EADS Reports 70% Operating Profit Down

Airbus parent EADS faces a "substantial" earnings hit this summer as it tries to salvage its delayed A400M military aircraft project, compounding concerns over the outlook for its civil plane business.

The prospect of a clear-cut charge to fix the delayed A400M -- which analysts said could be as high as EUR3 billion euros (USD$4.09 billion) -- rattled EADS shares, as the aerospace group also posted a worse-than-expected 70 percent drop in first-quarter operating profit.

But the company said it could give little indication how big the cost of the A400M troop transporter would ultimately be, nor how battered airline markets would evolve in coming months.

Dampened by Airbus, EADS group first-quarter earnings before interest and tax, or operating profit fell to EUR232 million from EUR769 million in the first quarter of last year.

Revenues fell 14 percent to EUR8.467 billion, and the Franco-German group's net profit fell 40 percent to EUR170 million.

EADS said underlying first-quarter operating profit before these items stood at EUR0.4 billion, down almost 50 percent.

Boeing said last month first-quarter profit halved to USD$610 million due to order deferrals by airlines, and cut its 2009 outlook.

The future of the A400M depends on talks with seven European NATO governments which have agreed a moratorium until July.

EADS said the talks on a revised industrial plan could lead to a "substantial" charge once the future of the project is clear and that this could happen with second-quarter earnings.

Finance Director Hans Peter Ring said the coming weeks would be decisive. "A400M is our top priority," he said.

EADS took an interim charge in the first quarter of EUR120 million for A400M costs that can be anticipated now, adding to EUR2.5 billion of provisions written off as the project ran into development problems in the past two years.

The aircraft is now three to four years late, provoking recent warnings from Britain and Germany that they might cut orders.

The A400M is Europe's biggest military project and seen as crucial to EADS's efforts to diversify further away from passenger jets as it approaches its 10th anniversary next year.