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Last Updated: Monday, 19 June 2006, 17:04 GMT 18:04 UK
Q&A: Airbus and EADS
Spectators at an air show standing in front of an A380
Things are not necessarily looking up for Airbus and its parent EADS

The firm THAT controls the Airbus plane maker - the European Aeronautic Defence and Space Company (EADS) - is in trouble.

One of the company's top bosses has admitted that it is in crisis after delays to its flagship A380 project caused its shares to nosedive.

What is behind the current problems?

The Franco-German consortium, which owns the bulk of Airbus, is banking on the success of the A380 superjumbo for its future growth.

Able to carry more than 800 passengers, the A380 will be the world's largest airliner when it goes into service next year.

Airbus has taken 159 firm orders for the plane from 16 carriers, including Emirates, Qantas and Virgin Atlantic.

EADS co-chief executives, Tom Enders and Noel Forgeard
EADS bosses have admitted the firm is in crisis

However, it revealed last week that the project had been hit by delays and that production targets would be scaled back.

It now hopes to hand over nine finished planes next year instead of its original target of between 20 and 27.

Delivery targets for 2008 and 2009 have also been altered.

The financial ramifications for the company are serious.

The delays are expected to reduce the firm's annual profits by 500m euros between 2007 and 2010.

How has the company reacted?

Initially, EADS bosses tried to put a brave face on the setback.

They stress that the A380's latest technical problems - involving the wiring on the twin deck plane - do not compromise its overall design.

However, EADS has been put on the back foot by allegations about how senior executives have handled the affair.

What are its bosses accused of?

EADS bosses say they were first aware of the potential problems facing the A380 at the end of April.

They ordered further tests and once it became clear that the problem would result in a significant delay to production, the company immediately informed investors.

But critics claim EADS was too slow to update the markets about the unfolding situation and that investors may have been kept in the dark.

Share deals involving co-chief executive Noel Forgeard and other staff have also provoked controversy.

Mr Forgeard and six other senior staff sold shares in EADS in March, only weeks before the latest problems surfaced.

Artists impression of the A350 plane
Airbus does not want to lose market leadership to Boeing

This has led to allegations of possible insider dealing, accusations which Mr Forgeard and the company have categorically denied.

Mr Forgeard said he did not possess any privileged information about the company's position before he decided to sell his shares.

EADS's board said there was no connection between the two events, arguing that executives were only allowed to exercise options during a limited period each year.

But some shareholder groups have called for an official inquiry into the affair. Regulators have made no comment on the issue.

What are the other implications for the firm?

Financially, the delays to the A380 could be very damaging.

As well as the earnings, the firm could have to pay huge compensation to airlines if it fails to deliver planes on time.

Politically, the difficulties are already putting a strain on the firm's French and German investors - including the French government - whose relationship has been fractious in the past.

This all comes at a time when EADS is trying to negotiate terms to buy out the minority 20% stake in the firm held by British firm BAE Systems, which has exercised its right to sell.

The two sides are at odds over how much the stake is worth.

How will it affect Airbus's battle with Boeing?

Airbus and Boeing are fighting a fierce battle for pre-eminence in the fast-growing global aviation market.

While Airbus overtook Boeing in 2003 in terms of aircraft sold, experts believe Boeing may emerge on top in 2006 in terms of the value of sales.

Some fear that the negative publicity surrounding the A380 delays could force some airlines to defect to Boeing.

Boeing believes many airlines don't need a plane as large as the A380.

It is placing its faith in the 787 Dreamliner, a smaller 250-300 seat aircraft, which will go into service in 2008.

Experts still believe Airbus will sell more than enough A380s to break even on the huge project.

However, they fear it could take quite a bit longer than originally planned.




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