Airbus Efforts To Repair Itself Falter

Airbus is struggling to regain its competitive footing to take on Boeing, with signs of new A380 problems and the failure to negotiate a sale of key industrial facilities in France. A similar deal in Germany had already fallen through.

The site sale and A380 recovery program were integral to efforts Airbus spelled out in late 2006 to overcome financial and programmatic problems that had shaken it to the core.

Last year, Airbus appeared to be deftly navigating itself out of the trouble wrought by two years of internal strife, poor product decisions and A380 problems. Although the fall of the dollar continued to present a huge problem, 2007 saw management streamlining while A380 deliveries picked up and the redefined A350XWB twin-widebody enjoyed market success.

But analysts like Unicredit's Stefan Halter say the goals of the Power8 restructuring plan "are threatened" by the setback. Firstly, Airbus has to invest far in excess of €1 billion ($1.55 billion) into technology upgrades for the French and German facilities - an investment it had hoped to offload to the site buyers. Another key element in the initiative was to reduce the company's euro cost exposure, as buyers would have had to sign long-term supplier agreements based on U.S. dollars. Now the exposure remains, and EADS/Airbus is only hedged sufficiently through 2009. The company might simply run out of time to reduce the currency risk before its hedges expire.