, either via a share or bond issue, but also reassured that the cash injection was not urgent.

Delays to the A380, the world's biggest civilian airliner which is two years behind schedule, are to cost Airbus more than 5.0 billion euros from 2006-2010, Gallois had said earlier this week.

EADS said on Friday it had booked a 2.5-billion-euro charge for the A380 during 2006, the main reason for the loss over the year.

Gallois and fellow EADS co-chief executive Tom Enders again stressed the importance of implementing the restructuring plan, called "Power8", to generate extra cash of 5.0 billion euros by 2010 and 2.1 billion euros per year thereafter.

"It will take some time but Power8 will make Airbus substantially more integrated and efficient," they said in a statement.

The cost-cutting strategy was unveiled last week and calls for 10,000 job cuts across Europe in the next four years, streamlined production involving the divestment of three factories and a major re-organisation of manufacturing.

"For 2007, our priorities are to drive operational improvements, restore the group's credibility and build a leaner and more dynamic EADS," they added.

The cutbacks face fierce resistance from trade unions, have caused diplomatic tensions between the French and German governments and have become a key campaign issue in the run up to presidential elections in France in April and May.

In addition to the cost pressures on Airbus in 2007, EADS also forecast that growth in deliveries would slow and that Airbus would face heightened competitive pressures.

Copyright AFP

Subject: French news

0 Comments To This Article