Friday, October 06, 2006

Airbus problems get bigger.

Bidness: A380 is killing them and Boeing is going for the rout.

PARIS — Problems of European jetmaker Airbus seeped beyond the troubled A380 superjumbo Thursday as doubts surfaced over two other projects. The European Aeronautic and Defence and Space Co., the aerospace group that controls Airbus, raised the specter for the first time that delays and profit warnings surrounding the A380 program could endanger plans to build the midsized A350, an aircraft Airbus insists is "fundamental" to its future. Airbus also said the A400M military airlifter it plans to build for seven European NATO countries faced the risk of future delays and would not make money unless costs were cut. "The (A400M) timetable is exactly on the edge. ... We are exactly on track but without any reserves (of time)," Airbus Chief Executive Christian Streiff told the Financial Times. Analysts say Airbus is straining its resources to handle all three projects at once, while the weak dollar is also hurting. Bruised by a 30% drop in its share price this year, EADS made clear it would not automatically allow Airbus to launch its A350 until it could prevent another crisis unfolding. "In the next few weeks we will hold in-depth discussions to see whether the financial ... and the engineering resources are available to actually take on this program," EADS co-CEO Thomas Enders told reporters in Berlin. "I personally believe in the A350," he added. After several false starts, Airbus has come up with a new wider design for the A350 to try to halt a surge in sales of Boeing's rival 787 Dreamliner. Both planes exist on paper only, but the midsized market is already the biggest battleground between the two companies despite public focus on the A380. Analysts estimate the new plane will cost 8 billion euros ($10.2 billion) instead of 4 billion to develop, eating into cash that is already being drained by a two-year delay in the A380 project. Airbus announced the latest delays to the world's largest airliner on Tuesday along with a 4.8 billion euro cumulative shortfall in the operating profit it projects over four years. Angry airlines refused to rule out cancelling their orders over the delays, which Airbus's biggest customer, leasing firm International Lease Finance Corp of the USA, called an "industrial tragedy." "The A380 timetable was ambitious from the start and from today's point of view perhaps unrealistic," Enders told Financial Times Deutschland. Asked whether the problems with the mammoth plane could endanger the A350, he said, "I cannot rule that out." Streiff said Airbus must produce the A350 even if it is three or four years behind Boeing's rival model. "The A350 is fundamental for us. It is up to the EADS board to decide," he told Le Monde in an interview.

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