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Farnborough 2008 : EADS Is Not Only Moving, But Wnning Says Louis Gallois

Farnborough 2008 : EADS Is Not Only Moving, But Winning Says Louis Gallois

After four months of preparation work, with 3,600 tonnes of temporary structures now assembled, and 6,000 contractors and around 1,500 exhibitors from 35 countries due to arrive: the 2008 Farnborough International Airshow in the UK is about to start. The doors open on Monday, 14 July for the 46th edition of the week-long Airshow, which celebrates the 60th anniversary of the first exhibition in 1948. And EADS will of course be present. Alongside its main stand in Hall 4, which will show the activities of all EADS Divisions, the static and flying displays will feature the Airbus A330 and A380, A310 MRTT, ATR 72-500 and Eurofighter. The main stand will also showcase EADS' HR activities, with workshops for young professionals scheduled for Thursday and Friday and participation in Friday's International Youth Day on the agenda. Friday also sees a Science & Technology Fair involving CTO/Innovation Works, Airbus UK HR and Astrium UK HR aimed at inspiring 14 to 16 year olds to consider careers in Aerospace. Farnborough 2006 witnessed 270,000 visitors, the A380's UK debut and $42 billion worth of orders - to stay up-to-date with this year's most important events, keep checking this Journal from Monday. On July 12, 2008, Louis Gallois, Chief Executive Officer of EADS, followed by EADS Divisions Top managers introduced during a Media Seminar his compagny and answered numerous questions from the International Press. Source: EADS.

Louis Gallois opening EADS Press seminar. Photo © Joël-François Dumont.

Louis Gallois opening EADS Press seminar

Welcome to all of you and thank you for being there.

  • I. We have to face the facts:

Currently EADS is mainly perceived in terms of challenges. I could give you a long list and I am sure we will be come back to some of them along the day. I am sure you have your own list.

- A strong Euro puts us at a disadvantage vis-à-vis our competitors with a different cost basis.
- The higher oil price is squeezing airline profits and will possibly have an input on their capacity to order aircrafts.
- Everybody is waiting for the first flight of A400M, after a very impressive Roll out, last month. I could say late Summer, possibly.
- A380 is facing the challenge of the ramp up of production and switch to fully industrialized wiring process.
- And, last but not least, AMF is making pressure on the company and concerned managers.

The list could be even longer. It is, at least partly, the consequence of the diversity of our products and technologies and the diversity of the fields on which we are acting.

I wish to give you today a more balanced view of EADS, a company which is moving fast and winning.

  • II. EADS is moving fast

In a bit more than one year, we have completely changed the governance of the Company:

- One chairman / one CEO = it is much more efficient and reactive
- A much more balanced Board = A Board which is no longer a Franco/German joint venture, and with independent members, thus much more demanding for the management.
- EADS is working every day more as an integrated company with clear reporting lines and transparency which is completely new. We are developing shared services at the level of EADS for the whole Company.
- At the level of Airbus also integration is on track on a transnational basis – even if it creates some reactions of people trying to come back to the traditional and inefficient national organisation.

Louis Gallois, CEO of EADS. Photo© Joël-François Dumont.

Louis Gallois, CEO of EADS

In the same period of time, eighteen months, Airbus has launched:

- A new airplane, the A350, which is welcomed by the market, which is a big commercial success.
- Airbus has launched a competitiveness plan: for Power8 which is not only a cost saving plan but leads to a complete industrial reorganisation of the Company. Power8 is on track, delivering savings and cash as expected. I wish to thank the whole Airbus team under the leadership of Tom Enders.
- The sale of some sites is delayed due to the present economic environment but we are in the final process of negotiation for Laupheim, Filton and Socata, and we are carving out aero-structure sites to prepare their sale when it is possible.

Now, EADS has a clear strategy – Vision 2020 – towards a more global company, developing its footprint out of Europe, with a more balanced portfolio between commercial aircrafts and other activities, with a stronger service business. A company which wants to contribute strongly to environmental protection.

- By end of July, every division of EADS will have defined its own Vision 2020 in the frame of EADS Vision 2020 creating a global alignment of all Business Units of the Company, and giving a common base for Operating Planning.
- We have completed significant steps implementing Vision 2020 in the last months. I could give you some examples:
- We are giving priority to the US: we bought Plant CML in the US, a leader in dispatching centres for emergency call in strong synergies with our secure network business.
- The project of a Final Assembly Line (FAL) of Airbus in the United States in Mobile (Alabama) is taking shape in the frame of the Tanker deal.
- Section 15 of the A350, a very significant part of the fuselage of the airplane, will be manufactured in the US for the first time.
- We are giving priority to the services: last spring we signed the FSTA contract, the biggest PFI for Tanker service to the Royal Air Force.
- We are buying 80% of Spot Image, leader in space observation services.
- Eurocopter bought Motorflug in Germany, a maintenance company for Helicopters.
- We want a more global EADS: Eurocopter signed a MOU a few days ago with the Brazilian government to transform its subsidiary Helibras in a full capacity helicopter manufacturer, with designer full capacity to manufacture parts, to assemble airplanes, to sell them.
-The first components of A320 are leaving Europe to be assembled in our new FAL in China, they have left already.

I could give you other examples of the strategic move of EADS. It is going faster than people believe and it is getting momentum – simply because we need it, not for the pleasure of moving ahead, to get access to markets, to technology resources, to make our company less sensitive to economic cycles, and above all less sensitive to sharp and extreme Euro/Dollar – exchange rate movements.

Louis Gallois, CEO of EADS. Photo© Joël-François Dumont.

  • III. EADS is not only moving, EADS is winning

Our backlog of orders is at a historical level: more than € 350 bn at list prices for Airplanes; it is not only because cycles are helping; it is also because our products and our technologies are outstanding and because EADS is a fierce competitor on the world market. We have the best sales and marketing teams in the world!

- 487 Airbus planes sold on the first 6 months of 2008 and more to come in the Air Show.
- Five successes in a row for our A330 tanker against Boeing.

Australia, UK, Saudi Arabia, Emirates and finally US – even if following the recommendations of the GAO, the DoD has decided to relaunch an RFP addressing only the 7 issues raised by the GAO. We know that we have the best airplane, we know that our plane is ready, with a boom (refuelling) system successfully tested every day in Spain. I have to say I have no news of the boom of our competitor.

- 4 satellites sold.
- For Ariane V, 5 new launches in 2008 already and now 26 successful launches in a row. Ariane V is the most reliable launcher in the world.
- After Columbus, ATV has been automatically docked to the international space station which is a world first.
- 473 helicopter orders booked in the first half 2008, with an extremely promising presentation of the medium size EC 175 at Heli Expo in the States for which 111 intentions to order were registered. It is not only intentions to order, it is with payement!

In parallel, our economic performance is improving: you have seen that, after the first quarter of 2008:

- € 39 bn of orders – (we will be above 50 for the first 6 months).
- EBIT at € 769 M, consistent with our guidance of € 1.8 bn for the year
- Net cash at € 8.3 bn, at the end of March, which is outstanding especially when I compare with the stock value of the company.

This means one thing. It means that with a US dollar at a reasonable value, to around 1.20 US $ for 1 Euro, the performance of EADS is extremely good, comparable to its US competitors, if not better.

The competitiveness efforts through Power8 in Airbus and similar programs in other divisions are built to tackle the US $ issue; on the long term they are reinforcing the capacity of EADS to deliver strong results. Power 8+, concerning all parts of EADS, not only Airbus, will increase the security of the company, vis-à-vis the dollar fluctuation. But what is more important for me, on the long term, whatever the evolution of the US dollar could be, they are reinforcing the global capacity of EADS to deliver strong results.

  • One word about environment:

It could be a fashion, but it’s not a fashion for air traffic.

  • Growth of the aircraft market:

I could say the same for helicopters – will depend upon our capacity to limit the environment impact – noise, CO2, NOX – of air transport. Most of our R&T effort is focused on energy savings for reduction of pollution. Now, it is one of our main priorities with a strong convergence of economic and societal objectives. We know that part of our future as a company delivering products is linked to our capacity to manage the environmental impact of our products.

I remind you, because we are here, that the greenest aircraft flying today is the A380. It is the airplane of the future, and everyday more when I see the oil price increase.

Louis Gallois, CEO of EADS. Photo© Joël-François Dumont.

This is EADS, with its challenges – and you can believe that we don’t underestimate them – but also with its unique capacity to be a winner on the world market. Only true European Company, EADS is also the only European company able to compete with the big prime contractors in the US on the full range of aeronautic, space and defence products and technologies. And sometimes we are forgetting that. I am not sure that our US competitors are forgetting it.

We are number 2 in the world, just behind Boeing and ahead of Lockheed Martin and Northrop Grumman. It is our responsibility to make this company, every day, greener, more global, more efficient and more profitable. The whole EADS team is working hard for that.

Thank you.

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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
Comité militaire : VAE Guy Labouérie (†), GAA François Mermet (2S), CF Patrice Théry (Asie).