Airbus delay on giant jet sends shares plummeting

Shares in European Aeronautic Defense and Space, the parent company of Airbus, fell sharply on Wednesday, after another delay in the delivery of the new double-decker A380 airplane raised questions about the company’s management and strategy.

Shares in European Aeronautic Defense and Space, the parent company of Airbus, fell sharply on Wednesday, after another delay in the delivery of the new double-decker A380 airplane raised questions about the company’s management and strategy.

Shares in the company, known as EADS, closed down 26.3 per cent at 18.73 euros, after it warned late Tuesday that a delay of six to seven months in the delivery schedule of the A380, the world’s biggest passenger jet, would probably reduce operating profit by 2 billion euros extending from 2007 to 2010. Several leading customers for the aircraft, including

Singapore Airlines, Emirates and Qantas Airways, suggested that they would seek compensation for the delay, adding further momentum to the sell-off.

Story continues below this ad

In addition, Singapore Airlines—unhappy that its A380 orders will be delayed—announced that it would buy 20 Dreamliner 787’s from Boeing, worth $4.52 billion, and take options on another 20 planes. ‘‘This is in our view very damaging both to the credibility of EADS management, and also to Airbus’s reputation for program management,’’ Sash Tusa, an analyst at Goldman Sachs, wrote in a note to investors. Airbus is betting its future on the A380, but the plane has been dogged with problems, ranging from engine noise to weight and fuel consumption.

The latest delays compound concerns about the company’s direction that had already been raised after it acknowledged that it had erred in the design of another airliner, the midsize A350, which it announced in 2004 to compete with the Dreamliner 787. In the short term, the latest fumble casts a cloud over the future of Noël Forgeard, a co-chief executive of EADS who oversaw the start of the superjumbo project when he led Airbus from 1998 to 2005.

Over the longer term, analysts said Airbus’s troubles would probably give a lift to Boeing, which last year fell behind Airbus in total aircraft orders but has been regaining lost ground as Airbus stumbles. Shares of Boeing rose 6.5 per cent yesterday, closing at $82.01.

‘‘This sets up a scenario for further market share gains by Boeing with its 777 and 747,’’ said Howard Rubel, an aerospace analyst at Jeffries & Company in New York. ‘‘And when the 787 Dreamliner comes on line, Boeing will have a modern and attractive product line.’’

Story continues below this ad

Analysts noted internal squabbles over leadership of EADS and Airbus might have distracted managers from addressing challenges posed by the Dreamliner.

NICOLA CLARK