EADS shares dive on A380 delays...

[v2]

Delays in planned deliveries of the Airbus A380 superjumbo wiped a third of the value off parent EADS on Wednesday as the European aerospace giant battled to head off an investor and airline revolt.
more...
http://edition.cnn.com/2006/BUSINESS/06/14/eads.airbus.reut/index.html

 

[syscom3]

This is just the beginning.

I suspect quite a few airlines will cancel orders

 

[FLYBOYJ]

YEP!!!!!!!!!

Airlines pummel Airbus over A380 delays By ANGELA CHARLTON, Associated Press Writer
41 minutes ago

PARIS - Airlines around the world punished Airbus on Wednesday for delays in the delivery of its A380 superjumbo, demanding compensation, reconsidering orders — and in one case, striking a major deal with its rival Boeing Co.


Shares in Airbus' parent company crashed and Boeing's soared as repercussions of the production problems with the world's biggest passenger plane resonated throughout the industry.

They also raised questions about the European planemaker's management and strategy, and the future of the double-decker A380. Boeing is staking its bets on a smaller, more fuel-efficient model.

Singapore Airlines, one of the world's top carriers and the first to buy the A380, said it was unhappy with the delays Airbus announced Tuesday. It demanded compensation and, on Wednesday, worsened the blow by announcing it would buy 20 Boeing 787-9 aircraft worth $4.52 billion and take options on another 20 planes.

Emirates Airlines, another sought-after buyer, said it was reconsidering its order of 45 A380s. Australia's Qantas Airways said it was seeking talks with Airbus over its orders for 12 A380s and wants some of its money back. Malaysia Airlines said it was reviewing terms of its deal for six of the planes.

Airbus parent European Aeronautic Defense Space Co. saw billions of dollars wiped off its value Wednesday as shares plummeted by 26 percent to close at 18.80 euros ($23.63), after it warned that operating profit would be cut by about 500 million euros ($625 million) each year between 2007 and 2010.

Shares in Boeing Co., meanwhile, rose 5 percent to $80.88 on the New York Stock Exchange.

The dismal day for Airbus reflected a sharp shift in the Toulouse, France-based company's fortunes since the 555-passenger A380 took a triumphant maiden flight last year over the Pyrenees. Airbus overtook Boeing in order numbers in 2001 and in deliveries in 2003 and until recently looked in robust shape.

But the anger fueled by Tuesday's announcement of production bottlenecks with the plane's electrical systems — the second major delay for the $300 million A380 — suggests a less rosy future for the planemaker.

"Boeing is eating Airbus' lunch, certainly this year. And they'll do it again next year and for the foreseeable future, unless Airbus can pull a rabbit out of a hat," said Jim Smith, aviation analyst and editor of Jane's Transport Finance.

It was the second Airbus project to falter in recent years, after the A350, which it hoped would be the answer to Boeing's 787.

The Singapore-Boeing deal stung especially deep because Airbus had hoped Singapore Airlines would be one of the first and biggest customers for the A350. But airline dissatisfaction with the A350 has forced Airbus to redesign some of its parts and consider a costly overhaul, delaying its launch for several years.

Airbus insisted Wednesday that it was not the A380 itself but minor production problems at fault for the delay.

"There have been minor production issues which have accumulated into a large number and require a complete, very detailed rethinking of the installation process of wires and harnesses," said Thore Prang, spokesman for the company in Hamburg. "It has nothing to do with the aircraft."

The A380 delay "couldn't be a worse timing for Airbus," said aviation analyst Richard Pinkham of the Centre for Asia Pacific Aviation. "Especially as it comes on the heels of the PR problems they had with the A350."

With the A380, Airbus was taking a risk, since only a few of the world's airports have runways long enough and terminals that can be modified to deal with its double deckers, analysts said.

Airbus wagered that the airline industry would increasingly offer large flights to international hubs. But Boeing bet that air travel would be marked by the need for fuel efficiency and long-haul flights and is focusing on the 330-passenger 787.

"EADS made a strategic error by opting for a jumbo-sized jet rather than a fuel efficient model, especially if the price of oil increases further," said Matthieu Raimbault of French brokerage Viel Tradition.

Singapore was the first carrier to buy the A380, ordering 10 with an option to purchase another 15. Airbus said the first delivery to Singapore was still expected by the end of this year.

But deliveries will likely be limited to nine in 2007 instead of the 20 to 25 initially planned, Airbus said, with an additional shortfall of five to nine A380 deliveries expected in 2008 and "around five" in 2009.

Emirates Airlines said it was told to expect a six-month delay. "We are considering our position and will be engaging with the manufacturer over the next few weeks," the airline said in a statement.

Airbus' chief commercial officer, John Leahy, confirmed that the company will incur more late delivery penalties, but declined to provide a figure. It could in theory also face order cancellations.

EADS co-CEO Noel Forgeard, who in 2000 oversaw the launch of the A380 as the head of Airbus, deflected suggestions that the setback could cost him his job.

"We have now to find the right ways forward," Forgeard said in a conference call Wednesday.

The troubles at Airbus damage the credibility of EADS management and may bleed over into its defense business.

Already they hit BAE Systems PLC, which owns 20 percent of Airbus but has been seeking to sell its stake. BAE dismissed concerns that the Airbus problems would hurt the price it could get for its stake, and its shares came off earlier lows to end the day down 1.1 percent at 345 pence ($6.35) on the London Stock Exchange.

 

[v2]

Airbus reveals latest A380 delay will cost EADS €2.8 billion in pre-tax earnings 2006-2010.
EADS will lose €2.8 billion ($3.6 billion) in pre-tax earnings between 2006 and 2010 because of another delay to its A380 programme, which was revealed late yesterday. The delay, which will now push the first A380 delivery back a year to the end of 2007, will also defer about €2 billion in earnings expected in the five year period to 2010 into the next decade.(04 October 2006).
(Flight)

more:
Airbus reveals latest A380 delay will cost EADS â'¬2.8 billion in pre-tax earnings 2006-2010-04/10/2006-Washington DC-Flightglobal.com

 

[syscom3]

hehehehe

 

[v2]

 

[Matt308]

...meanwhile the Russians, flush with cash, want a 5% stake in Airbus. Who in their right mind would allow the Russkies to invest in such a flagship industry when their involvement hinges upon the highly volatile price of oil?

 

[Parmigiano]

I would, from a business point of view !
In addition than money they can also bring their technology and an opening to the East markets (how many planes will buy China in 15 years? And Russians already have contacts with China major decision makers on that market)

If the government wants instead to 'preserve' the aircraft industry as a 'prestige' and 'strategical' niche, well they will have to pay this luxury, either funding directly (like in Europe) or indirectly (like in the US)

 

[Matt308]

The only argument against that logic is what happens when the volatile petrol market crashes and Russia is again back to its poor communist/socialist economics. The cash that Russia has is supported by a single source for the most part and without some diversity in their socio-economic makeup, are subject to swings in support and decision making. Too much risk for this capitalist.

 

[FLYBOYJ]

More bad news...

Airbus CEO resigns, successor named By LAURENCE FROST, AP Business Writer
41 minutes ago



PARIS - Airbus chief executive Christian Streiff resigned Monday after a little more than three months as head of the troubled European plane maker and parent company EADS named one of its own co-CEOs to replace him.


European Aeronautic Defence and Space Co. said in a statement Louis Gallois will succeed Streiff in the top job at Airbus while continuing in his current role as joint head of the Franco-German defense group.

Streiff's departure deals a fresh blow to Airbus as it struggles to limit the damage from a costly two-year delay to the heralded A380 superjumbo jet.

The 52-year-old former Saint-Gobain executive took over as Airbus CEO just over three months ago, replacing Gustav Humbert — who was ousted along with EADS co-CEO Noel Forgeard as a result of the A380 production problems.

As part of the latest executive reshuffling, EADS' German co-CEO Tom Enders will no longer have direct managerial responsibility for Airbus, the EADS announcement said.

EADS owns 80 percent of Airbus and is tightening up supervision of the jet unit as it acquires the remaining 20 percent from Britain's BAE Systems PLC.

Shares in European Aeronautic Defence and Space Co. closed 1.3 percent lower at 20.16 euros ($25.41) in Paris ahead of the announcement.

 

[v2]

New Airbus boss warns of job cuts

Louis Gallois, the newly appointed head of planemaker Airbus, warned on Tuesday that there would likely be painful job losses at Airbus in the wake of delays to the A380 superjumbo and a resulting profit warning.

"There will be job cuts," Gallois told France's Europe 1 radio station. But he said the cuts were more likely to be in administrative and management jobs because the current structure was too heavy and the group needed its blue-worker workers in order to be able to make and deliver its planes.

Gallois, who remains co-CEO of parent EADS, was named late on Monday to replace Christian Streiff as Airbus chief after a week after Airbus pushed back its A380 superjumbo by another year and issued a new profit warning.

Streiff had been at the helm of Airbus for just three months.

Gallois said decisions on the Airbus structure would be taken in several months while he hoped the EADS board would give its go-ahead for the launch of the planned A350 midsize passenger aircraft in the next few months.

He added that the weak dollar had eroded Airbus's competitiveness versus arch rival Boeing Co and the European group therefore needed to cut its cost base, as planned in the "Power8" plan drawn up by Streiff.

Gallois said Airbus cost-cutting measures would have to be evenly split between its French and German operations. He added that Airbus now had a more simplified management structure than before because of his double role.

Analysts have often said that Airbus has been hampered by internal tensions between the French and German parts of the company, but Gallois denied this was the case since Airbus's superjumbo woes stemmed mainly from difficulties installing wiring.

"This isn't a French or a German problem, it's a problem specific to Airbus," he said, adding that Airbus needed to be a better integrated company.

Gallois added he hoped that French President Jacques Chirac and German Chancellor Angela Merkel would pledge their support for the company at a Franco-German meeting later this week.

EADS shares opened one percent higher, at 20.39 euros, after a drop of over 36 percent so far this year.

PARIS, France (Reuters) - POSTED: 0818 GMT (1618 HKT), October 10, 2006

 

[Matt308]

Ouch. 36%. EADS investors must be looking for a kill. I read in AvWeek that Airbus is looking towards a midlife upgrade to the A320 to align with the CFM56 and Aero Engines V2500 upgrades set to enter service in mid-2008. Apparently this is somewhat related to the A380 and A350 fallout and the need to maintain some market share. Also, looks like the A320 will not receive new winglets. Apparently they do result in substantial fuel savings over the existing winglets, but introduce additional wing loading that would require substantial stiffening and subsequent weight penalties that offset the fuel savings.