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EADS shares drop with Deutsche Bank predicting a slump in jet orders

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Jan. 7, 2008, Paris – Shares in European Aeronautic Defence & Space Co. NV
dropped nearly eight per cent Monday after Deutsche Bank predicted
weaker commercial jet orders in 2008.

"We have growing concerns over weaker commercial aerospace cycle
fundamentals for 2008,'' said analysts Benjamin Fidler and Sebastien
Gruter in a research note.

"This will likely result in weaker order momentum for Airbus,''
Deutsche Bank said in downgrading its rating for Airbus' parent
company to "sell'' from "hold.''

The warning about comes after a bumper year in which Airbus and
rival Boeing Co. set an industry record for orders.

Boeing Co. sold 1,413 commercial jets in 2007 while delivering
441 planes, its best showing in six years, the U.S. company said
last week. Its European rival is expected to come out ahead on both
orders and deliveries when it reports results Jan. 16.

Sales may slow this year should waning consumer confidence and
other U.S. economic woes decrease air travel. Airlines are expected
to delay new orders until their finances and the economy at large
show stronger signs of recovery.

Peter Arment, an analyst with American Technology Research Inc.,
said in a research note that he expects orders to halve this year,
echoing recent predictions by other analysts.

Another worry for EADS, the Deutsche Bank report notes, is the
falling U.S. dollar, which reduces the value of the planes sold by
Airbus.

The dollar fell 11 per cent against the euro in 2007 and analysts
say a raft of disappointing U.S. economic data and oil prices, which
hit $100 a barrel for the first time ever last week, could push it
still lower.

EADS chief executive Louis Gallois said in November that the
weaker dollar means Airbus needs to find an extra one billion euros
($1.47 billion) in cost savings, equivalent to the cost he has cited
in the past of a 10-cent rise in the euro against the dollar.

That is in addition to a restructuring program, dubbed
"Power8,'' which aims to recoup two billion euros ($2.95 billion)
in savings by 2010 and cut 10,000 jobs.

A key issue for the Deutsche Bank analysts is "the need for EADS
to deliver further material savings beyond Power8.''

They also mentioned fears over the ramping up of production on
the much-delayed A380 superjumbo, uncertainty over the development
of the mid-size A350 and delays to the A400M military transport jet.
Altogether it makes the shares "unappealing,'' the Deutsche Bank
research note said.

A report in Germany weekly Wirtschaftswoche pointed to new
problems with the A400M, saying the planned July date for its first
flight is questionable.

In November, EADS announced a delay to the A400M program which it
said could cost as much as 1.4 billion euros ($2.06 billion) in
penalties and other charges.

Airbus's parent company fell 7.9 per cent to 19.11 euros ($28.14)
in Paris midday trading.

EADS did not immediately return calls.

THE ASSOCIATED PRESS