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02 October 2006
Company

Ad-hoc release, 3 October 2006. EADS and Airbus finalise A380 review

Amsterdam

  • Further significant delays on Airbus A380 deliveries
  • Cumulated EBIT* loss of € 2.8 billion from A380 series production until 2010
  • Airbus launches “Power8” programme to counter financial impact and to speed up development processes
  • Cost reduction and efficiency improvement across entire Group
  • A380 Type Certification on track for year end 2006

Following a detailed joint EADS / Airbus review of the A380 programme, Airbus has revised the A380 delivery schedule for the period 2007 to 2010. The first Airbus A380 series aircraft will be delivered in the second half of 2007. In 2008 Airbus plans to deliver 13 aircraft. In 2009, 25 A380s shall leave the final assembly line followed by 45 A380s in 2010, with that year’s total including the first freighters. Compared to the June 13 plan deliveries will be delayed for another year on average, EADS announced after a meeting of its Board of Directors on Tuesday and specified the resulting financial impact.

However, the A380 review also confirmed that type certification for the A380 is likely to be achieved by the end of the year. While flight testing is proceeding as planned, the A380 is meeting or even exceeding its performance targets, and proves to be a highly reliable and comfortable aircraft.

Comparison to original pre-June plan

The revised A380 delivery schedule results in cumulative EBIT* shortfalls of € 4.8 billion compared to the margin contribution of its original baseline plan for the years 2006 to 2010 (at $1.30 per €1.00):

  • Thereof, close to € 2 billion cumulative EBIT* previously expected between 2006 and 2010 will be postponed beyond 2010 as a result of the delivery shifts to later years.
  • In addition, cost overruns and late delivery payments will result in irrecoverable expenses and a corresponding € 2.8 billion reduction in previously expected cumulative EBIT* over the 2006 to 2010 period.

EBIT* contribution, 2006 guidance

From an Income Statement perspective, the management estimates that the A380 series production will generate a cumulative programme EBIT* loss of around € 2.8 billion for the years 2006 to 2010, of which approximately € 1.1 billion is anticipated in 2006 and approximately € 0.7 billion in 2007. The A380 programme shall deliver a first positive EBIT* contribution in 2010. The management estimates that the A380 programme contributions will be substantial beyond 2010.

The above 2006 programme EBIT* loss reflects an estimated € 0.6 billion of provisions for A380 loss making contracts. The A380 charges, and charges potentially arising from the outstanding decision on the A350 programme, as well as the amount and phasing of non recurring charges of the “Power8” programme, invalidate the previously provided 2006 EBIT* guidance. Until further notice, EADS will not issue an updated 2006 outlook. Possible contract terminations under the new A380 timetable have not been taken into account in the financial estimates.

Power8 competitiveness programme

To restore its competitiveness, and to counter the financial impact of these delays, Airbus is launching the “Power8” programme which is intended to generate sustainable annual cost savings of at least € 2.0 billion from 2010 onwards. Furthermore, “Power8” aims to speed up development processes and to deliver around € 5.0 billion in cumulative cash savings by 2010. The Board of Directors fully supports the “Power8” programme presented by Airbus CEO Christian Streiff.

Improvement and cost reduction programmes will also be implemented in other parts of the Group. Furthermore, EADS will continue Group wide integration to reduce costs and to achieve more efficient and more effective management structures.
The Board of Directors decided to conduct an independent assessment of individual discharge of duties in the situation that led to the A 380 delays. This investigation will extend to scrutinizing potential responsibilities at the management level. The Company reserves all its rights in the circumstances.

EBIT

EADS uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the EADS merger, the Airbus Combination and the formation of MBDA, as well as impairment charges thereon.

Contact:

Michael  HaugerEADS
Tel.: +49 89 60 73 42 35

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