July 30, 2012

Airbus owner EADS ups targets, delays A350

by Toby Sterling
Associated Press

Airbus parent company EADS NV July 27 announced a further delay to its new A350 aircraft as it reported second-quarter earnings that almost quadrupled from a year ago.

Net profit at the Leiden, Netherlands-based European Aeronautic Defence & Space Company was $567 million, up from $148 million in the same period a year ago. Sales rose 12 percent to $16.5 billion. Analysts polled by Factset had forecast profit of $428 million on sales of $15.6 12.8 billion.

However, the aerospace company also revealed that the entry into service of Airbus’s new A350, which is meant to compete with rival Boeing’s 787 “Dreamliner,” will be delayed by several months, until the second half of 2014. The company said the reason for the delay was “time taken for the implementation of the automated drilling process for the wings.” Airbus has taken a $151.9 million charge as a result, and warned that further delays would lead to greater charges.

Incoming Chief Executive Tom Enders, promoted from Airbus in June, said the company’s order book is now at a record $676 billion. He vowed to “globalize” EADS, citing an assembly line for the A350 in the U.S. as an example.

“One important step into this direction is our decision to build a final assembly Line for Airbus aircraft in the U.S.,” he said. Earlier this month EADS said it would spend $600 million over five years to build an assembly line for its A320 single-aisle jet in Mobile, Ala. – its first factory in the United States.

Based on the company’s first-half performance, Enders raised sales targets to a 10 percent increase in 2012 from the 6 percent EADS forecast after first quarter earnings. Operating profits will be $3.3 billion, up from $3.06 billion, he said.

Enders also stuck to 2012 targets for sales of 30 Airbus A380s, the world’s largest passenger aircraft, but said the company would probably sell somewhat less than that in 2013. Airbus is in the process of fixing a problem with planes already in service it says is not an immediate safety concern: small fractures found near some rivets on some planes at the spot where wings’ metal covers, or skins, are joined with the wings’ ribs.

Airbus is fixing the problem on affected planes, which it says is not a design flaw but a construction flaw that arose during the building of the first A380s made. It will begin building planes differently in 2014 to avoid the problem.

Analysts believe some clients are pushing back their orders to get new planes, rather than working with retrofitted planes.

Enders says the company still forecasts sales of 35-39 A380s annually by 2015, the level needed for profitability.

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