Airbus loses lead in orders to Boeing, warns on profit
PARIS -- The two-year delay to the Airbus A380 is proving costlier than expected, parent company EADS said yesterday in a profit warning that sent shares lower as the aircraft maker confirmed it had lost its five-year lead in orders to Boeing Co.
Airbus won orders for 824 airliners last year, the company said -- well short of both Boeing's 1,050 tally and its own industry record of 1,111 in 2005 -- but delivered 434 planes to its US-based rival's 398.
Despite the production crisis blighting the double-decker A380, 2006 was "the best year ever in terms of deliveries and the second-best year in terms of sales," said EADS co chief executive Louis Gallois, who also heads Airbus.
Shortly before the orders disclosure, EADS said an unspecified fourth-quarter accounting charge tipped Airbus into an operating loss for 2006 and will "roughly balance" earnings before interest and tax from other divisions.
Hans Peter Ring, chief financial officer for both EADS and Airbus, said the "bulk of the charges" were caused by previously disclosed loss projections that had been brought forward, including costs linked to the A380 setbacks and restructuring plans.
"We're accepting a bigger hit in 2006 to prepare a better future," Ring said, declining to provide any breakdown of the losses. The A380 problems would wipe $6.2 billion from 2006-2010 profit, EADS said last October.
In its statement, however, EADS also blamed the Airbus loss on new A380-related costs that were "not originally envisaged." For the first nine months of 2006, Airbus had posted an operating profit of $1.46 billion .
Airbus credibility may suffer more damage if new A380 charges turn out to be the main factor, said Paris-based Kepler Equities.
Previous disclosures "do not explain" the full extent of the warning, said Harald Liberge, an analyst with CM-CIC Securities -- which projects a $2.2 billion fourth-quarter Airbus operating loss from the EADS statement.
"Our impression is that there are losses that are greater than expected even by Airbus," Liberge said, citing compensation to airlines as a likely contributor.
Dubai-based Emirates, the biggest A380 customer, with 43 planes on order, has said it stands to lose hundreds of millions of revenue dollars because of the delays. Airbus will have to take a "massive write-off" to foot the bill, Emirates president Tim Clark said in an interview published Tuesday.
Airbus said yesterday that it had completed the wiring on the first A380 due to enter commercial service with launch customer Singapore Airlines in October.
Meeting the first delivery deadline remains "by far our biggest challenge," Airbus chief operating officer Fabrice Bregier said.
Bregier said Airbus will learn from mistakes on the A380 as it steps up development of the A350 XWB -- the mid-size airliner launched last month to plug a gaping hole in the Airbus product line, which has leaked business to Boeing Co.'s 787.
While Boeing has already booked 448 orders for the fuel-efficient "Dreamliner," Airbus faces the task of renegotiating most of its 102 A350 sales with customers who ordered an earlier version of the plane, which has since been scrapped.