Bad News Takes Toll on Shares of Airbus
Shares of Airbus’ parent plunged 26% on Wednesday -- wiping out nearly $7 billion in value -- after the world’s largest aircraft maker lost a major order to U.S. rival Boeing Co. and announced a second production delay for its new super-jumbo jetliner, the A380.
The sharp drop came as angry airlines confronted Airbus and parent European Aeronautic Defense & Space Co., demanding compensation for the delays and even threatening to cancel orders for the double-decked plane that is designed to carry more than 500 passengers.
For EADS, the biggest blow came when Singapore Airlines, an influential buyer and the first carrier to order the A380, said Wednesday that it would buy 20 787s from Boeing. In addition to that order, potentially worth $4.5 billion, the airline said it would take options on an additional 20 of the 250-seat planes.
The Boeing order was announced after the usually reticent Singapore Airlines publicly chastised Airbus and said it would seek compensation for the delays in A380 deliveries.
“I’m extremely sorry,” EADS Chief Executive Noel Forgeard said in a conference call Wednesday with analysts. “I have based my entire industrial career on building confidence with the shareholders. This announcement comes as a big blow, and I apologize for that.”
The setbacks at Airbus boosted Boeing shares, which climbed $5.03, or 6.5%, to $82.01. That was among the largest one-day increases in the company’s history.
After several years of losing market share to Airbus, Boeing has been winning orders, particularly for its 787, a fuel-efficient line of jetliners that is under development. The company, based in Chicago, is poised to regain the title as the world’s largest airliner maker next year, analysts said.
Airbus said Tuesday that deliveries of the A380 would be delayed six to seven months because of production bottlenecks caused by mechanical and electronic changes that resulted from test flights. Instead of delivering more than 20 A380s in 2007, Airbus expects to deliver nine.
Still, Airbus said, the first production A380 will be delivered to Singapore Airlines in December, as scheduled.
The delivery delays will shave 2 billion euros ($2.5 billion) of profit in the next four years, said EADS, a consortium of European companies that has dual headquarters in Paris and Munich, Germany.
Aerospace analysts said the delays should have only a modest effect on A380 suppliers in the U.S., more than 100 of which are in Southern California.
“Nearly all subcontractors in the industry touch the A380,” Jefferies & Co. analyst Howard Rubel said. “All will feel some impact because of the size of the program and the magnitude of the delay,” at least in the near term.
The delays highlight the scope of building the mammoth aircraft, which involves a global mobilization of supplies that is unequaled for an industrial project. More than 18,000 suppliers in 30 countries have a hand in its construction.
Thousands of A380 parts crisscross the globe daily en route to factories in Europe. Major sections are shipped to Airbus in Toulouse, France, for final assembly.
