Airbus faces new costly delay

Aerospace group EADS warned on Monday that delays to its Airbus military aircraft will cost up to 2.0 billion dollars as it grapples with an insider trading scandal and costly setbacks to its A380 superjumbo.
The news sparked a heavy sell-off in EADS shares as the group disclosed it would now have to reconsider operating profit projections for 2007 when it announces quarterly results November 8.
The group until now has forecast 2007 operating earnings at roughly the same level as last year, 399 million euros. "It's a new and heavy blow to the credibility of EADS," said analysts at Exane BNP Paribas.
The European Aeronautic Defence and Space Company (EADS) announced that delays of at least six months in deliveries of the Airbus A400M military transporter would cost it between 1.2 and 1.4 billion euros. "While the calculations have not been finalised, EADS currently estimates it will have to spend between 1.2 and 1.4 billion euros, of which more than one billion for Airbus," the group said in a statement.
EADS said on October 17 that delivery of the A400Ms to the French air force would be moved back six months to 2010 because of engine problems. It warned at the time of an "additional risk of a further slippage of six months."
"The problems with the A400M programme show that EADS has still to demonstrate that it can overcome and improve a defective execution strategy," said analyst Harald Liberge-Dondoux of the bank Credit Mutuel CIC. Analysts at Natixis bank noted that while EADS had already set aside 352 million euros to cover difficulties with the A400M, it did not say if this amount was included in the 1.2-1.4 billion euros.
At brokers HPC, analyst Andre Chassagnol predicted that charges of more than one billion euros could produce negative operating results in 2007, adding that the full extent of costs problems with the A380 and the A350 XB, were not known.
"I have no confidence in the current management of the group and I find it incredible that its leaders have never studied the additional costs related to delays in different programs and the number of years that will be affected by these costs," he said.