Company Watch - Airbus.

Oct 9, 2006

Aeroflot will now split a long awaited order for new aircraft between Airbus and Boeing chief executive Valery Okulov CE told reporters at an economic forum in the Siberian city of Irkutsk last week. It seems that Aeroflot wants 22 Airbus and 22 Boeings. However Russian politics being what they are these cannot be considered firm orders and both manufacturers have declined to comment. Aeroflot is owned by the state which through the national bank recently acquired a 5% interest in EADS, soon to become the sole owner of Airbus. http://www.aeroflot.ru/eng Oct 2, 2006

Air France KLM's Van Wijk said the Franco-Dutch airline expected to invest much of the merger savings in new planes, noting that KLM had several Boeing 747s that were 25 years old, the company needed to replace MD-11s and Air France is buying new A380s. Oct 4, 2006

Adding to speculation that the recently installed Streiff might be leaving was a French media report on Friday which linked the Airbus boss with a move to automaker PSA Peugeot Citroen. Airbus denied the report, which was published in French magazine Challenges. Streiff is new to Airbus, hired as an outsider in July to shake up the world's top-selling maker of airliners. After his initial review of the company, he issued his rescue plan this week, sparking nervous response from politicians and labor groups in the four countries most likely to be affected by expected job cuts and plant sales. Officials in Germany stressed that any trimming of Airbus operations must be spread evenly, because Germany has more plants than France, Spain or Britain. A German government spokesman on Friday confirmed that Chancellor Angela Merkel and French President Jacques Chirac were expected to discuss the company's woes when they meet in Paris next Thursday. EADS as parent of Airbus is Europe's aerospace champion, the product of a deal which merged German, French and Spanish firms in 2000 to build scale needed to compete against much larger US companies. Oct 8, 2006

Germany Expects On-Time Delivery Of Airbus A400Ms. Germany expects Airbus to deliver on time the 60 A400M military transporters it has ordered, a spokesman for the Defence Ministry said on Friday. The comment came after Airbus Chief Executive Christian Streiff said in a newspaper interview on Thursday that the A400M program was "on the edge". A total of seven European NATO countries have ordered the A400M and need the plane to bolster their airlift capacity. The A400M is the aircraft maker's first major venture into the military field and delays to it would be a huge blow. Airbus is in the midst of a crisis surrounding its A380 superjumbo. The world's largest airliner is now running two years behind its original delivery schedule as engineers struggle to overcome wiring problems. Oct 6, 2006

Airbus A380 customers made clear their intention to seek compensation for the extensive program delays and some may consider cancellations. German Finance Minister Peer Steinbruck was one of many German officials to express concern yesterday over Airbus CEO Christian Streiff's plans to reduce overhead costs by 30%, warning that shifting A380 work away from Hamburg, where the company employs 11,000 workers, must not be "to the detriment of Germany." In France, union leaders representing Airbus plant workers called on the French government to step in and prevent major job losses, which appear likely given Streiff's call for ambitious cost cuts. Prime Minister Dominique de Villepin said he would be "vigilant" in monitoring Airbus job reductions. Oct 5, 2006

Airlines Review Fleet Needs After A380 Delay. The world's airlines were forced to review growth plans on Wednesday after Airbus revealed more delays to its troubled A380 superjumbo. Airbus on Tuesday delayed deliveries of the world's largest passenger jet by another year, leaving it two years behind schedule, because of wiring installation problems. EADS predicted a profit shortfall of EUR2.8 billion euros (USD$3.55 billion) over four years on top of EUR2 billion (USD$2.54 billion) disclosed in June and announced a EUR2 billion annual cost-savings program, far above previous measures. It also took provisions for penalties to airlines and acknowledged the risk of further charges for its new A350 aircraft, which needs to be redesigned to counter Boeing's 787 Dreamliner. Debt rating agency Standard & Poor's said overnight it might cut its rating on EADS on the back of the profit warning and the delay, due mainly to problems installing wiring in the USD$300 million double-decker. Oct 4, 2006

Airbus could slow 2007 deliveries to just two aircraft said one newspaper report, down from a target of 25 that was chopped to nine in June. Analysts have said Airbus needs to deliver about 300 of the planes to break even. Airbus Chief Executive Christian Streiff was appointed in July to sort out the company's problems and has pledged to put an end to its fitful performance on delivery of the A380 and launch of the mid-sized A350. He presented the EADS board on Friday with a proposal to revamp how and where Airbus builds planes, which major shareholders DaimlerChrysler and Lagardere objected to, according to France's Les Echos newspaper. It said Streiff threatened to quit if his reforms were not adopted. The EADS board has lined up a meeting on Wednesday with the company's works council and managers. EADS acknowledged last month that fresh delays in the world's biggest airliner were likely but has not yet spelled out how big a delay or the likely costs. Airbus faces rising compensation claims from airlines which will have to lease other planes until Airbus sorts out the wiring troubles holding back the A380. Oct 3, 2006

The troubled Airbus A380 was designed as a flagship product for Airbus, a symbol of its supremacy over Boeing and its ageing 747 jumbo. Analysts now say the project poses an increasing risk to Airbus as it ties up money and engineering resources which the planemaker needs to use to build its next plane, the A350 positioned in a much more profitable segment of the market. Oct 3, 2006

A profitable Airbus is also key to EADS for funding defense operations which it hopes to expand deeper into the US and other markets, partly to offset the cyclical nature of the civil airliner market. Analysts expect demand for airliners to slow as the industry's typically decade-long cycle comes off its 2005 peak. Sales of the A380 superjumbo have stalled and buyers appear to be holding off on the planemaker's A330 and especially its A340 model as the mooted A350 threatens to eclipse both. Streiff's mandate is to cut costs to help counter overruns on the A380 superjumbo which is running two years late as well as to do something to counter the weak dollar, which in an industry priced in dollars is helping US-based rival Boeing. He also needs to spearhead Airbus's strategic efforts, which most urgently require a design for the A350 model due in 2012 which can claw back market share being lost to the 787 due in 2008 and the larger 777. Earlier this week, EADS pushed back the A380 superjumbo by another year as engineers struggle to fix problems encountered in wiring the mammoth 555-seat planes. Oct 8, 2006

Airbus Denies CEO Leaving, EADS Silent. Airbus on Friday denied a media report saying Chief Executive Christian Streiff had resigned and that his departure had been approved by parent firm EADS. "I want to reconfirm that Streiff has not resigned, contrary to the indications," an Airbus spokeswoman said. An EADS spokesman declined to comment. The Associated Press reported that a person close to EADS had said its co-CEOs had received and accepted Streiff's resignation. Reuters was told by a source close to the matter that Streiff had earlier backed his bold proposals for reforming Airbus with a pledge to resign if they were not implemented. However, Streiff would need EADS' co-CE0s Thomas Enders and Louis Gallois to agree to his resignation, something the parent firm had not issued as of Friday. Oct 8, 2006

French PM Defends Airbus Chief As Speculation Rises. France's prime minister defended the head of troubled plane maker Airbus on Sunday, saying he saw no reason for Christian Streiff to resign as speculation swirled that he was set to leave after just three months at the helm. The comments, by Dominique de Villepin in a televised interview, came amid a deepening crisis at the Toulouse-based group, linked to extended delays on its high profile double-decker A380 superjumbo. Brought in to lead the group in early July after problems with the A380 forced out his predecessor Gustav Humbert, Streiff has vowed to cut costs, saying deep changes are needed at the plane maker's network of manufacturing sites. But his plans have run into resistance at EADS, the Franco-German parent of Airbus, and reports surfaced on Friday that Streiff's departure was imminent. Oct 8, 2006

Airbus and EADS officials concede Boeing advantage. Airbus CEO Christian Streiff admitted that the manufacturer now is up to a whole decade behind rival Boeing, while parent EADS co-CEO Tom Enders conceded that it no longer may be feasible to pursue the A350 XWB program. The revelations came yesterday as Airbus continued to deal with the fallout from Tuesday's announcement that the A380 will be delayed an additional year and the company will undergo a radical restructuring dubbed "Power8" aimed at slashing overhead costs by 30% Streiff told Le Monde that his review of Airbus operations has uncovered serious production inefficiencies. "It will take us about 10 years to catch up with Boeing in terms of development and efficiency," he said. Oct 6, 2006

EADS's Enders, speaking at a Berlin news conference, said the A350 XWB program is under review. "We will discuss intensively in the next weeks whether we have the financial and engineering resources to actually take on this program," he said. Both executives and EADS co-CEO Louis Gallois have said repeatedly this week that no firm decisions regarding the Power8 plan have been made. "Everything's possible but nothing's decided," Streiff said. Speculation over job cuts and transferring assembly work, including moving A380 production from Hamburg to Toulouse, already have generated political controversy in France and Germany. German Economics Minister Michael Glos warned at a press briefing that job cuts and facility closures must be "equally [and] fairly distributed" between France and Germany. Airbus employs 42,000 workers in Germany, including 11,000 in Hamburg. What is clear, however, is that EADS will incur significant losses due to the A380 delays. Former Airbus CEO Gustav Humbert and former EADS co-CEO Noel Forgeard resigned shortly after a six-month delay to the A380 program was announced in June.. Airbus now says it "underestimated" its problems at that time. Oct 6, 2006

Airbus A380 Delay Stretches To 2 Years. Airlines revealed production troubles on the Airbus A380 will now delay it by two years, putting a board meeting at parent EADS under fresh pressure to map out how it will get the USD$15 billion superjumbo back on track. Emirates, the biggest buyer of the A380 with 43 on order worth USD$13 billion at list prices, called the program's latest delay "very serious" and warned it was reviewing how to respond. Emirates said its planes would come 10 months late, while Lufthansa said it now expected a fresh delay of a year. Air France said it would receive its first A380 only by spring 2009. A spokeswoman said the original delivery target of spring 2007 had already been postponed by a year. Virgin Atlantic and Qantas also confirmed a delay in deliveries. Oct 3, 2006

EADS Board To Meet On Costs, A380 Delay. The board of Airbus parent EADS is expected on Tuesday to decide on a cost-cutting program and assess the impact of the latest delay in its A380 superjumbo plane, which one newspaper report said could now slow 2007 deliveries to just two aircraft. Airbus said in June it expected to deliver nine A380s next year, down from an original target of 20 to 25. It said last month there would be fresh delays, but declined to be more specific pending the outcome of the board meeting. A spokeswoman confirmed the company's board would meet on Tuesday, after holding an inconclusive session on Friday, but declined to comment on details. La Tribune newspaper said the board would meet by videoconference. An announcement from the firm may have to wait until Wednesday, however, as a meeting is scheduled then with the company's works council and managers. According to La Tribune, Oct 3, 2006

EADS is due to announce it will shift the bulk of A380 production to its Toulouse factory in France. In compensation, its German factory in Hamburg will take over production of the A320 single-aisle aircraft and play a lead role in building the new A350 mid-sized model which is due to be launched soon. But Les Echos newspaper said an overhaul of the production process, proposed by new Airbus Chief Executive Christian Streiff four days ago, was seen as too drastic by the company's main shareholders. DaimlerChrysler has a 22.5 percent stake in EADS, the French state holds 15 percent and Lagardere has 7.5 percent. The paper said Streiff had threatened to resign if his plan was rejected. EADS had no comment. Trade union sources on Friday said that the cost savings envisaged by Streiff could be as much as EUR2 billion (USD$2.54 billion) by simplifying the production process. The work is currently spread out over the former Airbus consortium's founder member's countries with a fleet of special 'Beluga' transport planes ferrying parts between plants. Germany and France are very sensitive about the geographical spread of plane production due to the high numbers of jobs involved. EADS in Hamburg has fought a long battle with environmentalists to extend the plant's runway specifically to be able to take part in the A380 project. The second delay in A380 deliveries, announced in June, not only revealed industrial difficulties at Airbus but also a management problem at EADS which re-opened French-German tension. Streiff and new EADS co-CEO Louis Gallois were brought in and the company announced a new revamp of its long-mooted A350 dubbed the XWB for "extra wide body", signaling a break with the past. But on September 21, after an audit by Streiff of all Airbus programs, the company announced a third delay to the A380 without giving a new timetable. The June delay triggered a 26 percent drop in EADS shares after the company said the setback would cost it EUR2 billion between 2007 and 2010. Airbus is expected to maintain the delivery of the first A380 to Singapore Airlines this year but it is unclear what will happen in 2007. La Tribune said deliveries of the plane, which can seat 555 passengers in a three-class layout, would be limited to two or three in 2007. Oct 3, 2006

Industry reports said EADS might look to trim production costs by consolidating A380 work in the southwest French city where Airbus is headquartered. It would concentrate work on the smaller A320 series at its factory in Hamburg, Germany. Goldman Sachs analyst Sash Tusa in a report last week said Airbus should also look to sell plants to help reverse some of the vertical integration which the A380 has only increased -- a step which rival Boeing has already taken. Formed through a merger of major aerospace players in Germany, France and Spain in 2000, EADS faces a delicate balancing act in how it divides its managerial power, jobs and technology -- something that could mean EADS finds it harder to reform than its US rival did. Its bid to cut jobs at loss-making maintenance unit Sogerma earlier this year saw French Prime Minister Dominique de Villepin wade in to save jobs. Oct 3, 2006

EADS issued a short statement Friday saying the board would "continue this [A380] discussion in the near future." Airbus sources suggested to this website that the board did not endorse the extent of the restructure recommended by new Airbus CEO Christian Streiff. Sources also said that the board "wanted to gauge reaction from airline customers" to the revised delivery timetable. Oct 2, 2006

Key customers were to be notified over the weekend of the full extent of the latest delivery delay for the A380. Two customers said that "we expect to have something to say Tuesday." On Sept. 21, EADS confirmed that the program faced further delays due to complex wiring issues. The board of EADS met in Amsterdam Friday to consider what is reported to be a far-reaching restructure of Airbus with transfer of more A380 assembly work to Toulouse and in the longer term more outsourcing of work beyond Europe. Oct 2, 2006

Airbus A380 stories continue to be rife within the airline community with several very senior executives privately showing exasperation with the whole program. All do seem to agree that once the aircraft actually enters service the problems will be quickly forgotten except as one VP put it. "If there is a minor technical difficulty down the line there could be chaos. We don't have a back-up for 500 delayed passengers". EADS, the senior partner in the project, has confirmed more delays in the program and the planned delivery of the first aircraft to SIA before the end of the year looks increasingly unlikely. On the plus side a series of four trial passenger flights, for which Airbus employees took part in a draw, appear to have been a success, the longest no less than 15 hours. http://www.airbus.com Oct 2, 2006

EADS To Unveil EUR2 Bln Airbus A380 Shakeup - Report. European aerospace group EADS will unveil restructuring measures this week aimed at saving EUR2 billion euros (USD$2.54 billion) a year after new delays in deliveries of its A380 superjumbo, a newspaper reported. The delays, discussed in a board meeting on Friday, are likely to cut EUR2 billion from the group's earnings by 2010, financial daily Les Echos said in an article on Monday, without quoting sources. The restructuring plan, which would come on top of a three-year EUR1.5 billion (USD$1.9 billion) savings plan launched in 2003, would involve a shakeup of industrial operations and assembly sites, increased use of external suppliers and the sale of sites judged non-strategic, the paper said. Les Echos said details of the plan would be presented to staff representatives on Wednesday. EADS, the world's second-largest aerospace group after Boeing has been hit by a series of crises over the past year, culminating in further delays to deliveries of the A380 superjumbo, which is now about 18 months behind schedule. The company, which called Friday's meeting to discuss a revised delivery schedule for the A380, is under pressure to present a clear picture of the future to ward off a further loss in confidence in its superjumbo. Oct 2, 2006

Malaysia Air Should Cancel A380 Order - Union. Loss-making Malaysia Airlines should cancel an order for six Airbus A380 superjumbos to save costs, the national carrier's major trade union said on Wednesday. The 7,000-strong MAS Employees' Union called for the order to be scrapped after Airbus announced another delay to production of the world's largest passenger jet and said it would be unable to start delivering the planes on time. An airline spokesman said he had no immediate comment. Malaysia Airlines ordered the A380s several years ago, before it began to address its financial problems with a turnaround plan to cut unprofitable routes. Oct 4, 2006

Airbus A380 customer Qantas' CFO Peter Gregg said the Australian carrier is "disappointed" with the delay and has commenced a review of its capacity needs. He said it expects to take four A380s in the second half of 2008 and hopes to have seven by mid-2009, but told reporters that Airbus will not be able to catch up on the delivery schedule, meaning that Qantas's 12th and final aircraft also will be two years late. Qantas has been considering the 777 and 747-8 for some time. Oct 5, 2006

Australia's Qantas Airways said it would not receive its first A380 until August 2008, two years late. It expects to receive four of the planes by the end of that year and seven by mid-2009.In the meantime it said it was reviewing its capacity needs. Qantas did not rule out canceling the A380 order. JP Morgan analyst Matt Crowe said while Qantas might consider scrapping the superjumbo order, it was unlikely to do so. Qantas's Borghetti declined to comment on whether the airline would claim further damages from Airbus on top of the AUD$104 million (USD$77 million) it already expects to receive. Qantas's comments echoed statements on Tuesday from Virgin Atlantic Airways and Dubai airline Emirates, the biggest buyer with an order for 43 superjumbos worth USD$13 billion at list prices. Oct 4, 2006

Rolls-Royce Suspends Work On A380 Engines. Rolls-Royce said on Friday it had suspended work on the Trent 900 engine for the Airbus A380 super-jumbo for about 12 months. The A380 is now not expected to start deliveries until the last quarter of 2007, two years late, as engineers work to fix problems in wiring the mammoth double-decker plane. He said the company did not expect immediate layoffs or any change in its financial guidance for the year. The Trent 900 makes up a small part of Rolls-Royce's annual turnover, which includes production and support for engines for several models of planes from Airbus, Boeing and other manufacturers. In addition to aircraft engines, Rolls-Royce manufactures ship engines and equipment used in the energy industry. Oct 6, 2006

Airbus A380 customer Singapore Airlines spokesperson said that "the delays are disappointing, all the more so because the flight test and certification program is proceeding well and the delays are down to production issues." To make up the capacity shortfall, SIA said it will have six 777-300ERs in service by year end with another 13 to be delivered in 2007. They are being delivered with almost identical interiors, including IFE, to those planned for the airline's A380s. It has options on a further 13 777-300ERs and may exercise those earlier than expected. Oct 5, 2006

Singapore Air To Get A380 Compensation. Singapore Airlines said on Wednesday it would receive compensation from Airbus for the delay in the delivery of its superjumbo A380 aircraft and the first plane would be delivered in the fourth quarter of 2007. It added the compensation sum was confidential. Airbus was previously due to deliver the first USD$300 million double-decker to launch customer Singapore this year, but the inaugural delivery was now delayed until October 2007, 10 months late. Airbus parent EADS said on Tuesday it pushed back its troubled A380 superjumbo by another year, and issued a new profit warning, as difficulties installing wiring stalled the delivery of the superjumbo, now running two years later than planned. Airbus has sold 143 passenger versions of the plane to 14 airlines. Oct 4, 2006

BAE approves Airbus stake sale; manufacturer under fire. BAE Systems shareholders, as expected, voted in favor of management's plan to sell its 20% holding in Airbus to EADS for [euro]2.75 billion ($3.52 billion), making EADS the sole stakeholder, while lawmakers and labor unions warned Airbus that they may challenge the "Power8" restructuring plans outlined Tuesday to deliver [euro]2.1 billion in cost reductions and drive [euro]5 billion in cumulative cash savings by 2010. Oct 5, 2006

Emirates, the largest Airbus A380 customer with orders for 45, would struggle to mitigate the effects of the delays. "The biggest impact of the delays could be felt most keenly in the Middle East," he said. "Emirates' and Dubai's growth trajectory and competitive impact could be slowed, but not stalled, by the delays." said Centre for Asia Pacific Aviation Executive Chairman Peter Harbison. Oct 5, 2006

Emirates May Top Up Boeing Freighter Order. Dubai-based Emirates said on Sunday it may buy 10 more Boeing freighter aircraft worth about USD$2.8 billion to tap the growing Middle Eastern air cargo traffic market. Emirates secured the right to purchase the 747-8F planes, it said in a statement. Purchase rights do not include agreement on price. Emirates also confirmed an earlier order for 10 similar aircraft worth USD$2.8 billion. "Our order for the 747-8Fs will be essential in helping us service our rapidly growing network of 28 freighter destinations," Emirates Chairman Sheikh Ahmed bin Saeed al-Maktoum was quoted as saying in the statement. Middle East air cargo grew 5.8 percent last year by tonnage, said Emirates, which operates nine freighters among its fleet of 98 planes. It also awaiting delivery of eight Boeing 777 freighters among more than 100 aircraft on order worth a total USD$30 billion. Emirates ordered 10 Boeing 747 freighters at the Farnborough Air Show in July. At the time, it said the order was worth USD$3.3 billion. A spokeswoman for Emirates could not explain the discrepancy with Sunday's confirmation price. Oct 8, 2006

Etihad Seeks Compensation From Airbus. Etihad Airways, the state-owned, Abu Dhabi-based carrier, is seeking compensation in the form of money or equipment from European plane maker Airbus over delays in the A380 superjumbo, the company said on Thursday. The three-year-old airline, which competes with Dubai-based carrier Emirates, has four A380s on order. Their delivery has been pushed back by Airbus a year to the second half of 2008 after the most recent delays, putting pressure on Etihad to come up with alternatives to pursue its expansion plans. Etihad, which has a fleet of 24 planes that will rise to 34 by the end of next year, is seeking to double its number of destinations to 70 by 2010. It planned to put the A380s to work on its biggest routes, from Abu Dhabi to London or New York, to which it starts service later this month. To adapt to the delay in the delivery of the double-decker planes, Etihad may firm up options it has on 12 other Airbus aircraft. The carrier will likely make a decision on this in the first half of 2007, Boven said. Oct 5, 2006

Airbus parent EADS said on Tuesday it had pushed back the A380 by another year. The A380 project is now running two years late, due mainly to wiring difficulties. State-controlled Malaysia Airlines was originally due to take delivery of its first A380s in January 2007. Now, it may have to wait until July 2008, said Chris Eng, analyst at OSK Research. Eng said the delay could be a blessing in disguise. Airbus has sold 143 passenger versions of the A380 to 14 airlines. Singapore Airlines, which ordered 19 A380s, is a launch customer. Oct 4, 2006

Editor: Aram Gesar, eMail: [e-mail]

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Oct 2, 2006