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Red ink expected for Airbus

January 18, 2007|From Reuters

FRANKFURT, GERMANY — European aerospace group EADS on Wednesday issued its third profit warning in less than a year because of production problems at Airbus, which now expects to post a 2006 loss despite record aircraft deliveries.

Extra costs linked to delays in deliveries of its A380 super-jumbo jet and a decision to bring forward some of the financial provisions budgeted for 2007 and beyond probably pushed Airbus into the red and left EADS near break-even in 2006, EADS said. The company will release its full financial results March 9.

The profit warning came as a surprise even to those close to Airbus and overshadowed the plane maker's attempts to focus on its record deliveries of 434 aircraft in 2006.

Airbus' deliveries beat rival Boeing Co., which delivered 398 planes. But in value Boeing was ahead, and the U.S. firm beat Airbus in orders for the first time in six years. Airbus said it had booked 790 net orders in 2006 versus Boeing's 1,044.

EADS has said it may have to raise new cash in 2007, but some analysts say the latest profit warning increases the possibility that EADS will have to raise capital through shares soon.

EADS said earnings contributions from its other divisions in 2006 "should roughly balance out" any operating loss from Airbus. Analysts had on average forecast an operating profit of 1.8 billion euros ($2.3 billion).

The A380 is due this year, two years behind schedule.

Airbus Chief Executive Louis Gallois stressed that 2006 was Airbus' second-best year in orders, but he acknowledged that the company had been hurt by the lack of a real rival to the Boeing 787.

Airbus had 2006 revenue of about 26 billion euros ($33.6 billion), Gallois said. He said Airbus expected to deliver 440 to 450 planes this year.

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