PARIS --- “Get a life!” Airbus CEO Tom Enders jokingly mocked reporters attending the EADS pre-air show media briefing on June 13, and wondered that they would spend an entire Saturday listening to briefings in a windowless basement instead of enjoying the first true summer day in Paris.
Yet, such is journalists’ fascination with EADS’ unique mix of state-of-the-art products, offset by management challenges, that several dozen reporters did just that.
Below is a compilation of newsworthy or significant points made by company executives during the briefings. The remarks were embargoed until June 14 midday.
-- EADS has launched an initiative, overseen by Airbus COO Fabrice Brégier, to enhance program management throughout the group.
-- There has been “a very strong improvement” in the A350 program, with more involvement of suppliers, taking earlier account of production constraints, and better assessment of the impact of new technologies, EADS CEO Louis Gallois said.
-- EADS must make a large acquisition to meet its growth plans as organic growth will not suffice. However, it is hoarding its cash until it has better visibility of how the market will evolve.
-- First flight of the A400M military transport aircraft is tentatively scheduled for late December but could slip slightly into early January. “The end of contract negotiations could coincide with the first flight, which would be a good symbol,” Gallois said.
-- The United Kingdom is taking an active part in the ongoing discussions. “We need the UK, we want to have the UK with us…but I don’t think it would kill the contract if the UK withdrew,” Gallois said. He also added that:
-- EADS has spent all of the 5.7 billion euros it was paid by participating governments, and is spending “over 100 million euros” of its own money on the program every month.
-- EADS has already lost 2.8 billion euros on the initial contract for 180 aircraft but sees a big future for exports, where the A400M will be alone on a market where “huge fleets of transport aircraft have to be replaced,” including thousands of C-130 Hercules.
-- Mismanagement of the A400M contract “doesn’t mean we should not be in the defense sector; it just means we should sign better contracts,” Gallois quipped.
-- The A400M has also been offered to the US Air Force, Ralph Crosby, CEO of EADS North America, said.
-- This year, EADS is marketing the A400M, and other products of the Airbus Military unit, to Greece, Saudi Arabia, UAE, Oman, India, Vietnam, Brazil and Mexico.
US Tanker Competition
-- “We hope that jobs will be taken into account, as we will create more jobs that our competitor…..We expect fair treatment, and have no reason to believe we will not,” Gallois said.
-- The key question is what credit will be given for capability above the requirements threshold, Crosby said.
-- Eurocopter signed 2.5 billion euros’ worth of contracts during the first quarter of 2009, but they have not yet come into force because it has not yet received related down payments. It has received down payments on another 500 million euros of Q1 military contracts, CEO Lutz Bertling said.
-- In 2008, world helicopter deliveries (excluding China and Russia) totalled 1,294 aircraft worth 10.1 billion euros, of which Eurocopter accounted for 30% by value and 45% by the number of aircraft.
-- Modifying the UH-72A to meet US Army requirements for the new Armed Scout Helicopter program requires minor changes to the engine software. Thus modified, the UH-72 can meet the seven key performance parameters set by the US Army, Crosby said, and it will be demonstrated to the US Army in the autumn. “The question is how quickly the US Army will do the program.”
Strategy & Markets
-- EADS sees its sales doubling to 80 billion euros by 2020, of which half from non-Airbus business. Services will generate 20 billion euros a year by 2020, marketing and strategy chief Marwan Lahoud said. EBIT should increase to 10% of sales by 2015.
-- EADS will focus its marketing on growth areas: Latin America, Middle East and Asia.
-- The company is currently running 160 marketing campaigns in the Middle East and Africa, chasing business potentially worth 60 billion euros, and another 200 campaigns in Asia, for business potentially worth 73 billion euros.
Defense & Security unit
-- After Airbus, D&S delivers the best return on sales within the EADS group: 7.2% in 2008. EBIT doubled since 2005, to 408 million euros in 2008, Stefan Zoller, CEO of the D&S unit, said.
-- Airbus is looking at future technologies for the next-generation single-aisle aircraft, but there is no urgency as the A320 family is still selling well, Airbus CEO Tom Enders said. “We need to prepare this new generation very thoroughly... as we are not just looking for incremental improvements."
-- In a worst-case scenario, deliveries could drop by a maximum of 15-25%, depending on aircraft segments, compared to 2008, which was a record year, Enders said. But the order book is for 3,500 aircraft, or seven years of production, so there is some flexibility.
-- The challenge is trimming production during the downturn while being able to quickly ramp it back up when it will be needed, Gallois said.