is taking a €158 million charge linked to the costs associated with wing component cracking on its with more costs excepted to come.
The latest charge covers repairs on 71 aircraft delivered and comes on top of a €105 million provision taken in March because of the same problem. Airbus CFO Harald Wilhelm says additional costs are due this year to cover the cost of fixing around 30 A380s being delivered this year. That could bring the bill to €260 million for 2012, he says.
Airbus has now identified a permanent fix to deal with the cracking of some of the L-shaped wing rib-feet in A380 wings, saysCFO Hans-Peter Ring. The (EASA) still has to sign-off on the fix, which will then trigger another airworthiness directive. Only once EASA has okayed the plan will Airbus be able to set when repair kits are available, Ring indicates.
“This final retrofit fix is more complex than initially anticipated in March,” EADS says in its first quarter earnings statement, noting that it is driving the €158 million charge.
Discussions are also only starting with airlines on how to apply the final fix, Wilhelm says. “This is a case-by-case discussion.” The implementation is expected to start toward year-end, with deliveries in 2013. Forward fit of the fix is to start in parallel, although the first aircraft are to be delivered in 2014.
, for instance, has said it will only take its A380s once the final fix is installed on the aircraft - the first handover to the Middle East carrier is due next year.
The fix also has hit A380 delivery plans. Airbus has temporarily slowed A380 production, with the impact of that move expected to be seen in 2013.
For this year, the aircraft maker expects to hand over 30 A380s. But reaching that target is “becoming more challenging with a more back-loaded delivery pattern,” Wilhelm says.
The setback comes as Airbus was looking forward to improving profitability on the A380 program after years of big losses. EADS notes that “the implementation in production of the final fix will temporarily generate headwind on the year-on-year A380 [earnings before interest and taxes] improvement in 2012 and 2013 to account for non-recurring costs and delivery adjustments.”
However, it adds that “this should not jeopardize the reaching of break-even by the beginning of 2015.” At that point Airbus hopes to start delivering profitable aircraft. The break-even assumption is built on delivering 35 to 40 aircraft, Wilhelm says.
The company also signals it has not settled, yet, on whether to boostoutput to 11 aircraft a month. In March, it announced planned to do so if the dispute between foreign airlines and the European Union’s inclusion of aviation in its emissions trading scheme did not harm orders. Several Chinese commitments are on hold because of the dispute. “Airbus continues to examine the implementation for an A330 production ramp-up,” the first quarter statement says. Airbus officials have indicated they are making the long-lead preparations for the higher output level.
For the, the aircraft maker merely notes that the program remains “challenging.” Final assembly of the first aircraft began in April and Wilhelm says that element of the program is progressing well.
Ring also dismissed claims fromthat Airbus has been heavily discounted to win orders. “Everything we have contracted on the NEO is above our pricing expectations so far,” he insists.
What is more, Ring confirms that there continue to be “contacts” with officials in Mobile, Alabama. Airbus has long considered establishing a U.S. final assembly line (FAL) and was going to do so if it won the U.S. KC-X tanker competition which eventually landed with Boeing. Ring, who is departing as CFO at the end of this month along with EADS CEO Louis Gallois, says any move to establish a FAL there will fall to the new management team, headed by Tom Enders who will take over as EADS CEO from his post as heading Airbus, where he will be replaced by Airbus COO Fabrice Bregier. Wilhelm will become combined EADS and Airbus CFO.