EADS reports $1.04B loss in 2009

European Aeronautic Defence & Space Co. said Tuesday it swung to a loss in 2009 as problem contracts weighed on results despite solid underlying performance in a sluggish commercial-aviation market.

The parent company of plane maker Airbus predicted that 2010 will be another difficult year, although it is getting a better sense of market conditions.

EADS posted a €1.8 billion ($2.45 billion) charge in the fourth quarter against cost overruns on the company's delayed A400M military-airlifter program, as EADS had warned it would on Friday. It also booked a €240 million provision on the Airbus A380 superjumbo jetliner, which has faced delays meeting production targets since 2005.

For the fourth quarter, EADS reported a net loss of €1.05 billion after a net profit of €490 million a year earlier. Revenue fell 5% to €13.1 billion, and earnings before interest and tax, or Ebit, after one-time items was a negative €1.41 billion.

The company attributed its loss for all of 2009 to the A400M provision and a €2.5 billion hit from exchange rates. Unfavorable hedge rates this year are likely to cost the company about €1 billion, EADS said.

EADS reported a net loss of €763 million for 2009 compared with a net profit of €1.57 billion in 2008. Revenue fell 1% to €42.82 billion. The company's Ebit loss was €322 million, compared with Ebit of €2.83 billion in 2008. Excluding nonrecurring items, Ebit was €2.2 billion.

The A380 superjumbo is expected to be unprofitable for at least two to three years, Chief Financial Officer Hans Peter Ringsaid. "There's a continuous struggle with the ramp-up of the program and costs related to it," said Mr. Ring, who called the world's largest passenger plane "quite a big burden on our results."

Chief Executive Louis Gallois said Airbus still plans to deliver 20 A380 jets this year, double the number of 2009, but both executives declined to say when the program will break even or turn profitable.

EADS said Airbus plans to increase the production rate of its A320 single-aisle jets to 36 a month from 34, starting in December, after lowering it from 36 to 34 last October. At the same time, EADS said it could more than double customer financing of jetliner deliveries this year, to as much as €1 billion from €400 million, and foresees more government guarantees of export sales. Mr. Ring said that EADS has planned conservatively for this and "financial markets are recovering better than we expected."

Airbus expects to maintain its jetliner-production rate in 2010 near the record 498 planes delivered in 2009, and is projecting between 250 and 300 new orders. "We are seeing some signs of progressive recovery" of demand from airlines, Mr. Gallois said, although he doesn't foresee orders topping deliveries—as they last did in 2008—until at least 2012.

Looking ahead, EADS said its Ebit before one-time items will be about €1 billion in 2010, or less than half the level of 2009, and it predicted that free cash flow after customer financing will be negative.

Mr. Gallois said EADS's priority now is to preserve its cash position in 2010 and coming years, in order to protect its credit rating and reassure its customers. At the end of last year, EADS had €9.8 billion in cash.

To preserve cash, EADS's board has decided to skip paying a dividend for the first time in 2010, but Mr. Gallois said the company is keen to resume a payout in 2011.

Commenting on the decision announced Monday by EADS partner Northrop Grumman Corp. to withdraw from bidding for a $35 billion U.S. Air Force aerial-refueling-tanker program, Mr. Gallois said EADS is following Northrop's lead and isn't considering submitting a bid on its own.

The two companies had planned to offer a tanker version of the Airbus A330. The decision to withdraw leaves Boeing Co. alone in the running for the contract with a version of its smaller and less-expensive 767 jet. "The competition with the A330 was not balanced in a way that gives us a chance except if we kill our price, which is not possible," Mr. Gallois said.
 

Write to David Pearson at david.pearson@dowjones.com and Daniel Michaels at daniel.michaels@wsj.com