Airbus parent company European Aeronautic Defence & Space Co (EADS NV) on Friday reported that first-quarter net profit fell 39 percent as its plane-manufacturing unit struggled with the “challenges” of producing its A380 superjumbo.
Paris-based EADS NV said that net profit in the January-March period fell to 103 million euros (US$129 million) from 170 million euros a year earlier.
Revenue fell 6 percent to 9 billion euros in the period, EADS said in a statement.
PHOTO: AFP
Airbus is struggling to ramp up production of the A380 because the cabins of the superjumbo require greater customization than other plane models.
The first A380 was delivered almost two years late to Singapore Airlines in 2007. Chief financial officer Hans Peter Ring said on a conference call that Airbus was still on track to deliver 20 A380s this year.
EADS also said its hedging position — contracts designed to lock in currency rates and potentially protect it from negative effects of foreign exchange fluctuations — deteriorated, weighing on earnings.
The hedging contracts were set before the recent strengthening of the dollar — linked to fears over sovereign debt in some of Europe’s weaker economies.
EADS chief executive Louis Gallois said the cheaper euro was good news for the company, which sells planes in dollars but has most of its costs in euros.
“EADS should benefit in the mid and long-term if the dollar trend is confirmed,” he said in a statement.
Overall, Gallois said that he was “cautiously optimistic that our industry is slowly on its way back up,” but recent market turmoil shows that “the crisis is not yet fully behind us.”
Success for the year requires Airbus getting on top of three big aircraft projects.
That means mastering the “operational challenges” of the A380, finalizing contract changes with customer nations of the A400M military transport plane — another troubled program — and “moving forward” with the A350 XWB widebody plane that Airbus is developing to compete with Boeing Co’s 787, Gallois said.
The revenue contribution from the A400M in the quarter was zero, EADS said.
EADS reached a last-ditch agreement with customer nations in March, allowing the over budget and much delayed project to continue.
In total, EADS has taken provisions of 4.2 billion euros for the A400M, but canceling the project would have cost more.
Earnings before interest and taxes, or EBIT, fell 64 percent in the quarter to 83 million euros at EADS. Airbus’ underlying profit was almost erased, dropping 92 percent to 7 million euros.
Last month archrival Boeing said first-quarter profit fell almost 15 percent to US$519 million in the first quarter as it delivered fewer aircraft.
EADS reiterated its outlook for this year, with Airbus expected to gross orders between 250 and 300 planes and to deliver the same number of aircraft as it did last year.
Revenues should be roughly stable this year, it said.
The A380 “while slightly improving, will continue to weigh substantially on” earnings, EADS said.
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