Costly Delays

European airplane manufacturer Airbus announced it will compensate airlines for the latest delays to its A380 airplane. Despite delays, Airbus parent company EADS has posted a strong first-quarter profit.

EADS surprised analysts by announcing stronger quarterly profits than expected on Wednesday, May 14. The announcement comes one day after EADS's subsidiary Airbus announced new delays to its A380, the world's largest passenger plane. The delays bring with them payouts to airline customers.

"It is bad news but not a catastrophe," EADS Chief Executive Louis Gallois said Wednesday in confirming the compensation payments.

He also said penalties would be less severe than those which helped to push Airbus deeply into the red last year.

The delays announced this week is the fourth such setback for the A380 program in two years.

EADS promises profitable year

Shares of European aerospace giant EADS soared by more than 5 percent in early trading Wednesday on the Paris stock exchange after the company reported stronger-than-expected results for the first quarter of 2008.

EADS has promised an increase in operating profit in 2008 and the company stuck to that forecast Wednesday. EADS has had three years of record orders as many airlines decided to convert to more fuel-efficient fleets.

First quarter revenues were helped by higher production of passenger jets and helicopters as well as a first payment for the A400M European military airlifter, though the project is also running late.

Dollar worries

The impressive results were achieved "despite a difficult economic environment and a weak US dollar," EADS said.

The dollar has been a main worry for Europe's largest aerospace group along with a predicted industry slowdown.

Yet EADS announced it has an 8 billion euro ($12.4 billion) reserve at the end of the first quarter to see it through planned restructuring and a possible slowdown.

Revenues up 10 percent

EADS said first-quarter operating profit was 769 million euros, up from 88 million euros a year earlier, and confirmed its target of 1.8 billion euros for the full year.

EADS said its quarterly revenues had increased 10 percent to 9.85 billion euros and a net profit of 285 million euros. This compares to a 10 million euro net loss from the first quarter 2007.

EADS has counted on a sharp increase in A380 production following two years of delays, but said this week that deliveries would be delayed up to three additional months for deliveries scheduled for 2008 and 2009. EADS also predicted it will not be able to meet its 2010 schedule.

Airbus now expects to deliver 30 to 40 A380 planes to its customers in 2010, instead of the planned 42 aircraft.