EADS Profit Falls on $690 Million Airbus Jet Charge

Airbus parent EADS on Thursday reported a sharp drop in second-quarter earnings, hit by a 500 million euro ($690.5 million) charge on the redesign of the airliner it is building to rival Boeing's 787.

European aerospace group EADS said second-quarter earnings before interest and tax fell to 278 million euros from 863 million a year earlier. Quarterly sales fell 4% to 9.509 billion euros and net profit fell 85% to 81 million.

Analysts had on average forecast second-quarter EBIT of 99 million euros, on sales of 9.648 billion euros, and a quarterly net loss of 2 million euros, according to a Reuters poll.

The group's results included a 500 million euro charge for the cost of redesigning and relaunching the Airbus A350 -- now dubbed A350 XWB for "extra wide body" -- to compete with the successful 787 Dreamliner which has strongly boosted Boeing's fortunes.

The charge came on top of a restructuring charge of 688 million euros taken in the first quarter as Airbus cuts 10,000 jobs to compensate for the dollar's record weakness against the euro and repair the cost of delays to its A380 superjumbo.

Boeing rolled out its lightweight, carbon-composite 787 Dreamliner earlier this month. The mid-sized, long-range jetliner is Boeing's first all-new plane in 12 years and has already attracted more than $100 billion in orders.

The world's second largest aerospace group after Boeing ditched its earlier pessimism over its ability to generate cash in 2007 in the face of a weak dollar but warned of risks to major military projects.

Paris Air Show

EADS said its cash position had been bolstered by a big harvest of orders at the Paris air show.

Airbus bagged a record tally of orders at the June event, triggering a slew of downpayments on future deliveries.

Full-year cashflow is now expected to be positive compared with a shortfall of up to 1 billion euros forecast in May.

However EADS said the "risk level on certain key programmes" prevented it from raising its other core forecasts despite the stronger operating performance at its biggest unit Airbus.

EADS is in the midst of examining the costs of another major Airbus project, the A400M military airlifter, and has run into problems in delivering the NH90 military helicopter on time.

Its Eurocopter unit took a 105 million euro NH90 charge.

The group reiterated its forecast for a low single-digit percentage drop in 2007 sales and "roughly stable" EBIT, while tightening its euro exchange rate asssumption to $1.35 from $1.30. The euro currently stands at $1.37.

EADS has predicted a "substantial" loss for the second year in a row for Airbus in 2007 but a combined EBIT close to 1 billion euros for the combined helicopters, defence and space businesses.

It confirmed the one billion euro target on Thursday but said this was "before any impact from the A400M cost assessment."

The tactical heavy lifter designed for 7 European NATO nations is now expected to stage its inaugural flight in the summer of 2008, later than the previous target of early 2008.

EADS had already announced a three-month production delay.

"The (A400M) programme contains material risks on the overall time schedule, and system providers continue to face challenges that may (imply) late design implications," it said.

Airbus posted a positive second-quarter EBIT of 88 million euros -- down 89 pecent from the same period last year but markedly better than the average consensus forecasts of a 116 million euros loss.

For the half-year, EADS reported EBIT of 367 million euros, above the consensus forecast of 170 million euros.

EADS reports EBIT before goodwill and exceptional items.

The EADS figures came after rival Boeing reported a higher-than-expected second-quarter profit and raised its full-year forecasts on Wednesday.