Well, What Did They Expect Would Happen?

Airbus and Boeing have cautioned for months they expect a sharp drop in orders for 2008, following record showings for both manufacturers in 2007... but it seems the world's financial markets are just now coming around to that reality. Aerospace stocks took a sharp drop Monday, and the expected orders slowdown is to blame.

Forbes reports shares in European Aeronautic Defense and Space -- the parent company of Airbus -- fell 1.55 euros ($2.28) during afternoon trading in Paris, a drop of 7.5 percent. A Deutsche Bank analyst further downgraded the stock to "Sell" from "Hold," citing the expected fall in orders, and a weakening global economy.

EADS also took a hit due to the dollar's declining value versus the euro; in the past six months, EADS shares have fallen 20.5 percent. Stocks may also have been impacted by a report in the German weekly Wirtschaftswoche, citing statements from an EADS executive another delay is looming for the troubled Airbus A400M military transport aircraft.

On Wall Street, stock in Boeing fell $3.04, a drop of 3.5 percent. Deutsche Bank rated Boeing a "Hold," saying stockholders shouldn't sell just yet as there are likely a few short-term gains to be had as the 787 Dreamliner approaches its first deliveries

Shares in aerospace suppliers Rolls Royce, Thales and Safran also slipped.

The record sales numbers for 2007 -- Boeing reported 1,413 net orders for the year last week, and Airbus is expected to post similar numbers January 16 -- were fueled by large orders from emerging markets in Asia and the Mideast, while US and European carriers were largely absent from the order books.

Some analysts had pinned hopes for 2008 on big orders from those entities... but the world's financial markets think otherwise.

"There has clearly been quite a big order frenzy from the Middle East, Asia and low-cost carriers," said Zafar Khan, analyst with Societe Generale. "The guys who are largely absent are some of the European flag-carriers and the US companies."

FMI: www.airbus.com, www.boeing.com