ATW Daily News

Airbus parent EADS falls to loss, cites 'concern' over A380

Tuesday November 17, 2009

Airbus parent EADS suffered an €87 million ($130.2 million) third-quarter loss, reversed from a €679 million profit in the year-ago period, as unfavorable foreign exchange rates and slight decline in revenue dragged the aerospace giant back into the red following seven consecutive profitable quarters.

The nine-month profit of €291 million, down 73% from the €1.08 billion earned in the first nine months of 2008, reflected the "challenging commercial market situation," CEO Louis Gallois said. "Protecting our cash and managing the order book and deliveries, these business priorities served us well this year."

He admitted, however, that the "A380 program is still a matter of concern. Industrial and financial reviews are underway." EADS said that progress is "slower than expected" and that "continuing production instability and customer requests for delivery postponements" have forced the company to "review" the production plan. It acknowledged that "a couple" of A380 deliveries scheduled for year end "will likely shift" to early 2010 (ATWOnline, Nov. 13).

EADS' third-quarter revenue fell 2% to €9.53 billion and operating income slipped 77% to €201 million from €860 million last year. The Airbus segment reported a 3% year-over-year decline in revenue to €6.24 billion and a 99% plunge in EBIT to €4 million. It said 2008 third-quarter EBIT was "supported by a €965 million effect resulting from the revaluation of loss-making contract provisions at the closing spot rate." It continued, "Compared to last year, higher volumes and Power8 savings were more than offset by hedge rate degradation, price deterioration on aircraft delivered and cost increases."

Airbus booked 59 firm orders during the quarter, with the nine-month net reaching 123 aircraft (compared to 737 last year). It has received 26 cancellations this year. As of Sept. 30, its order book was worth €332 billion, down 7.2% year-over-year, including a €14 billion decline owing to a weakening US dollar. EADS said the order book still "provides a solid platform for continued deliveries in the future."

Airbus's nine-month EBIT of €523 million represented a 64% drop from the €1.46 billion recorded last year. Revenue slid 2% to €20.19 billion.

The group said it is "cautiously envisaging an improvement of the economic and market conditions in the next months" but that "deterioration of hedge rates and uncertainties surrounding the A380" will pose challenges.

by Brian Straus

Other headlines: