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Wed, May 28, 2008

EADS Chief Blames Airbus For Plummeting Stock Prices

Cites Ongoing A380, A400M Problems

EADS CEO Louis Gallois has been asked some tough questions lately about his company's financial performance, corporate restructuring, project delays and outlook going forward. For better or for worse, he's giving equally blunt responses.

Reuters reports the company's stock has fallen 32 percent this year, underperforming French blue-chips by 23 percent, and lagging Boeing by 27 percent. In casting blame on Monday, Gallois threw his company's airliner division under the proverbial Airbus.

"Although we have made significant progress on the development and ramp-up of A380 and A400M there are still significant levels of execution risk," he said. "And the environment is characterized by the weaker and weaker dollar, increasing oil prices and tightened access to credit for airlines."

As ANN reported, in March EADS posted its first quarterly loss in five years, a net loss for 2007 of about $684 million US for 2007.

Gallois also stressed the need for further cuts at Airbus. Plans to cut 10,000 jobs at the European planemaker, as part of the controversial Power8 restructuring program, have stalled on the neverending decline in value of the US dollar.

"The head of Airbus is too big for the legs," Gallois said. "...The market believes that air traffic will disappoint. This is reflected by the performance of the commercial aerospace stocks and in particular EADS."

Citing recent announcements by US carriers like American Airlines -- and a profit warning issued this week by Air France/KLM --  Airbus chief Tom Enders added, "There really are some dark clouds on the horizon for air travel," in comments this week at the Berlin Air Show.

There was also room for hope, however. Gallois (above) predicted that despite the gloomy talk in the markets, EADS will be in a position to increase its shareholder dividend next year.

In newspaper interviews over the weekend, he also made a uniquely European suggestion for more government subsidy of the aerospace industry.

FMI: www.eads.com, www.airbus.com

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