Weak dollar leads to EADS losses

Airbus delivered its first A380 to Singapore Airlines in October

The European aerospace and defence company EADS has reported bigger than expected losses for 2007 but predicted a recovery in 2008.

EADS made a loss of 446m euros ($685m; £341m) last year, compared with a profit of 99m euros in 2006.

The weak dollar has reduced the value of EADS's greenback-based earnings.

The company was also hit by well-known delays to its Airbus A380 aircraft, the first of which was delivered to Singapore Airlines in October.

Currency issues

Most of the firm's costs are paid in strong euros but most of its aircraft are paid for in dollars, so a weak dollar against the euro eats into its profits.

In December EADS said it was selling off six plants to British, French and German companies, as it focuses on "core activities".

The sites were the manufacturing plant at Filton in the UK, Meaulte and Saint Nazaire Ville in France, and Nordenham, Varel and Augsburg in Germany.

At the time EADS chief executive Louis Gallois said the move "helps EADS to reduce financing needs in a period strained by conjunction of costly programmes and weak dollar uncertainty".

EADS and Airbus executives made a number of warnings in 2007 that the weak dollar was causing difficulties.

Structural problems

The Airbus unit made a loss of 881m euros after having to pay penalties to airlines for delays to its A380.

Airbus also had restructuring charges as it tried to deal with the structural problems that were blamed for the delays.

EADS predicted operating profits of 1.8bn euros for 2008 and was particularly upbeat about the air-to-air refuelling tanker contract it has just won in the US.

"Improvements across the board and our recent success on the US defence market point to a promising start into 2008," EADS chief executive Louis Gallois said.

But he may have to wait before starting production of the tankers for the US because Boeing has lodged an official complaint against the awarding of the contract, which could delay the process by a year.