Airbus Parent EADS Swings to Loss on A380 Delays, Says Further Cancellations Possible

Airbus parent EADS said Wednesday it swung to a third-quarter loss due to problems at the European aircraft maker and warned that the freighter version of its A380 superjumbo could suffer more order cancellations.

The European Aeronautic Defence and Space Co. said it lost 195 million euros ($245 million) in the July-September quarter, after a net profit of 279 million euros in the year-earlier quarter. The company said costly A380 production delays and a weak U.S. dollar weighed on the bottom line.

Memphis, Tenn.-based delivery company FedEx Corp. said Tuesday it had scrapped its order for 10 of the A380 freighters because of delays to the program, now two years behind the original schedule. FedEx ordered 15 Boeing Co. 777s instead.

EADS Chief Financial Officer Hans-Peter Ring said Airbus' 15 remaining freighter orders - 10 from United Parcel Service Inc. and five from International Lease Finance Corp. - still need to be "reconfirmed."

All the freighter orders are now "in the cancellation zone," he said. UPS said late Tuesday the Atlanta-based company was still reviewing its options.

Airbus still has 142 orders on its books for the plane's passenger version. In the wake of the latest delays, Virgin Atlantic Airways deferred delivery of its first A380s until 2013 and Emirates, the program's biggest customer with 45 planes on order, announced it was sending an audit team to France to check on the latest delivery schedule. Australia's Qantas Airways Ltd. increased its A380 order to 20 planes from 12.

EADS said Wednesday that earnings before interest and taxes, or EBIT - a closely watched aerospace benchmark - swung to a loss of 239 million euros ($305 million) compared with a year-earlier profit of 559 million euros.

Revenue for the quarter rose 14 percent to 8.49 billion euros ($10.83 billion), helped by strong sales of both military and civilian aircraft.

Nine-month revenue for the Franco-German company came in at close to 27.5 billion euros ($35.08 billion), while EBIT and net profit both slipped about a third to 1.4 billion euros ($1.79 billion) and 848 million euros ($1.08 billion).

In the past few weeks, some analysts have raised concerns that the A380 delays could hamper development of the A350 - a new widebody jet designed to compete with Boeing's fast-selling 787 and 777.

A decision on whether to go ahead with the A350 will be taken in the next few weeks, Ring reiterated Wednesday. Airbus will have to meet cost-cutting targets if it is to "deliver on all programs at the same time."

Airbus announced plans Monday to slash the number of suppliers it uses to 500 from the current 3,000, as part of a promised drive to find annual savings of 2 billion euros ($2.5 billion) by 2010. Thousands of job cuts are also expected.

Penalty payments to airlines that ordered a now-abandoned, less ambitious version of the A350 could reach up to 800 million euros ($1 billion) in the last quarter of the year, Ring said.

Shares of European Aeronautic Defence and Space Co. rose 1.6 percent to 20.99 euros ($26.77) in Paris.


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