EADS Profit Declines 39 Percent On A380 Burden

Nearly four years after serious production problems with its A380 jet threw Airbus into a full-blown industrial crisis, its parent company, European Aeronautic Defense & Space, said Friday that the twin-deck superjumbo remained a “substantial” financial burden for the group.

Net profit at EADS declined 39 percent in the first quarter, to €103 million, or $131 million, from €170 million a year earlier, the company said. Operating profit dropped 64 percent, to €83 million.

While factories in Germany and France are slowly catching up with an order backlog of more than 170 of the planes, Airbus is still unable to mass-produce the plane at a pace comparable with other models.

“We are still trying to reduce the amount of outstanding work on the A380,” EADS’s chief financial officer, Hans Peter Ring, said during a conference call.

He said the company aimed to deliver 20 superjumbos this year — double the number in 2009, but far short of the program’s original 2010 goal of 45 planes.

Doug McVitie, managing director of Arran Aerospace, a consulting firm in Dinan, France, said Airbus had ironed out a lot of the biggest problems with the A380, but he doubted it would deliver more than about 17 A380s this year.

“There is still a high degree of customization on these early planes which is holding them back from serial production,” he said. Since 2007, Airbus has delivered only 26 A380s.

EADS wrote off €240 million last year in cost overruns linked to the A380. Mr. Ring said Friday that the company did not anticipate any further charges linked to the program this year.

The value of foreign-currency contracts intended to insulate it from sharp swings in the dollar versus the euro also deteriorated during the quarter, eating into earnings, EADS said. Those currency “hedges” were bought before concerns about the debts of some of Europe’s weaker economies triggered a sharp drop in the euro, which hit a fresh 18-month low of $1.24 on Friday. EADS said its average euro hedge was $1.32 in the first quarter and stood at $1.37 for the full year.

With most of its production costs in euros — while its aircraft are priced in dollars — EADS has struggled in recent years to cope with a stronger European currency. A reversal of that situation would be good news for the company, the group’s chief executive, Louis Gallois, said. “EADS should benefit in the mid- and long-term if the dollar trend is confirmed,” he said in a statement.Revenue for the quarter rose 6 percent from a year earlier to €8.95 billion, thanks to a higher number of commercial jet and military helicopter deliveries, EADS said.



Source: nytimes