EADS profits take off

Airbus parent group EADS this week saw its profits take off with a roar to match the maiden flight of its A380 superjumbo.

The European aerospace and defence giant turned in pre-tax profits of e657m (£448m) in the first quarter of 2005, more than three times the figure for the same period last year. Sales were 16 per cent ahead at e7bn.

The earnings surge was driven by a strong performance from Airbus, which delivered 87 aircraft during the quarter, 20 more than at the equivalent stage in 2004.

EADS owns 80 per cent of Airbus, with the remaining fifth held by the UK’s BAE Systems.

The extra deliveries were mainly of A319 aircraft, but the company claimed that the recent first test flight of the A380 proved EADS will be in a strong position to take the fight to arch-rival Boeing for years to come. Its orders at the end of march stood at e141bn, including commitments from 15 customers to buy a total of 154 A380s.

Airbus said development of the A380 freighter was also well underway, and the company expects to deliver a total of between 350 and 360 aircraft in 2005 as a whole, up to 40 more than last year.

Away from Airbus, EADS’s performance was less spectacular, but saw several key divisions move nearer to the black. Its military transport business reduced losses to e6m from e8m a year earlier. The group’s space operations also trimmed its deficit — e6m compared to e11m last time — and appears on track to turn a profit for the group before too long.

Despite the strong first quarter, which beat the expectations of market analysts, EADS said the strength of the euro compared to the dollar would have a negative impact across the year as a whole.

The fiscal benefits of a reduction on R&D spending on the A380 as it moved from development into the production phase would also be reversed later in the year, with more R&D expenditure needed on the aircraft’s freighter version.

Another threat to EADS/Airbus’s finances could come from a price war among commercial aircraft manufacturers, with the European group forced to slash the cost of its planes to secure new orders in the face of competition from US rivals.

EADS said it didn’t expect prices to decline on average, but said this depends how aggressive other makers, particularly Boeing, were prepared to be on cost.