EADS hit by Airbus A380 wing cracks charge


Airbus parent EADS took a charge of 158 million euros for the cost of overcoming wing cracks on the A380 superjumbo as it posted better-than-expected first-quarter results buoyed by resilient aircraft and helicopter demand.

The move, following 105 million euros (US$134 million) covered by an existing warranty provision, reflects efforts by Europe’s leading aerospace group to draw a line under the episode in balance sheet terms but leaves Airbus facing a potential drag on operating profit for the next two years.

The cracks on a handful of fixing brackets inside the aircraft’s wings were first discovered in January and were blamed on a combination of manufacturing flaws and the choice of materials, Reuters reports.

Authorities ordered checks on the superjumbo fleet, but said the A380, in service since 2007, is safe to fly.

Airbus said on Wednesday it had come up with a retrofit that would provide a long-term solution to the problem. But it said this was more complicated than first thought and went beyond the amount normally set aside for repairs under warranty.

Applying the fix to aircraft still in production will weigh on efforts to reduce A380 operating losses in 2012 and 2013 but should not derail the target of breaking even on the plane “by the beginning of 2015”, EADS said in a statement.

The company also said it would stick to a target of delivering 30 A380s this year, but that this would be “more challenging” as deliveries are shunted towards the latter part of the year. It delivered four superjumbos in the first quarter.

Airbus has acknowledged it may be grappling with the legacy of the cracks for years but chief executive Tom Enders – who steps up to run EADS in June – has pledged to root out the cause of the problem and move ahead as quickly as possible.

Airbus meanwhile said its key A350 mid-sized airliner project, which began first assembly in April, was advancing while remaining “very challenging”.

The headaches come as Airbus rides on a wave of commercial orders for jets that have also boosted rival Boeing (BA.N).

EADS first-quarter operating profit before one-offs doubled to 480 million euros as revenue climbed 16 percent to 11.4 billion, with helicopter unit Eurocopter performing strongly.

Analysts were on average expecting operating profit of 371 million euros on revenue of 10.64 billion, according to a poll conducted on behalf of Reuters.

EADS maintained its financial objectives for 2012.

Despite concerns over the economy, commercial jet orders have been rising as Asian and Middle East carriers expand their fleets to keep pace with growth in emerging markets and carriers in the United States carry out long-delayed fleet modernization.