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Thursday, 20 September, 2001, 06:27 GMT 07:27 UK
Airbus freezes expansion plans
Airbus A380
Development of the A380 super jumbo is on target
European defence giant EADS has frozen its expansion plans because of the slump in the aerospace sector.

The new situation created by the September 11 terrorist attacks in the US makes it difficult to formulate immediately a precise delivery forecast for 2002 and beyond

EADS is the majority shareholder of aeroplane manufacturer Airbus. Its US rival Boeing said on Wednesday that it would cut production sharply and sack up to 30,000 workers.

The European Aeronautic Defence and Space company (EADS) made the announcement as it reported a 38% rise in core profits for the first half of the year due to strong deliveries and the consolidation of Airbus into a company.

Despite the poor industry outlook, EADS said its plans for the A380 super jumbo were on track.

EADS was formed from the merger of three aircraft and defence companies in France, Spain and Germany, and makes almost all its profits from its 80% stake in commercial aircraft maker Airbus.

The world's second largest commercial plane maker also stuck by its target of a 10% operating profit in 2004, despite the negative outlook for the airline sector following last week's terrorist attacks in the United States.

Expansion frozen

Among the measures being taken are a freeze in some investment and capacity expansion, the company said, without giving further details.

"We believe our strong business fundamentals and an array of new products and services both on civil and defence markets, as well as initiatives and actions we have already started allows us to maintain our 2004 operating margin target of 10% despite a highly uncertain market," EADS said in a statement.

But with the US airline industry in trouble, and some carriers even facing bankruptcy, analysts are predicting airlines will defer retiring older aircraft, cancel order options and put off deliveries for 2003 and 2004.

Some airlines have also reportedly started renegotiating the cost of their orders.

Forecasts difficult

EADS said Airbus was still planning to deliver 320 aircraft this year, but that "the new situation created by the September 11 terrorist attacks in the US makes it difficult to formulate immediately a precise delivery forecast for 2002 and beyond."

Earnings before interest and tax at EADS were 764m euro, up from 553m euro last year, slightly below analysts expectations.

Airbus's order intake in the half year totalled 38.7bn euro, compared with a proforma 15.5bn a year earlier. The Airbus backlog at 30 June was 157.7bn euro.

EADS shares have fallen 17% since the Paris air show in June.

The BBC's Sarah Pennells
"No one knows how long the slump will last"
See also:

19 Sep 01 | Business
Turmoil threatens superjumbo orders
20 Sep 01 | Business
Airlines slash thousands of jobs
20 Sep 01 | Business
British Airways to cut 5,000 jobs
13 Sep 01 | Business
Profits up at UK defence giant
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