Airbus A380 facing risks, exec warns

AMSTERDAM, Netherlands — Airbus faces risks in the development and stepped-up production of two new plane programs: the superjumbo A380 and the A400M military transport aircraft, the head of Airbus parent EADS said.

"There are still significant levels of execution risk," Chief Executive Louis Gallois told European Aeronautic Defence & Space shareholders Monday at their annual meeting in Amsterdam. He did not elaborate.

Earlier this month, the European aircraft maker announced further delivery delays for its flagship A380 superjumbo. Airbus already was almost two years late delivering the world's biggest passenger plane to launch customer Singapore Airlines in 2007.

Airbus CEO Tom Enders said May 13 that the switch from individual production of the planes to serial production was two to three months delayed.

Gallois said Monday that delivery of the double-decker plane could be three to five months late.

"Every company wants to have the airplane as quickly as possible," Gallois said, adding that EADS was in discussions with customers.

Airbus could be liable for financial penalties as airlines demand compensation for late delivery. Gallois said EADS won't know the cost of the latest delays until it has finished talks with customers about the time second-quarter results are released.

In November, Airbus said a delay to its A400M military transport could cost as much as 1.4 billion euros ($2 billion) in penalties and other charges.

"We still have some challenges, notably with the wiring and engine management system," Gallois said.

Gallois said he expects the pace of new Airbus orders to slow as airlines struggle to cope with rising fuel costs, a slowing global economy and tougher access to credit.

He reiterated EADS' 2020 goal to double revenue to around 80 billion euros ($126 billion) as it boosts its defense activities. By then, Airbus should account for half of revenues, compared with two-thirds now, he said.

Gallois said EADS will continue to shift production out of Europe to protect the company from the effects of the rising euro, which cuts into profits. Gallois said that by 2020, EADS should source around 40 percent of its costs and 20 percent of its employees outside Europe.

Meanwhile judicial officials in Paris said French financial investigators planned to question former EADS co-President Noël Forgeard on Wednesday as part of an investigation into suspected insider trading at the company.

The case centers on EADS' management and main shareholders in 2005 and 2006, when massive amounts of company shares were sold just before announcements that the A380 would be delayed.

Gallois said he has complete confidence in EADS' managers named in the investigation.