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Thu, Sep 21, 2006

Airbus Confirms Yet Another A380 Delay

No Word Yet On Delivery Timeframe, Added Costs

The rumors are true -- for the second time in less than three months, European planemaker Airbus SAS has announced a delay for its new A380 superjumbo.

Bloomberg reports wiring issues have gotten the best of the planemaker... 300 miles of wiring to be exact. Airbus promised customers it could customize entertainment systems for each aircraft -- which adds to the complexity of building each plane, as different wiring has to be preinstalled in each plane for its specific iteration.

"I'm not surprised that the plane is once again delayed, given the complexity of the electrical-harness system," said Exane BNP Paribas analyst Olivier Esnou. "The real question is, how much more in penalties and cost overruns will Airbus have to incur?"

Airbus parent company EADS issued a statement saying it "does not confirm nor deny specific information reported by various media relating to the A380 program because the review of the program is not completed yet."

EADS did acknowledge, however, "continuing industrialization challenges with the wiring of production aircraft have been identified and are being tackled... Consequently, from what is known today, there will be further delays."

Along with the delay, EADS says it hasn't determined the financial impact of the delay... hinting at a cost increase. Also up in the air, so to speak, is how the delay will affect scheduled deliveries of the airliner to customers... deliveries that have already been delayed by at least six months.

This announcement follows a string of bad news for Airbus. As reported in Aero-News, earlier this year EADS co-CEO Noel Forgeard was replaced when he shocked the industry by selling his company stock just before news broke of an earlier delay in the A380. EADS also axed Airbus CEO Gustav Humbert.

Earlier this month, BAE Systems sold its 20-percent stake in Airbus back to EADS -- at a significantly lower price than originally quoted. At that time, company CEO Mike Turner also hinted at further delays with the A380... possibly giving BAE a reason to get out while the getting was good.

Add to the mix Airbus' sound thrashing by Boeing in this year's sales race... by a margin of four-to-one for the first half of the year -- and it looks as though Airbus may be eating humble pie for some time to come.

"Customers are certainly going to be upset by this," said Nick Fothergill, head of industrial sales and trading at Lehman Brothers "They may want more compensation. This is one of imponderables as to how much."

FMI: www.airbus.com

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