November 10, 2011 / 8:00 AM / 7 years ago

EADS delays A350 but avoids heat of crisis

PARIS (Reuters) - Airbus parent EADS EAD.PA pushed back its A350 carbon-fiber jetliner by six months with a 200 million euro ($272 million) charge as it seeks to avoid errors like those that nearly derailed Europe’s A380 superjumbo.

The delay trimmed third-quarter profits that nonetheless beat expectations as Airbus stabilized costs on the troublesome superjumbo project. And EADS shares got a boost as Europe’s largest aerospace group raised its outlook for the year.

Despite storm waves in Western economies, Airbus and Boeing (BA.N), who dominate the $70 billion aircraft market, are boosting output to meet demand from Asia and the Middle East.

“I am confident the commercial aircraft market will sustain our growth in years to come despite the weakening of the macro-economic environment and particularly of the European economies,” Finance Director Hans Peter Ring told reporters.

“Fifty percent of our backlog is in growing regions of the world and not in Europe or the provided there isn’t a big double-dip recession we think it is manageable for us.”

He declined to comment on the instability ripping through the euro zone or to say whether EADS, seen as another key European symbol, had drawn up contingency plans for further turmoil.

“I am not in politics and this is something nobody can anticipate reasonably at this point, so we are following the environment, that is all I can say.”

EADS operating profit fell 15 percent to 322 million euros in the third quarter as revenues fell 4 percent to 10.751 billion euros. Net income rose sharply to 312 million euros.

The Franco-German-led group said it expected strength in the commercial market to boost 2011 operating profit to 1.45 billion euros rather than staying flat at 1.3 billion euros.

Shares rose six percent to 21.17 euros. EADS is already the top gainer in the French CAC-40 index .FCHI this year.

Analysts were predicting operating profit of 51 million euros on sales of 10.37 billion and a net loss of 34.6 million.

Aircraft sales remain buoyant despite fears that the economy will dampen passenger travel and a downturn hitting cargo.

After injecting new life into its best-selling A320 with a revamp in the summer, the world’s largest commercial planemaker now expects record 1,500 orders in 2011 instead of 1,000.

The prediction, beating a 2005 record of 1,111 orders, sets the tone for what industry sources expect to be a haul of at least 100 new Airbus sales at the Dubai Air Show next week.

These include a sale of five new A380s to Qatar Airways, doubling its previous order, though it remains to be seen how the A350’s largest customer responds to the delay in that model.

Airbus had 1,372 gross orders by the end of October.


Airbus faces a steep learning curve on the lightweight, carbon-fiber A350 but said it had learned from mistakes on the A380, when it clogged up factories by failing to spot weak coordination early enough.

The delays hammered its shares in 2006 and stoked tensions between Paris and Berlin. Germany’s Daimler (DAIGn.DE) confirmed on Thursday it would sell part of its stake.

EADS said the A350 would enter service in the first half of 2014 instead of late 2013. It pushed the start of the first final assembly back three months to the first quarter of 2012.

The A350 aims to compete with Boeing’s 787 Dreamliner which entered regular service this month, three years late due to problems in mastering the same lightweight carbon materials.

“Each delay of the A350 program and the individual models allows Boeing to recover some breathing room on the 787 program and to develop the 787-9,” wrote U.S.-based aviation analyst Scott Hamilton, referring to the next Dreamliner variant.

Airbus and Boeing see a market for several thousand of the twin-engined planes which aim to save costs by some 30 percent.

Airbus, which overtook Boeing in 2003 as the world’s largest commercial jet maker, turned the page on its earliest attempts to compete on the world’s longest routes by axing the A340.

The four-engined plane first flew 20 years ago with a focus on routes like the 18-hour trip from Singapore to New York.

But its “four engines are better than two” slogan backfired when airlines put their faith in twinjets like the Boeing 777.

The decision to scrap the plane rubs salt in the wound a day after Boeing trumpeted the start of work on its 1,000th 777. A two-engined sister version, the A330, continues to sell well.

The A340 made its mark as a luxury accessory for VIPs like the Sultan of Brunei but it was dwarfed by sales of the 777.

India’s Kingfisher KING.BO is expected to cancel two last A340 orders, leaving just two jets to assemble for unnamed VIPs.

Bloomberg News reported Boeing could meanwhile notch up record 777 sales this year including possible orders in Dubai.

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