EADS counts potential €8.1bn cost of beleaguered Airbus

The super-jumbo's parent is facing overrun losses and fines as it struggles to keep its customers on board
Click to follow
The Independent Online

EADS, the beleaguered parent of Airbus, which last week announced yet another delay to the rollout of its flagship airplane, the super-jumbo A380, faces costs of more than €8.1bn (£5.5bn) in fines, lost revenues and other payments, The Independent on Sunday can reveal.

The company saw a quarter of its market value disappear last week after it announced a six-to seven-month delay in its schedule. Only one of the new 555-seaters will be delivered by the end of this year.

That revelation was followed by allegations that EADS's co-chief executive, Noël Forgeard, knowingly sold shares ahead of the bad news. The shock revelation stoked doubts about the company's ability to manage the whole A380 project.

EADS can expect little respite this week. That's because banks haggling over the value of the 20 per cent holding in EADS that BAE Systems is trying to sell have been unable to thrash out a price. As a result, they have agreed to draft in Rothschild investment bank to determine a fair value. Goldman Sachs and Gleacher Shacklock are advising BAE; Merrill Lynch is working for EADS.

BAE wants up to €5.8bn for the holding, which is more than the €5.5bn in cash that EADS has on its books. EADS thinks the stake is worth much less. After last week's falls in the company's value, that argument may have gained some weight.

EADS will be obliged to pay whatever figure Rothschild comes up with. Fines for late delivery, meanwhile, will begin to pile up. Emirates Airline, the biggest buyer of the A380, has said publicly that it is reviewing its options, as have Singapore Airlines, Qantas and Malaysia Airlines.

Credit Suisse estimates the company will be liable for up to €350m in fines for late delivery. Airbus also expects to lose €2bn in profit between 2007 and 2010 due to the setback.

At the same time, its US rival Boeing is performing well. So far this year, it has grabbed three-quarters of all new plane orders, thanks to the popularity of its new 787 Dreamliner.

No Airbus customers have cancelled. But as the company tries to convince more airlines to buy the A380, the delay has left it in a weakened negotiating position. "The biggest concern for Airbus should be convincing customers not to exercise their cancellation rights," said one industry source.

"Airbus is probably going to be throwing in as many sweeteners as it can."