EADS plunges into heavy loss on bailout, provisions

The A380 continued to weigh heavily on the underlying performance EADS. (AFP)

Airbus parent EADS fell to a heavy 2009 loss and axed its dividend as production niggles on its A380 superjumbo swelled provisions and dampened the outlook for this year, despite signs of an aviation recovery.

The Franco-German group also ruled out a solo bid for a lucrative US tanker contract after partner Northrop Grumman dropped out of the race, leaving US plane maker Boeing as the only bidder.

Its earnings included a previously announced charge of €1.8 billion (Dh9bn) for its share of a European bailout for the A400M military transport, agreed last week, but EADS also took a €240 million knock from costs on the A380.

And while EADS was confident enough in a nascent aviation recovery to plan an increase in single-aisle Airbus A320 production from December, it said the A380 would continue to weigh "substantially" on core earnings this year. EADS said it expected roughly stable revenue and an operating profit of around €1bn in 2010.

Chief Executive Louis Gallois told reporters Northrop's withdrawal from the tanker tender meant "we have no chance to win in the competition in these conditions".

Airbus CEO Tom Enders also dampened talk of an independent European bid, barring a change in the situation.

"I leave the political assessment to others. For me it is clear, however, that under the current conditions a bid makes no economic sense for Airbus," he said by e-mail.

"The outlook for 2010 is very disappointing due to deteriorating [currency] hedge rates and further A380 problems," said DZ Bank analyst Markus Turnwald.

The world's second-largest aerospace group after Boeing posted a 2009 net loss of €763m and an operating loss of €322m, a far cry from a net profit of €1.57bn and an operating surplus of €2.8bn in 2008.

"The A380 continued to weigh heavily on the underlying performance," EADS said in a statement, adding it had also suffered exceptional foreign exchange effects.

Total currency effects hit 2009 earnings before interest and tax by €2.5bn compared to 2008, it said.

EADS excludes some exceptional items and goodwill from its standard reporting of operating income, but has recently used another yardstick stripping out other one-off items such as the A400M to allow investors to gauge its underlying business.

Such operating earnings before one-offs generated a €2.2bn profit in 2009, beating company forecasts of €2bn. Weakness in commercial aerospace was offset by strength in defence including higher Eurofighter export deliveries.

In a surprise move, EADS said Airbus would restore output of its most popular A320 family of single-aisle planes to 36 from 34 a month in December.

 

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