EADS falls deep into the red on delays, overruns

PARIS — Airbus parent company EADS reported Tuesday that spiraling costs on its military-transport plane and its A380 superjumbo pushed it into the red and warned that both programs will be loss-making for years.

Paris-based European Aeronautic Defence & Space Co. said it lost $1.44 billion (1.05 billion euros) in the three months to December after booking charges of 1.6 billion euros for the A400M military project and 240 million euros for the A380. The loss compares with a net profit of 490 million euros a year earlier.

Its full-year net loss was 763 million euros, compared with a net profit of 1.57 billion euros in 2008.

EADS has been grappling with cost overruns and delays to its troubled military program and the A380, both of which are years late. In 2007, delays to the programs also led to a full year net loss.

EADS reached a last-ditch agreement with customer nations Friday, who agreed to inject another 3.5 billion euros or nearly $4.8 billion into the A400M project, allowing it to continue.

CEO Louis Gallois, who had threatened to halt the program if no deal was reached, said the project is "now back on track."

Airbus doesn't expect to make any money on the first 180 military planes for its launch customers — meaning it needs to win export orders. But at the moment Airbus has only one: Malaysia, which has ordered four.

And Airbus still has problems with the hulking A380 plane, of which 26 are already flying.

Chief Financial Officer Hans Peter Ring said Airbus is "continuing to struggle with the ramp up" and will be losing money on the program for at least another two to three years. Airbus plans to deliver 20 superjumbos this year.

On Tuesday, EADS shares closed down 2.8 percent in Paris.

Christophe Menard, an analyst with European investment bank Bryan, Garnier & Co., said investors are "worried about the A380 and the fact that difficulties continue in 2010."

EADS' defense division suffered a setback Monday after American partner Northrop Grumman withdrew from a $35 billion contract to build refueling tankers for the Air Force.

Gallois said Tuesday that EADS won't bid alone, and German Economy Minister Rainer Bruederle warned the situation had "signs of protectionism."

But Gallois said the decision doesn't change EADS' intention to boost its presence on the U.S. defense market.