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. Last Updated: 07/27/2016

Airbus' Troubles Sink EADS Profits

PARIS -- Profit at European Aeronautic Defense and Space Company plunged 94 percent last year after its main unit, aircraft maker Airbus, reported its worst year ever, the consequence of major production troubles that have plagued its flagship superjumbo jet, the A380.

The results -- released Friday along with predictions of another substantial loss for Airbus this year -- were seized upon by the co-chiefs of EADS to underscore the "urgent need" for an overhaul at the plane maker.

An overhaul plan announced in February, which includes cutting 10,000 jobs, has prompted major protests by labor unions in France and Germany, home to about 40,000 of the company's European work force of 55,000.

EADS reported that its net income dwindled to 99 million euros ($130 million) in 2006, down from 1.68 billion euros one year earlier. That was largely because of 2.5 billion euros ($3.3 billion) in charges related to a two-year delay in A380 deliveries, as well as a weak dollar versus the euro.

Airbus recorded its first operating loss ever, of 572 million euros. In 2005, the company reported a profit of 2.3 billion euros.

Louis Gallois, EADS co-chief and Airbus CEO, described 2006 as "the worst year for Airbus in its life" and warned that the financial pain was likely to continue with another "substantial" loss expected this year.

The dismal performance at Airbus largely offset significant growth in the group's military and space businesses. EADS, Europe's largest military contractor, reported a 15 percent increase in revenue, to 39.4 billion euros ($52 billion), which included a 30 percent rise in military revenue.

Gallois and Thomas Enders, the other co-chief executive of EADS, said the disappointing results at Airbus illustrated the "urgent need" for an overhaul. Their cost-cutting plan calls for the elimination of 10,000 jobs across Europe over the next four years and the sale of up to six of its factories.

The plan "will make Airbus substantially more integrated and efficient," the two men said in a statement.

For the fourth quarter of 2006, EADS recorded a net loss of 768 million euros ($1 billion), compared with a profit of 405 million euros for the period in 2005, on revenue of 12 billion euros.

Airbus had a quarterly operating loss of 1.7 billion euros, versus an operating profit of 453 million euros one year earlier.

The 2.5 billion euros in A380-related charges -- including cost overruns and compensation payments to customers -- that EADS booked in 2006 represented slightly more than half of the 4.8 billion euros in lost earnings over the next four years that the company forecast in October.

Hans Peter Ring, the chief financial officer at EADS, told analysts during a conference call that the final cost of the A380 delays would very likely exceed 4.8 billion euros.

In addition to the one-time A380 charges in 2006, EADS said Airbus had additional expenses of about 500 million euros related to the redesign of the A350 midsize jet, now called the A350 XWB.