Airbus suffers operating losses of more than $1bn

European aircraft manufacturer Airbus suffered an operating loss of more than a billion dollars last year despite record orders for its aircraft, forcing parent firm EADS into the red, company results showed yesterday.

Airbus, struggling with cost overruns on its star A380 superjumbo project and delays with its A400M military plane, reported an operating loss of €881 million ($1.4bn), worse than the loss of €572 million in 2006.

“2007 was a tough year with many high profile challenges to be overcome,” said EADS chief executive Louis Gallois, reflecting on the worst ever results for Airbus.

EADS itself reported a net loss of €446m for 2007, following a collapse in its profits in 2006, but the giant aerospace and defence group forecast a return to profitability this year.

Operating profits of the company as represented by earnings before interest and taxes (Ebit) were forecast to be €1.8bn compared with just €52m in 2007.

Sales are expected to rise to “more than €40bn”  against €39.1bn in 2007. Shares in the company plunged by more than 5.0 per cent on the Paris stock exchange, with analysts saying the forecast for this year was weak.

Furthermore, the net loss by EADS was worse than most analysts had predicted and news that US rival Boeing was to protest a decision to award Airbus a massive Pentagon defence contract added to negative sentiment.

“All-in-all a disappointing outlook, which should further weigh on the company’s already disappointing results,” said one senior Frankfurt-based investment banking analyst who asked not to be named.

In midday trading in Paris, EADS shares showed a loss of 5.21 per cent at €16.38.

Airbus has suffered huge delays and incurred multi-billion-dollar cost overruns with its A380 and A400M programmes and has also been forced to relaunch its mid-sized A350 plane.

The A400M was launched in May 2003 but is already six months to one year behind schedule due to technical problems.

EADS, which stands for the European Aeronautic Defence and Space Company, said in November that it was going to have spend between €1.2bn to €1.4bn to deal with the delays.

“We stick to the plan of first flight this summer,” Gallois told a press conference, responding to reports that a planned maiden flight in July would be delayed because of difficulties with the engines.

“There are still risks on the programme on the engines,” he added.

Airbus is also struggling with the rise of the euro to record levels against the dollar, which makes its planes relatively more expensive compared to those of Boeing and reduces its margins.

Gallois said EADS was working on plans to deepen cost-cutting measures in Airbus’s restructuring plan, dubbed Power8, for the 2011-2012 period.

“We have to bring additional measures to Power8,” he said, referring to a plan that foresees 10,000 job cuts over four years and the sale of six Airbus factories to partners later this year.

“We are screening our costs to see where we could gain something,” he added.

Despite the production and design problems with new aircraft, Airbus won 1,341 firm orders in 2007, slightly fewer than its US arch rival Boeing, but higher than the European company’s previous record set in 2005 of 1,055.

Airbus delivered 453 aircraft to customers, including the first of its A380s to launch client Singapore Airlines albeit 18 months late.

The combined orders of Boeing and Airbus, which dominate the world market for passenger jets, were the highest in the history of the industry in 2007.

Late last month the United States Defence Department awarded an aerial refuelling tanker contract worth $35bn to EADS and the US-based group Northrop Grumman, instead of to US group Boeing.

It was a stunning upset for the American company, until now the sole supplier of air refuelling planes to the US military, and Boeing has said it may protest against the decision. (AFP)