EADS earnings plunge amid A-380 problems, development costs

Friday, November 12, 2010

PARIS - European aerospace and defence corporate group EADS reported Friday it remained barely profitable over the summer due to losses related to the A-380 superjumbo plane and higher development costs.

Reporting results for the first nine months of 2010, the parent company of Airbus said its net income came to 198 million euros ($270 million), down almost one-third from the year-earlier period.

In the third quarter, earnings had dwindled to just 13 million euros, far below analysts’ projections.

Pre-tax profits for the first nine months came to 784 million euros, down 28 percent.

The company’s revenues, however, increased by six percent to almost 31.6 billion euros.

That led EADS management to boost its projections for this year and next, with its earnings before interest and tax now expected to reach 1.1 billion euros - 100 million euros higher than before, chief financial officer Hans Peter Ring said.

Among others, new orders in the first nine months had surged by 135 percent to 57.7 billion euros, boosting total order book volume to 426.4 billion euros, EADS said. Group turnover for the year is now projected at 44 billion euros.

EADS expects the profitability of Airbus - its biggest subsidiary - to “significantly improve” in the mid-term, with orders for 500 planes expected this year. In the meantime, more than 500 new planes are also to be delivered.

In a telephone conference call from Singapore, EADS chief executive Tom Enders conceded that the problems with the Trent-900 jet engines supplied by Rolls Royce would slow down Airbus deliveries of the superjumbo A-380 next year.

But Enders said he did not expect any damage to the image of Airbus despite the problems after last week’s incident when a Qantas A-380 had to make an emergency landing in Singapore after one of the Trent-900 engines failed. No A-380 orders had yet been cancelled.

Enders said the expected slight delay in delivery of A-380 planes was explained by new instructions from Rolls-Royce calling for increased inspections and the exchange of certain parts in the Trent 900 engines.

Enders said he expected these measures to affect deliveries particularly in 2011.

He also stressed that the engine failure should not affect the reputation of the engine manufacturer or the plane itself, noting that it actually showed the aircraft to be capable of handling extreme situations.

“The reputation of the aircraft stays intact and will increase even further,” he said.

He also praised the cockpit crew aboard last week’s Qantas flight for their professional conduct during the engine failure.

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