Big Difference From A Year Ago

"How do you like me now?" We wouldn't be surprised if some Airbus executives this week are asking that very question of officials with parent company EADS, after the European aerospace consortium posted a healthy first quarter profit, largely due to some positive economic news from the planemaker.

Fueled by continued strong demand for its airliners, and a $620 million early payment towards its struggling A400M military transport plane, Airbus helped EADS bounce back to a $440 million profit for the quarter. That compares favorably to the $15 million loss EADS incurred for the same period in 2007, due to heavy losses at Airbus related to the delay-plagued A380.

The International Herald Tribune reports EADS CEO Louis Gallois called the Q1 results "encouraging" in the face of serious economic concerns, including the strong euro that devalued much of the fiscal gains the aerospace company has made. EADS took a $557 million hit to its operating profit in the quarter, due entirely to disparate values between the euro and the US dollar.

Gallois has earlier called the strong euro "a sword of Damocles" hanging over EADS, and Airbus. Most of the planemaker's expenses are incurred in euros, but its products are priced in dollars. That offset means Airbus makes less real money on each sale.

"Though many serious challenges have been overcome, there remains much to do in order to secure the significant and lasting improvement in operational performance we are targeting," Gallois said Wednesday.

EADS continues to look towards manufacturing facilities outside the European Union, including plants in the United States, to help offset the dollar/euro valuation crisis. Airbus has also ramped up deliveries to bring more cash in; the planemaker delivered 123 planes in the quarter, including a record 48 aircraft delivered in March.

Most of those planes were narrowbody A320s, however... the least-expensive planes in the Airbus line, with the lowest profit-margins. Still, those deliveries contributed to a $971 million operating profit at Airbus for the first quarter.

BCG Partners investment strategist Howard Wheeldon said EADS deserves credit for posting an impressive turnaround... but cautioned against showing too much enthusiasm.

"They are back to profit, they managed to deliver more aircraft in the first quarter and it has painted a better picture than we've seen over the last six to seven quarters," Wheeldon said. "But they haven't given answers on how they will achieve all they have set out to achieve," referring to Airbus' controversial Power8 restructuring program.

Power8 relies heavily on massive jobs cuts -- as many as 10,000 -- at Airbus by 2010, and the sale or closure of seven Airbus plants. Union protests have halted the former, however, and weak economic conditions have conspired to thwart the sale of Airbus sites in France and Germany.

Airbus also can't rest on its plane-delivery laurels for long... as earlier this week, the planemaker also confirmed deliveries of the A380 will be delayed yet again, due to problems as the company transitions to line production of the superjumbo airliner.

FMI: www.eads.com www.airbus.com