U.S. News

Airbus Expects Substantial Loss in 2007

Airbus parent EADS posted a multimillion euro quarterly loss Friday and warned that Airbus would "display another substantial loss in 2007.” The company blamed a weaker dollar and major delays at its Airbus unit dragged its 2006 profit down.

“We are disappointed, but the only cause for the difficulties of EADS are concentrated on Airbus and it’s a problem we have to solve,” said Louis Gallois, CEO of EADS, to “Squawk Box Europe.”

The Amsterdam-based company lost 768 million euros ($1.01 billion) in the fourth quarter compared with a profit of 405 million euros a year earlier. Sales, however, were up 11% to 11.96 billion euros ($15.73 billion) compared with 10.76 billion euros in 2005.

Despite the loss, Gallois said to CNBC the company doesn't "need immediately to raise additional capital, because … we have a very positive cash position, around 4.2 billion (euros).”

EADS said the effect of delays on the A380 superjumbo and charges on its A350 XWB program, along with higher research and development costs, hurt profitability in the quarter.

Airbus posted a fourth-quarter operating loss of 1.72 billion euros ($2.26 billion) compared with a 453 million euros operating profit in the same period a year ago. During the fourth quarter EADS bought BAE Systems PLC's 20% stake in Airbus for 2.75 billion euros ($3.62 billion).

Sales rose 8% to 6.6 billion euros ($8.68 billion) compared with 6.14 billion euros in 2005.

For the year, Airbus, based in Toulouse, France, had an operating loss of 572 million euros($752.29 million) compared with a profit of 2.3 billion euros in 2005. Sales rose 14% to 25.2 billion euros ($33.14 billion) compared with 22.2 billion euros in 2005.

Overall, EADS earned 99 million euros ($130.2 million) in 2006 compared with 1.67 billion euros in 2005 as sales rose 15.4% to 39.4 billion euros ($51.82 billion) from 34.2 billion euros a year earlier. Analysts polled by Dow Jones Newswires had expected a 2006 net profit of 39 million euros ($51.29 million).

Job Cuts Key to Profitability

Co-chief executives Tom Enders and Louis Gallois said that the results were hampered by Airbus, but predicted the recently announced Power8 plan, that will cut up to 10,000 jobs in the coming years, would help return the unit to profitability.

"It will take some time but Power8 will make Airbus substantially more integrated and efficient," the pair said in a statement. "For 2007, our priorities are to drive operational improvements, restore the group's credibility and build a leaner and more dynamic EADS."

Looking ahead this year, the company said it expects revenue experience a single-digit increase and said that Airbus revenues would likely remain stable based on an expected 440 to 450 deliveries this year.

The company has be hampered by interference from the French and German governments, which Gallois said they have the right to do, but insisted the management of the company should be left to work as a normal company.