EADS admits that Airbus A380 production costs are "still higher than expected", while suffering a fall in earnings in the first half of 2009 and a large cash outflow due to the A400M's continuing travails.
"We are putting too much resource on each A380," said EADS chief Louis Gallois during a briefing about financial results during the first six months. "It's a question mark for the learning curve. Airbus has to look at that during the second half of the year. We will see if we have consequences on our forecast for cost of the airplane."
Gallois remains confident that 14 A380s will be delivered by the end of the year, but acknowledges that this is "not a very strong performance" given that the number of deliveries in 2008 was only marginally lower, at 12. The company has revised the 2009 figure down several times over the last year from 21 to 18, and then to 14.
EADS says it expects Airbus to capture "up to" 300 new gross orders in total this year "even if that goal is challenging in the current market environment". This forecast scales down an earlier prediction of 300-400 orders and follows some caution put on that target by Airbus chief salesman John Leahy in May .
EADS's revenues for the first half of 2009 were "negatively impacted" both by low A380 deliveries and by foreign exchange effects, but nonetheless rose 2% to €20.2 billion ($28.4 billion). Group earnings, however, fell 23% to €888 million, while those of the Airbus unit declined 27% to €519 million.
Airbus revenues totalled €13.9 billion as higher volumes and savings from the Power8 cost-cutting programme were "more than offset" by deterioration in prices and hedge rates, increasing customer support activities and the higher-than-expected A380 costs. The decline in revenue equates to around 1%, if revenue for the first half of 2008 is restated to reflect the subsequent integration of the Military Transport Aircraft division.
For the first half of 2009, EADS recorded a negative cash flow of €1.17 billion, compared with a positive flow of €975 million in the first half of 2008. An outflow of €400 million was accounted for by the troubled A400M military transport aircraft programme.
Negotiations with the A400M partner nations - the timeframe for which has been extended until year-end - are expected to be "tough", says Gallois. He cautions that, from EADS's perspective, "the A400M can only be a success if we and our customers can agree to a rational and more balanced business model based on adequate funding, realistic milestones and a trustful and transparent co-operation". However, he believes that customers remain committed to the A400M. "The most recent signs that governments will support the continuance of this programme are encouraging," he says.
Excluding one-off items, earnings in the second half of 2009 will be positive, but lower than in the first half, according to EADS's forecast, with increasing R&D expenses and further hedge rate deterioration likely to outweigh favourable seasonal effects and an easing in price deterioration.
The company has raised its prediction of cash consumption in 2009 to €1 billion after customer financing but excluding A400-related impacts. "The range and magnitude of the potential A400M programme charge is wide," it says.
Source: Flight International
