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Cost over-runs push EADS into the red

Text by News Wires

Latest update : 2010-03-09

EADS blamed cost over-runs on its flagship A380 superjumbo jet and the A400M military transport aircraft for a whopping €763 million net loss last year, just hours after announcing its withdrawal from a major US defence contract.

AFP - European aerospace giant EADS said on Tuesday that it plunged into loss last year because of big provisions to cover cost over-runs on its A400M military transport project and A380 superjumbo jet.
  
EADS released its results just hours after it withdrew from a joint bid with US partner Northrop Grumman to build an aerial refuelling tanker plane for the US Air Force.
  
US rival Boeing was poised to win the 35-billion-dollar contract after EADS pulled out of the bidding, later objecting vigorously that the terms of the latest tender had beeen skewed by US uthorities in favour of Boeing.
  
EADS posted a 2009 net loss of 763 million euros (1.04 billion dollars) after making a net profit of 1.57 billion euros the previous year.
  
EADS was hit by a 1.8-billion-euro provision for the much-delayed A400M, but the company struck a deal with seven NATO clients on Friday to share the burden of big unexpected cost over-runs in developing the highly innovative aircraft.
  
"Thanks to the agreement between the cstomer nations and EADS this programme is now back on track," EADS chief executive Louis Gallois said in a statement.
  
"Although the Group has to take an additional significant provision, this stabilises the programme," he said.
  
"Apart from the A400M, we remain fully focused on improved programme management including further ramp-up of the A380, the development of the A350 and the Saudi Border Surveillance programme."
  
The company also took a 240-million-euro charge last year because of difficulties stepping up production of the A380 double-deck airliner.
  
EADS said it would not pay a dividend to shareholders for 2009 owing to the losses.
  
EADS was cautious in its outlook for 2010.
  
The group said it expected "roughly stable" sales this year after a turnover of 42.8 billion euros in 2009.
  
It also forecast earnings before interest and tax of one billion euros after an EBIT loss of 322 million euros last year.
  
"As EADS enters into 2010, the Group remains fundamentally solid to cope with the improving but still volatile economic environment," the company said in its earnings statement.
  
The company said it expects to receive gross orders for between 250 and 300 aircraft in 2010.
  
It said it would deliver at most the same number of planes as in 2009, when it delivered a record 498 aircraft to airlines.
  
The entire A400M project, which was meant to show Europe's independence from US defence suppliers and employs 10,000 people, had been under threat, after years of delays led several countries to question its viability.
  
But some governments, particularly France -- which is home to the main Airbus plant and is particularly attached to the idea of shared European defence projects -- pushed hard for a solution.
  
The seven governments agreed on Friday to give EADS an additional 3.5 billion euros to save the military transport project.
  
Belgium, Britain, Luxembourg, France, Germany, Spain, Turkey ordered A400M planes but after the project ran into trouble, they initially balked at EADS demands that they cover cost overruns of about 5.2 billion euros.
  
The governments agreed to waive damages for the delays, accelerate pre-delivery payments and provide another 1.5 billion euros in exchange for a share in any future export sales.

Date created : 2010-03-09

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