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

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.