Dollar’s Fall Cutting Into Airbus Profit

From Reuters

The plunge in the dollar is a catastrophe for the European aircraft maker Airbus Industrie and is adversely affecting the rest of the French aviation industry, French Trade Minister Michel Noir said Wednesday.

Noir told the daily newspaper France Soir that the 25% drop in the dollar against European currencies over the past year had cut deep into Airbus’ profit margins, since the consortium’s costs are largely in German marks, French francs and British pounds, while its sales contracts are denominated in dollars.

In recent years, Airbus has become a major competitor with Boeing and McDonnell Douglas, two American aircraft builders, for airliner orders worldwide.

The weakness of the dollar is “a catastrophe for Airbus,” Noir said, adding that the planes which the consortium delivers over the next few months will actually be sold at a loss due to the fall in the dollar since the contracts were signed.


But Noir said layoffs were unlikely at the Airbus assembly plant in Toulouse because order books are full until 1992, mainly due to the success of the A320 150-seat passenger jet that has notched up more than 400 orders and options.

“In addition, no one can predict where the dollar will be in two years. The situation is catastrophic at present, but you have to look at the medium term,” he said.

Airbus is 38% owned by Aerospatiale of France, 38% by Messerschmitt-Boelkow-Blohm (MBB) of West Germany, 20% by British Aerospace and 4% by CASA of Spain.

The dollar fall is having a mostly neutral effect on French trade in general, Noir said, with the benefits of lower dollar-denominated import prices--especially for oil--being roughly balanced out by the loss of competitiveness for industrial products being exported to dollar markets.


But he warned that if the slide continued, exports from Japan, Southeast Asia, South Korea and Taiwan could start being diverted from the United States to Europe.

“The only possible response is European solidarity. . . . We need a team spirit among European countries to react together,” he said.