EADS Reiterates Decline In Commercial Aviation Affecting Bottom Line

Right after passing Boeing to become the world’s larges aerospace company EADS continues to state that the decline in airline orders for its products will affect its earnings and revenues. Reiterating what it said in early May when the quarterly earnings report came out that airlines are restructuring their orders for airliners and this is causing uncertainty.

At the annual shareholders meeting the CEO, Louis Gallois, claimed the company will still make a profit this year but it will be less then last years’ 2.8 billion Euros ($4 billion). EADS said that the delays to the A400M and the commercial airliner market are the two programs having the biggest effects on their earnings and revenue. In fact the company claims it cannot predict “demand or earnings beyond 2009 as airlines cancel or defer Airbus orders”. Unlike Boeing which is looking at delivering the new 787 Dreamliner EADS does not have any new aircraft models starting this year, but is seeing airlines cancel or delay orders for their products.

EADS is looking at actually cutting back on production of Airbus aircraft instead of expanding it as originally planned for this year. Currently there are no plans to restructure their workforce but Gallois does not rule that out if there are continuing economic issues. EADS may face struggles there as it has a joint German and French labor force and each country’s government is very parochial when it comes to laying people off.

The eventual cost of the A400M is also still in negotiation with the buying EU nations as they still have the right to cancel those orders and demand money back from EADS. If they do do this then the financial hit to the company will be enormous as not only do the lose the sale but must take money out of their cash reserves. A decision by the buyers is expected fairly soon as it had been delayed from March.

EADS and Boeing face a strenuous year especially if the worldwide recessions continues. There are still several major defense contracts that offer possibilities but until the airlines recover and begin to buy aircraft again the two companies will have a great deal of pressure on their bottom line. Unfortunately that doesn’t seem like it will happen anytime soon.