Massive Losses at Airbus

Airbus parent company EADS reported on Thursday that its ailing aviation subsidiary, currently in turmoil over job cuts and delays to its new flagship A380 superjumbo, suffered its first-ever operating loss of 572 million euros ($752 million) in 2006 and was expected to suffer further losses in 2007.

The restructuring costs for Airbus' A380 superjumbo have been cited as the main cause for the forecasted "substantial" operating loss for 2007 along with the problems arising from the adaptation of the popular A350 to the upgraded A350XWB jet. In 2005, Airbus achieved a profit of 2.3 billion euros.

EADS announced at the presentation of its annual results in Munich that net profit for 2006 plunged to 99 million euros from 1.8 billion euros the previous year. Operating profit before interest and tax slumped from 2.9 billion euros in 2005 to 399 million euros last year, the company added.

The drop in profits came despite a 15 percent increase in revenue from 34.2 billion euros to 39.4 billion euros.

Airbus is currently undergoing a restructuring program, which is expected to result in the loss of 10,000 jobs and the selling off of factories.

Restructuring a priority, say chiefs

EADS co-chairmen Louis Gallois and Thomas Enders said Friday that implementation of the restructuring program had utmost priority despite the horrendous financial report. They said the company needed to improve its operating performance, regain the confidence of clients and turn itself into a lean, dynamic operation.

One of the main aspects EADS is looking into in terms of streamlining is the abolition of a two-headed senior management team. Earlier this week, both Gallois and Enders said in separate statements that the current system was too cumbersome and that the company would benefit from a single president rather than the split role of the two co-chairmen.

On Friday, the German government announced that it was open to the idea of doing away with the long-standing practice of having twin French and German chief executives at EADS.

Berlin's coordinator for aeronautics, Peter Hintze, told members of parliament on Thursday that the European aerospace giant could instead distribute posts lower down in the leadership ranks equally between French and German nationals to maintain the power balance.

Until now the European Aeronautic Defense and Space company has always had a French and a German co-chief executive.

Simmering row over Franco-German ownership

If EADS were to appoint a single company head, problems would surely arise as to the nationality of the chairman. If either Gallois nor Enders were to be appointed sole chief, the simmering animosity between France and Germany would surely erupt, with the country losing its chairman also perceivably losing a considerable amount of influence in the company.

The current conflict between the two countries over EADS bubbled to the surface again on Thursday after French Finance Minister Thierry Breton said his country should have taken a bigger share in Airbus parent EADS at the firm's creation.

Hintze responded to Breton's claim by saying Germany would ensure the even balance between the countries would remain.

Shift in French power rejected

"When the French finance minister, Breton, ... called on French radio for the 50-50 relationship between Germany and France to change to 60-40 in France's favor, I can reject that emphatically in the name of the German government," Hintze said in a fiery speech to the Bundestag.

Hintze accused Breton of seeking to disrupt the delicate balance between the two countries that has existed since EADS was formed in July 2000.

The French finance ministry replied to the German outburst hours later, denying that Breton had ever called for a rebalancing of the French and German shareholdings. The ministry said Breton had only been referring to the origins of the pact in the radio interview.