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Significant ''execution risks'' on A380, A400 programmes, says EADS news
28 May 2008

Amsterdam: Though retaining its earnings guidance for 2008, European defence and aerospace major, EADS has warned however that it still sees "significant" execution risks on its A380 superjumbo and A400M military transport aircraft programmes. Speaking at the company's annual shareholder meeting, chief executive, Louis Gallois, told the company that though the company had made significant progress on the development and industrial ramp-up of the A380 and A400M, "there are still significant levels of execution risk."

EADS subsidiary, Airbus, had recently announced delay to deliveries for the double-decker A380, its fourth, and had said that deliveries would be pushed back by three to five months.

Gallois said that the company was still to determine the financial cost of the new delays. Some airlines have already announced their intention to seek compensation for the delays from Airbus.

Earlier, EADS had also announced delays of up to 12 months for the A400M. "We still have some challenges, notably with the wiring and engine management system," Gallois said. The delay in this programme had forced EADS to make provisions for 1.4 billion ($2.3 billion) in 2007.

Gallois also mentioned the weak US dollar as a handicap faced by the company along with rising oil prices and tighter credit access for airlines.

Gallois said that EADS should have revenue of more than 40 billion, with an EBIT at 1.8 billion, based on the expectation that Airbus will book more than 700 orders for its commercial jets this year. The guidance is based on the assumption of an average US dollar/euro rate of $1.45.

Gallois also said that EADS would be aiming for annual revenue of 80 billion by 2020, and also aim at achieving an even balance between Airbus and the company's other businesses. At present, Airbus accounts for two-thirds of the company's revenue.

The company also has defence, helicopter, military transport aircraft and space industry units.

Under EADS's "Vision 2020" programme, the company will broaden its global reach and also spread the risk from the US dollar. The plan calls for 40 per cent of the company's sourcing and 20 per cent of its employees to be located outside of Europe.

The plan also calls for the consortium to achieve 10 billion in annual revenue in North America in non-Airbus businesses and to become a prime supplier to the US government.

EADS is also pressing ahead with its Power8 cost-saving and restructuring programme, aimed at achieving savings of 2.1 billion. The results in the first quarter, said Gallois, exceeded the company's targets.

The company still plans to spin off seven plants in France and Germany, a key component of the Power8 plan.

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Significant ''execution risks'' on A380, A400 programmes, says EADS