Airbus superjumbo disaster to cost £3bn and thousands of jobs

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The Independent Online

Airbus unveiled a sweeping cost-cutting plan likely to involve thousands of job losses last night after warning that delays on the troubled A380 superjumbo programme would cost it €4.8bn (£3.2bn) - more than twice its initial estimate.

The embattled aircraft manufacturer also announced a further one-year delay in deliveries of the 555-seater jet and said only one A380 would enter service next year compared with an original plan to deliver 25.

EADS, the Franco-German parent of Airbus, said cost overruns on the A380 coupled with compensation payments to airline customers for late delivery would cost it €2.8bn between 2006 and 2010. This is on top of the €2bn profit hit EADS announced in June after problems with the wiring system of the A380 came to light.

The company will also have to find an extra €1.5bn in working capital, meaning that the total cash cost of the production delays on the €10bn programme will be €6.3bn.

Details of the doubling in losses on the A380 came out after the market had closed, but EADS shares are bound to fall further when trading resumes in Paris and Frankfurt today. They have already slumped by 31 per cent this year.

In an attempt to offset the A380 losses, Airbus said it was embarking on a new efficiency drive designed to save €5bn over the four-year period up to 2010 and deliver ongoing cost-savings of €2bn a year from then onwards.

Christian Streiff, the new Airbus chief executive, said the cost savings would entail a 30 per cent reduction in overheads and a 20 per cent productivity improvement among its 90,000-strong staff. He said the efficiency gains would "not be possible to achieve without headcount reductions", but he declined to put a figure on the number of job losses or where the axe would fall.

However, they are expected to run into their thousands. Airbus employs about 13,000 workers directly in the UK at sites in Broughton, north Wales and Filton near Bristol, making wings for its family of narrow and wide-bodied jets. Shareholders in BAE Systems meet today to approve the €2.75bn sale of its 20 per cent stake in Airbus to EADS.

Mr Streiff denied any of the 16 launch customers for the A380 had indicated they might cancel any orders. But the Middle East airline Emirates, the biggest customer by far for the A380 with 45 planes on order out of a total of 159, described the latest delay as a "serious issue" and said it was "reviewing all its options". The carrier will not now take delivery of its first A380 until August, 2008 - almost two years late. Air France and Lufthansa said deliveries would be delayed by a further year. The first A380 will be delivered to Singapore Airlines in October, 2007 - 20 months after the airline had planned to begin commercial services.

After the initial single delivery next year, production will rise to 13 in 2008, 25 in 2009 and 25 the year after that. Airbus said it expected the A380 to start contributing a profit from 2010.

EADS is working on a wider restructuring of Airbus which is likely to see final assembly concentrated on fewer sites and the time it takes to bring an aircraft from drawing board to delivery cut from seven and a half years to six. Tom Enders, co-chief executive of EADS, said: Airbus must change and change quite radically."

The crisis at Airbus has forced it to impose a staff freeze across the group and seek further head office savings. EADS is also facing a doubling in the cost of its new mid-range jet, the A350-XWB, and worries of cost overruns on the A400M military transporter jet. Mr Enders said these two issues would be dealt with by the end of the year.

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