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Airbus announces new delays to A380 superjumbo aircraft

Airbus on Tuesday announced new delays on deliveries of the superjumbo A380, already almost two years late, saying the company is behind schedule in switching to automated production. The setback deals a blow to Airbus' hopes of putting the woes of its flagship superjumbo project behind it, and risks financial penalties from customers.


May 13, 2008
By Carey Fredericks

May 13, 2008 – Airbus on Tuesday announced new delays on deliveries of the superjumbo A380, already almost two years late, saying the company is behind schedule in switching to automated production. The setback deals a blow to Airbus' hopes of putting the woes of its flagship superjumbo project behind it, and risks financial penalties from customers.

The European aircraft maker is also struggling with the weakening dollar, which is eating into profits, and the global credit crisis, which has impeded plans to sell factories. Airbus said in a statement Tuesday that it will deliver 12 planes in 2008 instead of 13, and 21 planes in 2009 instead of 25. Executives will talk to customers about deliveries for 2010 – originally foreseen at 45 – in the coming weeks.

Airbus CEO Tom Enders said the switch from individual production of the planes to serial production is about two to three months delayed. He declined to say when Airbus will meet its goal of delivering four A380s per month, a pace the plane maker had hoped to meet in 2010.

"This is unfortunately not the first delay and as CEO of Airbus I have to say I regret this very much,'' Enders said in a conference call. But he said the additional delays should not be compared with the problems that have so far plagued the superjumbo program.

"We are not talking about a catastrophic scenario,'' he said. A series of increasingly worrisome announcements beginning June 2005 revealed missteps, technical setbacks, communication failures and financial improprieties that tarnished the plane maker's image.

Botched management of production of the 525-seat superjumbo compounded wiring difficulties and communication failures among Airbus plants in Germany and France. Enders declined to say how much the financial penalties from the additional late delivery will cost Airbus. Combined with spiralling development costs, penalties have already wiped billions from Airbus profits.

Airbus rival Boeing Co. is also dealing with delays to its long-range 787 jetliner, which analysts say will cost billions of dollars. The Chicago-based plane maker has pushed back the date for delivering the first of the 787s three times. Japan's All Nippon Airways, the first customer on the list, was supposed to receive its first of the jetliners this month, but that was recently rescheduled for the third quarter of 2009.

Airbus, which is owned by European Aeronautic Defence & Space
Co., has delivered four A380s to Singapore Airlines so far. It has 17 more superjumbos destined for customers, including Emirates Airlines and Qantas, that are in various stages of production.

"The changes in production schedules will potentially have some mimpact; the details of which we will need to understand from Airbus,'' Singapore Airlines, which has ordered 19 A380s, said in a statement.

John Leahy, Airbus' chief salesman, said he doesn't expect any cancellations as a result of the new delays. Airbus says total orders for the A380 stand at 192. Emirates is the biggest customer with 58 superjumbos on order.

The delay comes as little surprise to investors, who initially sent shares higher on Tuesday's announcement before letting them fall. Enders said last month Airbus was conducting a “major review'' of its planned delivery schedule for its A380.

"The financial impact will be negative but minor,'' Natixis analyst Olivier Brochet said of the delays. "It's not as bad as it could have been.''

EADS shares were down 0.4 per cent at 15.67 euros (US$24.18) in
afternoon trading in Paris. EADS is to release first-quarter earnings Wednesday.