Airbus plunged into its first-ever operating loss in 2006 and will be in the red again this year, parent company Eads said on Friday in another twist of the crisis at the European plane maker.
Analysts at Citigroup investment bank said that prospects for Airbus were now “awful” after management warned about vast cost problems and signalled that recovery by rival Boeing was hurting the group.
The figures reinforced warnings from Airbus chief Louis Gallois that the problems are deep and cutbacks are urgently needed, but he reassured on Friday that the jet maker was not driving Eads into a cash crisis.
Eads said Airbus made an operating loss of €572-million ($752-million) in 2006 from an operating profit of €2,3-billion in 2005, despite delivering a record 434 aircraft last year.
“Airbus will display another substantial loss in 2007,” Eads said, pointing to more costly gloom ahead and a worsening business environment.
The main costs in 2007 would arise from a controversial restructuring programme announced by Airbus last week, overruns from its much-delayed A380 superjumbo project, and charges from the launch of its mid-range A350 XWB.
The fall of the dollar, falling margins on new aircraft orders and increased research and development spending would also exacerbate losses.
Eads, which has helicopter, space and defence assets as well as Airbus, reported an 86% fall in its operating profit to €399-million.
Net profit plummeted to €99-million compared to €1,676-billion in 2005, while sales rose 15% to €39,4-billion.
Shares in Eads, which have fallen by about a quarter in value in 12 months, showed a loss of 2,91% to €23,0 on a broadly weaker Paris stock exchange in midday trading. The group is capitalised at about €18,5-billion.
“Airbus long-term guidance is awful,” said analysts at Citigroup. “Management appears to have capitulated on the long-term outlook.”
Airbus acknowledged on Friday that growth in deliveries was slowing amid pressure on the pricing of new orders.
This amounted to evidence that Boeing was gaining market share and was testament to the more modern product range of the US manufacturer, the analysts said.
“We can add to this the enormous FX headwind,” they added, referring to the falling dollar against the euro which makes Airbus planes more expensive in international markets.
The Airbus results contrasted sharply with those of Boeing, which made a comeback last year after spending five years behind its European rival in the battle for new orders.
In January, Boeing reported a 14% rise in net profit for 2006 to $2,21-billion (€1,68-billion.)
Gallois, who is also co-chief executive of Eads, said again on Friday that Eads would need to raise fresh capital at some point, but he stressed that the cash injection was not urgent.
Delays with the A380, the world’s biggest civilian airliner which is two years behind schedule, are to cost Airbus more than €5-billion from 2006-2010, Gallois said earlier this week.
Eads booked a €2,5-billion charge for the A380 during 2006, the main reason for the loss over the year.
Gallois stressed the importance of implementing the “Power8” restructuring plan unveiled in the teeth of opposition from trade unions and politicians last week.
“Airbus has three weaknesses: We need to reduce our costs … to create a network of partners around us, and integrate Airbus as a complete company, not as a partnership between four national companies,” Gallois said after presenting the results on Friday.
The cost-slashing strategy calls for 10 000 job cuts across Europe in the next four years, streamlined production involving the divestment of three factories and a major re-organisation of manufacturing.
The cutbacks face fierce resistance from trade unions, have caused diplomatic tensions between the French and German governments and have become a key campaign issue in the run up to presidential elections in France in April and May.
Airbus was formed in 1970 as an amalgam of British, French, German and Spanish aerospace companies. – AFP