Airbus losses could have a far-reaching impact on the financial strategy of parent company EADS, as it considers issuing new equity to bolster its funds in order to support the relaunch of the A350 widebody twin.
Delays to the A380 programme and related charges mean the aircraft manufacturer is expected to make a negative contribution to EADS's earnings before interest and tax (EBIT) when it releases its 2006 full-year results in March. Airbus chief executive Louis Gallois says the forecast of losses is "a consequence of our 2006 turbulences, in particular reflecting the effect of the A380 delay".
EADS will be recognising charges associated with the A380 delays in 2006 that had initially been expected to affect its 2007 balance sheet. "Clearly, we are cleaning the grounds and preparing for a new Airbus," says Gallois, adding that "we are also taking into account the launch of the A350 XWB and the financial impact of Power8 [a cost-cutting programme], which we originally expected for 2007".
Analyst Sandy Morris of ABN Amro predicts the airframer will record a €500 million ($647 million) loss, while EADS will break even for the year. The company says it is still "too early" to reveal firm plans for a share issue. "But we will consider all instruments to strengthen the equity base," EADS says.
Any decision would have to be approved at the company's annual general meeting, scheduled for 4 May. The company's shareholder base may have shifted by then, as DaimlerChrysler seeks to reduce its 22.5% stake to 15%, and a German consortium prepares to take on a 7.5% stake.
Morris says EADS could "probably just get by without a share issue", but warns that it is relying on a "balancing act" of several factors, including demand for commercial aircraft, ongoing order levels and results of the Power8 cost-saving initiative. A negative impact from any of these factors could "tilt the company decidedly towards fundraising", he adds.
Source: Flight International
