At the end of a decisive Board of Directors, EADS yesterday lifted the veil on what resembles an industrial and financial disaster: delays in the A380 and its consequences for Airbus. They exceed the worst prognosis. The European aircraft manufacturer will not be able to deliver the first copy of his very large carrier Singapore Airlines before October 2007. Be a year of further delay to the timetable presented in June, two years from the initial schedule. No other delivery is expected next year. The constructor will deliver also 13 aircraft in 2008 and 25 in 2009 and not succeed to reach the production rate initially 45 A380s that by 2010.
The financial impact of this year to further delay exceeds also all forecasts. It should result in a loss (ebit) operating income accumulated approximately 2.8 billion euros for the period 2006-2010, including approximately 1.1 billion in the current year and 0.7 billion in 2007, is the double of the figure in June. The impact on cash of EADS is even more spectacular, with a shortfall estimated at EUR 6.3 billion in the same period. It will also affect the results of the shareholders. The first of them, DailerChrysler (22.3) has already announced a revision of its forecast of result for 2006.
To cover losses and restore its competitiveness, Airbus will suffer a shock treatment. The Board of Directors has validated the restructuring plan "Power 08" presented by the pattern of the aircraft manufacturer, Christian Streiff, intended to generate at least 2 billion euros in savings per year from 2010. In addition to the measures to lower costs, which will pass by the reduction of 30 of the staff of the headquarters in Toulouse, its relief programme also aims to bring 7 and a half years to 5 years and a half duration of design and development of future devices. The terms of this industrial reorganization will be arrested within four or five months, in consultation with the trade unions. However, no assumption is ousted, including the specialization of the Airbus sites with the transfer mentioned the production of the A320 in Germany and the surrender or even the closure of certain non-strategic units and duplicate. The first concrete applications of the "Power 08" plan materialize from January 1. In addition to the personnel of Airbus, EADS will also be put to contribution, with the displayed objective, but not yet detailed, generate EUR 1 billion in savings on the divisions non-Airbus by 2008.
Cash requirements
In contrast, the shareholders of the Franco-German group always took no decision concerning the launch of the new version of the A350, supposed to see the day in 2012. In addition to the acceptance of the restructuring plan, they must still find the necessary funding for a program that the price would be 9 or 10 billion euros. Added to the additional costs for the A380 and the financial impact of the restructuring, cash requirements may require, as a last resort, an increase of capital, either at the level of EADS or at Airbus. Other decisive boards of Directors are therefore to be expected in the coming weeks.
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