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A400M drags EADS to loss, Airbus reports no new orders in Feb-2010 – Suppliers Share Wrap

Analysis

EADS finally has a deal which will salvage its EUR20 billion A400M programme, at the cost of an EBIT and net loss in 2009.

Summary
  • EADS reaches a deal to salvage its EUR20 billion A400M programme, resulting in an EBIT and net loss in 2009.
  • Partner nations agree to increase the contract price by EUR2 billion, waive liquidated damages, and provide additional funding in exchange for participation in future export sales.
  • EADS expects an increase of EUR1.8 billion in the A400M loss provision for 2009, leading to a full-year EBIT and net loss.
  • Investors welcome the rescue of the A400M, but EADS warns of potential significant impact if there are substantial changes to the agreement.
  • Airbus, a unit of EADS, reports no firm aircraft orders in February 2010 but signs an MoU with Hong Kong Airlines for six A330s.
  • Share prices of EADS, Boeing, and Embraer show positive movement following the news.

The company confirmed on Friday that it has entered an agreement with the seven partner nations of the A400M programme. The member nations agreed to increase the price of the contract by EUR2 billion, waive all liquidated damages related to current delays, provide an additional amount of EUR1.5 billion in exchange for a participation in future export sales through Export Levy Facilities and accelerate pre-delivery payments in the period of 2010 to 2014.

EADS now expects an increase of the A400M loss provision of EUR1.8 billion (pre tax) for the full year 2009. Based on this, the company expects to report a full-year EBIT and net loss. Full results for EADS are due to be released on 09-Mar-2010.

While the news of the loss will be unwelcome, the fact that EADS and its partners have acted to rescue the A400M has been welcomed by investors. The company has cautioned however that if substantial changes to its assessment of the agreement were to occur, EADS performance "could be significantly impacted". EADS shares finished trading on Friday up 2%. Boeing shares were up 3.9%, while Embraer gained 0.2%.

EADS commercial aircraft unit, Airbus, reported it received no firm aircraft orders in Feb-2010, and delivered 38 aircraft: 33 A320 family aircraft, four A330s and one A380. The manufacturer did sign an MoU with Hong Kong Airlines for six A330s during the month.

Selected Aviation suppliers' daily share price movements (% change): 05-Mar-2010

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