Fri, Oct 20, 2006
Confirms Need For Higher A380 Break-Even Sales
EADS CFO Andreas Sperl
warned potential investors Thursday rumors of a higher break-even
target for the A380 program are true. How much higher? Financial
Times reports 55-percent.
The troubled A380 program is Airbus' biggest thorn right now.
Three delays (it's now 2 years behind schedule), wiring issues,
senior management shakeups, angry customers, a weakening
dollar and dwindling potential returns have all conspired to
finally convince EADS a major restructuring of Airbus is the only
way to save the program.
When Airbus originally pitched EADS on the idea of the A380, the
company said it needed sell only 250 aircraft to break even. Armed
with a market forecast claiming deliveries of 1,250 aircraft with
more than 450 seats over the next 20 years, Airbus sold EADS on the
deal. Company financials are still based on selling just over 750
of the superjumbos over the A380 program's lifetime.
Previous financial forecasts published in 2005 estimated the
break-even sales number for the A380 at 270 aircraft. At a meeting
with investors in Hamburg Germany, Sperl bumped that estimate to
420.
The group Sperl spoke to represents a number of German banks.
EADS wants them to buy the 7.5% stake in the company that it
believes DaimlerChrysler will sell as early as next year.
Although not a done deal, maintaining the status quo vis-a-vis
French-German interests will keep pressure on management to
remain balanced as jobs are cut during the coming Airbus
restructuring. The German government is obviously keen on a
successful sale of that 7.5% to German investors.
UK jobs are also at stake during Airbus' restructuring and EADS'
co-CEOs plan to meet with UK trade officials next week to quell
rising fears. Airbus reportedly plans to cut costs during the
restructuring by nearly $2.5 billion a year by 2010.
Airbus has 159 confirmed orders for the A380. As might be
expected, new orders have dropped off almost entirely since rumors
of program delays hit the streets earlier this year.
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