EADS reported that they are unable to predict earnings beyond the end of the year because of the lowered demand from airlines as they cancel and defer Airbus aircraft. Another growing wound for EADS is the A400M aircraft, that is costing the European aerospace giant a nice sum of cash. EADS’s CFO Hans Peter Ring said that 300 gross orders for Airbus by the end of 2009 is “certainly realistic.” However, it is unknown what lies in the long-term forecast for EADS and their subsidiary, Airbus.
Everyone knows that airlines are having a tough time with the shrinking demand for air-travel. Unfortunately, that trickles down to the manufacturers that supply the airlines with aircraft. Airlines have deferred and cancelled orders, and sales for EADS have fallen sharply by 14 percent. Mr. Ring did say that it’s certainly realistic to sell 300 more Airbus aircraft, but he also noted that it is “becoming more challenging in the current market environment.”
Airbus accounts for roughly 2/3s of EADS’s revenue. Airbus delivered 116 aircraft in the first quarter, down 7 aircraft (123) from a year earlier. Last week, Airbus announced that they would be trimming A380 production. Production for the A330 / A340 aircraft series has been slowed as well. On an unrelated sidenote, I’m curious to know how the new China plant is doing with the A32X series production. It was my understanding that this would help cut costs.
The A400M has hurt EADS quite a bit recently. The aircraft has suffered from engine design problems that led to a 120 million Euro charge in Q1. It currently is the company’s greatest financial risk. Sound familiar? (A380) Yet, risk is sometimes good – Airbus is continuing to invest in the future, and the ongoing competition with Boeing has spawned unique innovations on both sides of the table. Despite suffering from the A400M program and airlines deferring and cancelling orders, Airbus looks to be on a steady track – considering the economic conditions.
