Airbus to Report its First Annual Loss; CEO Cites Problems With A380

Planemaker Airbus will report an annual loss for the first time since corporate parent EADS became a public company in 2000, CEO Louis Gallois said Wednesday. EADS will report 2006 results in March.

At a Paris news conference, Gallois also made official what the industry has suspected for months: Airbus sold fewer airplanes last year than Boeing for the first time in six years.

Until 2006, France-based Airbus had outsold the USA's Boeing in commercial airplanes for five-straight years. But Gallois said Airbus booked 790 airplane orders last year. That was well behind 1,044 orders last year for Boeing. "These are the first consequences of our 2006 turbulences," Gallois said.

He blamed the problems mainly on costly production delays in Airbus' new A380 superjumbo jet, now nearly two years behind schedule because of major wiring installation problems. The A380, which will be the world's largest passenger plane, is designed to carry 555 passengers in three classes on two decks. Singapore Airlines, the first to fly the plane commercially, expects delivery this year.

Airbus also was forced to redesign its midsize wide-body, the A350, because the original version was rejected by airline customers in favor of Boeing's high-tech 787 Dreamliner. The redesigned A-350 XWB, for "extra wide-body," won't enter commercial service until 2013, years after Boeing's Dreamliner. The first 787 Dreamliner is scheduled to roll out next year.

For Airbus, 2006 was "a bad situation, worsened by a weak order book," said aerospace analyst Richard Aboulafia of the Teal Group in suburban Washington, D.C.

"We have to give birth to a new Airbus: faster, more efficient and integrated, more global, working more tightly with partners and suppliers," Gallois said. "This will be a matter of years."

EADS, the third-biggest aerospace and defense company behind Boeing and Lockheed Martin, said Airbus will be hit by one-time charges, including delay settlements with A380 customers and costs of its restructuring program. Last year, EADS said the Airbus problems would lead to a profit shortfall of about $6.2 billion in coming years. It's working to cut costs at Airbus by about $2.6 billion a year.

The crises at Airbus triggered two senior management shake-ups at the company last year, culminating in the appointment of Gallois as Airbus CEO. Still, last year was Airbus' second-best year for aircraft sales, and it was its best year ever for deliveries of completed aircraft. The company said it delivered 434 planes, more than the 398 deliveries by Boeing.

Airbus' 2006 orders represented a 43% share of the market for large passenger jets, worth about $75.1 billion at list prices. Boeing estimated its 2006 orders are worth about $114 billion at list prices. Sales are typically made at a discount from list price.

Boeing spokesman Peter Conte called 2006 "another remarkable year for our customers, the industry and for Boeing and Airbus." Both aircraft builders had anticipated fewer orders in 2006.



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