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EADS Mirrors Boeing In Earnings Report

EADS is the largest aerospace company in Europe as is Boeing in the United States. Boeing was the only major defense contractor to report a loss for the recent quarter. EADS announced yesterday that they too had a loss. In Boeing's case the military programs turned a profit but the cancellation or deferment of civil aircraft sales drove their losses.

EADS also took a big hit due to the decline in Airbus sales and orders. Like Boeing, EADS relies on civil aircraft for most of their revenue. The world's economic problems has seriously affected the airline industry leading to cutbacks. EADS, though, had to take another charge on the A400M military transport program as it continues to be late. The aircraft has had difficulties integrating the new engine and fuel control system. The latest hiccup is getting certification for the engine control system. EADS may be facing cancellation of some orders for the aircraft as the nations buying it have the right to opt out due to the delays.

Boeing and EADS also face an uncertain future with the defense budget proposed for next year. Most of the major programs cut by Obama and Gates affect Boeing. EADS has had limited work in the U.S. but had been trying to expand. The next major contract available to them will be the KC-X which they won last year but lost on protest by Boeing. There are limited opportunities beyond that right now. Boeing saw the F-22, C-17, Future Combat System (FCS) and missile defense all canceled or restructured.

If there is not a significant pick up in the civil aviation market EADS and Boeing face a few similar quarters as the last one. There may be a chance that some military contracts will continue to offset those problems. It may be a rough year for the two major manufacturers of passenger aircraft.

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