all the defense and aerospace news
defense news
aerospace news

A400M Cost EADS 191M Euro Loss, 400M Euro Outflow in First Half

Louis Gallois, CEO of EADS, said: “We welcome the commitment of our A400M launch customers to the programme. In partnership with our customers and our suppliers we are now continuing to work hard in order to bring the A400M back on track.”


The working capital deterioration is due to inventory build-up at Airbus and the retention of customer advance payments for the A400M programme. The outflow for the A400M amounts to EUR -400 million.


The customer OCCAR and the launch nations have reiterated their commitment to the A400M: On 24 July, they confirmed that they will adhere to the A400M programme to enable further detailed negotiations up to the end of year. This provides an opportunity for all parties involved to realign the programme on an achievable basis.

EADS is using this phase to carry on with its suppliers and partners to establish a robust timetable including a date for the first flight. Furthermore, this period gives room to rebase the contract on realistic conditions acceptable to all parties. EADS intends to reduce any further potential loss, but the full financial consequences of the delays will only be known once the negotiations are finalised.

Over the last months, the programme made further progress. The first A400M development aircraft is being prepared for engine fitting. The second aircraft is assembled and has entered systems testing phase while final assembly for the third unit has started. The flying test bed for the engine has successfully performed twelve flights with more than 35 flight hours. A first version of the revised engine software FADEC was received and is showing good initial results in testing.

Due to the continuing high level of uncertainty on the programme, EADS retained the early stage accounting treatment of this programme. This resulted in an EBIT impact of EUR -191 million for the first six months (thereof EUR -120 million taken in the first quarter).

Substantial negative income statement impacts may still have to be booked in future periods depending on the progress of the development and the outcome of the negotiations on the A400M programme.


Concerning one-off impacts affecting H2, the range and magnitude of the potential A400M programme charge is wide.


Airbus Military revenues accounted for EUR 855 million (H1 2008: EUR 898 million) of the Airbus total benefiting from an increase in tanker as well as medium and light activities. This was more than offset by the difference between the absence of the Power On Milestone – booked in the first quarter of the previous year – and the revenues booked as the recoverable part of the A400M costs. Accordingly, EBIT stood at EUR -36 million (H1 2008: EUR -20 million). (end of excerpts)

(EDITOR’S NOTE: The amounts detailed above are smaller than those announced at the Paris air show in June, when EADS said it was investing 100 million euros each month on the A400M program. Separately, Thales announced today that it had taken a new, 102 million euro provision in the first half against its share of the A400M program)


EADS Reports First Half-Year Results (excerpts)