EADS to Focus on Programs, Costs, UAVs in 2011
(Source: defense-aerospace.com; published Jan. 13, 2011)
LES MUREAUX, France --- EADS is finalizing negotiations with the governments participating in the A400M military airlifter program, and could sign the final contract soon after the German Bundestag’s finance committee reviews the program on January 19.

“With the contract on the way to being signed, we have removed considerable risk from the program; this is the leading achievement of 2010” company CEO Louis Gallois told reporters here Jan. 12, during the company’s New Year press conference. He added that EADS is sticking to the estimate of 400 to 500 global sales for the aircraft, adding that “production of the series aircraft is starting as I speak – today.”

Reviewing the group’s 2010 performance, Gallois noted that “orders were better than expected” and that “cash-flow generation was excellent,” with both orders and deliveries for Airbus, the group’s largest unit, exceeding 500 aircraft for the first time. He also expressed satisfaction at having, in 10 years, “turned four medium-sized national companies into a world leader in aerospace, defense and security.”

But profitability “is not yet satisfactory,” mainly because of insufficient currency hedging, higher than expected cost of programs, and defense cuts throughout the world.

Although the company provided no information on its 2010 financial results, and little more about Airbus, which is to announce its results on Jan. 17, Gallois and company chief financial officer Hans-Peter Ring provided some snippets of interest:

-- EADS and Airbus are now “out of the woods” on the A380 program; “we have taken control of the manufacturing process,” Gallois said. The focus in 2011 will be on “reducing cost of programs, with a priority on the A380;”

-- First deliveries of the A350XWB have slipped slightly to the “second half” of 2013 instead of the previous goal of July 2013, adding that the program “is a difficult technical challenge;”

-- Gallois wants EADS to be appointed prime contractor for the planned European MALE (Medium Altitude Long Endurance) UAV Unmanned Aerial Vehicle (UAV) program, and it is currently self-financing its work on the Talarion UAV. He sent a double message to governments: “EADS has by far the best expertise on MALE drones in Europe … we expect that this expertise will be recognized” when Europe launches its cooperative MALE program because “common sense is to use this expertise.” And, he cautioned, “there is a risk in having two programs in Europe, as experience has shown on aircraft programs.”

-- EADS expects a decision on the US Air Force’s new tanker aircraft sometime next month, Sean O’Keefe, CEO of EADS North America. Previously due for announcement in November, the award was delayed because the US Air Force and the Pentagon “want to make it uncontestable.”

-- France and Germany both support the mid-life upgrade of the Ariane 5 space launcher, which is seen as a “significant” asset in the company’s push to obtain funding for the project. Development of the new version is estimated at about 1 billion euros, and these funds need to be secured;

-- Now based predominantly in Europe, EADS will gradually shift its operations to a more balanced, “three-pillar” stance with major operations also in the United States (which is half of the world market) and the developing world, where “we must dramatically increase our footprint…and become local players.” In response to a question, he stressed that “we have the capacity to grow outside Europe without jeopardizing our presence in Europe.”

-- “Acquisitions are another way to grow our footprint; it is a question of opportunity and price,” Gallois said, shrugging off criticism that the company was clueless as to what to do with its cash hoard of well over 10 billion euros. Hans-Peter Ring later said that EADS was “working on a number of acquisition projects,” and that “I would expect something to happen this year.”

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