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BAE to Audit Airbus After Low Valuation Hits Disposal Plan

BAE Systems plc announces that, in accordance with the terms of the shareholders' agreement dated 11 July 2001 between BAE Systems, European Aeronautic Defence and Space Company EADS N.V. and Airbus S.A.S., BAE Systems today served notice on Airbus of its intention to undertake an audit of the Airbus Group.

On 13 June 2006, Airbus announced that the delivery schedule for the A380 programme would undergo a delay of six or seven months due to production ramp-up issues and EADS announced an anticipated annual EBIT shortfall from 2007 to 2010 as a result of this delay of approximately EUR 500 million.

On 14 June 2006, BAE Systems announced that it did not believe any credible or serious assessment of the likely financial impact of the delay in A380 deliveries could be made at that time.

On 2 July 2006, an independent expert determined the price payable by EADS in relation to the proposed disposal of BAE Systems' interest in Airbus.

BAE Systems expects that the Audit will assist its Board in assessing whether or not to recommend that its shareholders vote in favour of the Proposed Disposal.

BAE Systems is required to give Airbus two weeks notice of its intention to undertake an audit. The Audit is not anticipated to be completed before the end of August 2006.

A circular setting out the Board's recommendation to shareholders and further details regarding the Proposed Disposal will be sent to shareholders after the Board has had the opportunity to review the outcome of the Audit.

BAE Systems Plc Serves Notice of Its Intention to Conduct an Audit of Airbus