EADS Co-CEO Calls 2006 the Worst Year

Major delays to Airbus' A380 superjumbo that led to a $1.01 billion fourth-quarter loss made 2006 the worst year in European plane builder EADS NV's history, the co-chief executive officer said Friday.

"It is clear ... it was the worst year for Airbus in its life," Louis Gallois told reporters at the company's annual news conference in southern Germany.

The comment came after the Amsterdam-based company said that a weaker dollar and major delays at its Airbus unit dragged annual profit down at EADS.

"We had big problems, as everyone knows," Co-CEO Tom Enders added. "This company needs more innovation, more focused innovation."

But he and EADS said the problems at Airbus would continue to be felt through 2007, warning that it would post another substantial loss in 2007.

EADS NV lost 768 million euros ($1.01 billion) in the fourth quarter, compared with a profit of 405 million euros in the same period a year earlier. Sales during the quarter, however, were up 11 percent to 11.96 billion euros ($15.73 billion).

Shares of EADS fell nearly 3 percent before they recovered slightly to 23.25 euros ($30.58), or down 1.8 percent in Paris trading.

"We do not think these results are OK," ABN Amro said in a research note to investors.

The European Aeronautic Defence & Space Co. said the effects of a series of management and financial crises, including a two-year delay to the double-decker A380 superjumbo, and charges at its A350 XWB program hurt fourth-quarter profits.

Adding to that were higher research and development costs, the company said.

Officially launched in December, the 11.6 billion euros ($15.26 billion) A350 XWB program promises better fuel efficiency and greater use of composites than the earlier version of the plane, but with later availability.

So far, Finnair PLC has agreed to order nine of the planes, and Airbus is in talks with other airlines about converting 93 outstanding A350 orders for the widebody model.

But the new Airbus jet is five years behind its rival, Boeing Co.'s 787 "Dreamliner," which already has notched up 464 firm orders as the U.S. company prepares to begin building the plane in the second quarter, with the first flight scheduled for August.

Airbus posted a fourth-quarter operating loss of 1.72 billion euros ($2.26 billion) compared with a 453 million euros operating profit in the same period a year ago. During the fourth quarter EADS bought BAE Systems PLC's 20 percent stake in Airbus for 2.75 billion euros ($3.62 billion).

Sales rose 8 percent to 6.6 billion euros ($8.68 billion) compared with 6.14 billion euros in the fourth quarter of 2005.

For the year, Airbus, based in Toulouse, France, had an operating loss of 572 million euros ($752.3 million) compared with a profit of 2.3 billion euros in 2005. Sales rose 14 percent to 25.2 billion euros ($33.14 billion).

New orders for planes reached 790 in 2006, compared to Boeing's 1,044.

Overall, EADS earned 99 million euros ($130.2 million) in 2006 compared with 1.67 billion euros in 2005. Analysts polled by Dow Jones Newswires had expected a 2006 net profit of 39 million euros ($51.29 million).

Sales rose 15 percent to 39.4 billion euros ($51.82 billion) from 34.2 billion euros a year earlier, helped by an increase in Airbus airplane deliveries to 434 from 378 a year ago.

Co-chief executives Tom Enders and Louis Gallois said the results were hampered by Airbus, but predicted a recently announced restructuring plan would help return the unit to profitability.

"It will take some time, but Power8 will make Airbus substantially more integrated and efficient," the pair said in a statement. "For 2007, our priorities are to drive operational improvements, restore the group's credibility and build a leaner and more dynamic EADS."

Airbus plans to cut 10,000 jobs and spin off or close six of its European manufacturing plants under the auspices of the so-called Power8 plan, which was unveiled Feb. 28.

Three sites making wing and fuselage parts in Britain, France and Germany are earmarked for sale to new investment partners as Airbus follows in Boeing's footsteps by seeking fresh financing for its programs.

Airbus has said potential investment partners include Britain's GKN PLC, Italy's Finmeccanica SpA and U.S.-based Spirit AeroSystems Holdings Inc. - a former Boeing division that was renamed after its sale to investment firm Onex and remains a major Boeing supplier.

The plan has caused political disagreement between Germany and France, with the German government endorsing Power8 as a chance to make the planemaker more competitive, and French politicians looking for ways to circumvent job losses.

"For Airbus ... we will deliver between 440 and 450 airplanes, but Airbus will display another substantial loss in 2007 because of the charges for the Power8 program (and) further costs to support the A380," Gallois said.

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On the Net:

http://www.eads.com

http://www.airbus.com


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