Unreliable production earns EADS a shaky future
Investors are fleeing from EADS, with the company losing 15 percent of its value in two days after official news of yet another major production delay.
Defense analysts in Washington are concerned that the dim prospects for the company make EADS look like an unreliable partner for long-term programs like the Joint Cargo Aircraft (JCA).
EADS is losing at least $3.6 billion in profits on one of its newest products, the A380 superjumbo jet, which is to be delayed another two years. "Some airlines failed to rule out the possibility of order cancellations," AP Business News reports.
According to Agence France Presse, EADS is expected to lose $6 billion over the next four years on the A380 alone.
Big investment houses are slashing their price targets for EADS. Morgan Stanley, UBS, Credit Suisse and WestLB are among the pessimists. UBS even questions the viability of EADS's restructuring plan.
Customers are readying to run away. Emirates, Malaysia Airlines, Qantas and Virgin Atlantic are all considering cancellation of their orders, according to AP. The order from Dubai-based Emirates Airline was huge: 45 planes. US-based Boeing is benefitting from the chaos.
EADS is stuck with a clunky production model that requires balance among its British, French, German and Spanish Airbus plants, and is subject to unusual interference from politicians from each country.
The chain reaction may have far-reaching results. One brokerage house warns that EADS might receive a downgraded credit rating, which along with the billions of dollars in lost profits and stock value, would make it difficult for the company to raise money for a new line of jetliners.