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    Sp e A ec 38 Th ial 0 c su om pp es le to m lif en e t: EADS Annual Review 2004 Letter from the Chairmen of the Board The EADS investment proposition The world in which we operate The A380 comes to life

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    EADS is a world leader and driver of change in the aerospace and defence industry. We deliver, we are balanced, we are global, and positioned for growth.

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    Key figures 2004 EADS Group 1 2004 2003 2002 EBIT (€m) Revenue €m 31,761 30,133 29,901 +58% 2,444 EBIT1(Earnings before interest and taxes) EBIT1 margin €m % 2,444 7.7 1,543 5.1 1,426 4.8 Net income2 €m 1,030 644 212 1,426 1,543 Earnings per share2 € 1.29 0.80 0.26 Dividend per share € 0.503 0.40 0.30 Net cash position €m 4,058 3,105 2,370 2002 2003 2004 Order intake €m 44,117 61,150 31,009 Order book €m 184,288 179,280 168,339 Net cash position (€m) Workforce (number of employees) 110,662 109,135 103,967 +31% Unless otherwise indicated, EBIT figures presented in this report are pre-goodwill amortisation and exceptionals 1 2 Compliant with IFRS3 from 2004 (no longer goodwill regular amortisation); 2003 and 2002 restated for comparison 4,058 3 To be proposed to AGM on 11th May 2005 3,105 EADS Divisions 2,370 2004 2003 2002 4 Airbus Revenue €m 20,224 19,048 19,512 2002 2003 2004 Order book €m 136,022 141,836 140,996 Order book/annual deliveries (in aircraft) years 4.7 4.8 5.0 Order book (€bn) +3% 168.3 179.3 184.3 Military Transport Aircraft Revenue Order book €m €m 1,304 19,897 934 20,007 524 633 Order book/revenue years 15.3 21.4 1.2 Aeronautics5 Revenue €m 3,876 3,803 3,834 2002 2003 2004 Order book €m 10,171 9,818 10,162 Percentages used with the charts throughout this report refer to variation between 2003 and 2004 Order book/revenue years 2.6 2.6 2.7 Defence and Security Systems5 Revenue €m 5,385 5,165 4,770 Order book €m 17,276 14,283 13,406 Order book/revenue years 3.2 2.8 2.8 Space6 Revenue €m 2,592 2,424 2,216 Order book €m 11,311 7,888 3,895 Order book/revenue years 4.4 3.3 1.8 4 Order intake and order book based on catalogue prices 5 In this report, 2002 figures are adjusted according to the new structure of Aeronautics and Defence and Security Systems since 2003 6 Full year 2003 includes EADS Astrium at 100% (full year 2002 at 75%)

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    Contents 5 Letter from the Chairmen of the Board 40 Operational review In 2004, recovering aviation markets and 40 Airbus strong management activity in the Space 44 Military Transport Aircraft Division drove very satisfactory results. 46 Aeronautics 48 Defence and Security Systems 8 The EADS investment proposition 50 Space To invest in EADS is to buy a share in a global 52 Human Resources company with leading positions in aerospace 54 Sourcing 56 Research and Technology and defence growth markets. 26 Statement from the 58 Organisational structure Chief Executive Officers Space Airbus EADS has five Divisions, each A landmark year for EADS. Defence Military closely aligned to the specific and Security Systems Transport Aircraft needs of its customers. Aeronautics Ò 30 EADS at a glance 60 Executive Committee EADS has strong leadership positions in 62 Corporate Governance areas of the commercial aviation, defence, homeland security and space markets. 34 The world in which we operate As aviation recovers and defence grows steadily, uncertainties such as high oil prices, the US Dollar and defence budgets persist. 2 | EADS 2004 | Contents

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    64 Corporate Social Responsibility The complete EADS Annual Report Suite New policies and a common reporting 2004 consists of: framework will allow EADS to act as a better citizen and neighbour. 68 Owning EADS shares 69 Glossary 71 Addresses EADS Annual Review 2004 (1) 73 The A380 comes to life An independent business school case study examines the rationale for the A380, the canvassing of customers’ needs, and innovations employed. EADS Financial Statements and Corporate Governance 2004 (2) 81 Financial calendar 2005 EADS Business and Legal Description 2004 (3) (available upon request)  The online version of the EADS Annual Report Suite 2004 is available at the Investor Relations section of www.eads.com EADS 2004 | Contents 3

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    Left: Manfred Bischoff Chairman Right: Arnaud Lagardère Chairman 4 | EADS 2004 | Letter from the Chairmen of the Board

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    Letter from the Chairmen of the Board Dear EADS shareholders, For 2004, our Company reported a very satisfactory set of results, exceeding targets again, and rewarding us for the perseverance of our management and workforce in our multinational European Group. Continuous success EBIT rose substantially from €1,543 million in 2003 to €2,444 million, the cash position was extremely strong (€4.1 billion at year end 2004) and the order book ended the year at a new high of €184 billion, comprising €135 billion in commercial orders, and €49 billion from the defence businesses. These achievements stem primarily from Airbus’s success in a recovering civil aviation market. For the second year in a row, Airbus delivered more aircraft, and for the fourth year in a row it took more orders than Boeing. In addition, those positive achievements were supported by the remarkable turnaround of the Space Division after thorough restructuring, as well as the defence businesses’ increasing contributions to the growth in revenue and orders. Progress was reflected in EADS’ stock price, which outperformed both its sector and market indices. EADS derives its forward looking spirit from the dedication of its people, its innovative products and its global presence. More than 100,000 people work for EADS in Europe and across the world. All are highly committed to best practice. We have a competitive product portfolio that sets the standards in many areas of aerospace and defence. And our Group has proved resilient through the aviation downturn of the past few years, while also adapting to compete in world markets. 5

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    Letter from the Chairmen of the Board Our strategic goals As the civil aviation cycle recovers, it is now the time to benefit from the enormous reshaping and integration undertaken in the – To strengthen our competitive position further through past five years. At the same time the Board has initiated several our portfolio of new and advanced products. new internal projects to be able to manage continuous market – To become a Global Industrial Group through expanding pressure and unfavourable exchange rate developments in the local activities in the target markets of Asia, the United States future to safeguard the leading position of our aviation business. and Russia. Meanwhile, our defence and space businesses have efficient – To deliver complete systems and service solutions, in order transnational infrastructures and product portfolios suited to meet the need of today’s defence forces and homeland to today’s evolving requirements. security agencies. – To maintain our focus on innovation and technology. We have great faith in EADS’ outlook due to the combination of our product portfolio, positive market developments, a strong order book, leading technology and management capability in all areas. Recognising both the achievement of 2004, and our outlook, the Board will be recommending an increase in the dividend from €0.40 in 2003 to €0.50 for 2004. This rewards our shareholders for loyalty through the turbulent geo-political and macro economic environment since EADS’ market entry. Dividend per share (€) It reflects the strong financial position as well as the prospects (gross amount) of the coming years. After the creation of EADS and establishment of a company +25% with global reach in the last five years, we are now entering a new phase. The two Chief Executive Officers who led us through that period deserve huge credit for their dedication, 0.50* their leadership and accomplishment in executing the strategy set by the Board. They have served all stakeholders well. 0.40 They have also created a new, international model for the aerospace industry, and have demonstrated its effectiveness. 0.30 After years of economic Thank you Philippe Camus and Rainer Hertrich! slowdown, EADS has embarked on a period of growth. To reflect Now that EADS’ creation has been completed, this is a time EADS’ soundness and confidence of new opportunities and new challenges. EADS must now in the future, another dividend concentrate on generating sustainable growth in an environment increase is proposed for 2004. 2002 2003 2004 where certain markets are expanding, others are pausing, * to be proposed at the AGM 2005 and competition remains fierce everywhere. We must also ensure that all EADS businesses remain in strong positions as the aerospace and defence industry consolidates. 6 | EADS 2004 | Letter from the Chairmen of the Board

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    We have great faith in EADS’ outlook due to the combination of our product portfolio, positive market developments, a strong order book, leading technology and management capability in all areas. A leadership strategy The Board’s vision for EADS In 2004, the Board decided a strategy to suit this new phase, In 2004, the Board had to decide on new strategic goals as the reinforcing the strengths of the past, and at the same time integration and initial competitive positioning of EADS was addressing the challenges of tomorrow. This is a refinement completed. The authorisation to offer the Airbus A350 long- of our previous strategy and the driving principle remains range 245–285 seat aircraft demonstrates the strategic impetus the same – value creation. We have absolute confidence it continues to provide. Meanwhile, management remained in the ability of the new management to implement this, and focused on driving forward all of our Divisions and delivering to achieve our goal of becoming the leading global aerospace on its commitments. and defence company. The Board, as the decisive body of EADS, will continue to pursue Our strategy has four key elements: profitable growth through setting the standards in our markets – that is defining and realising the products that customers need. – To strengthen our competitive position further through This is how we strive to create long-term value. our portfolio of new and advanced products. Businesses such as Airbus, Eurocopter, MBDA/LFK and EADS SPACE In doing this, we acknowledge our corporate social and ethical Transportation are already leaders in their markets, while responsibilities. Indeed, our corporate vision balances economic other business areas have not yet reached that position. We performance, consideration for all stakeholders’ interests and intend to consolidate market leadership in the areas where we caring for the environment. We believe that using this vision have it, and to improve our competitive position in the areas to guide our major strategic decisions is in the best long-term where we do not. interests of our shareholders. – To become a Global Industrial Group through expanding local The A380 exemplifies this. It testifies to our innovation, activities in the target markets of Asia, the United States and labour and teamwork. Europe and the world as a whole have Russia. In 2004, we took additional steps to change our focus demonstrated the power of partnership in pioneering this from being primarily a European exporter to a global company new benchmark for flight in the 21st century. with a worldwide presence through investments, acquisitions and programme partnerships. In this way, we intend to grow For the future, the Board has taken action to guarantee continuity our international sales, to broaden our technology portfolio, to in its operations and its composition. It will remain committed gain cost advantages and to increase natural currency hedging. to the success of EADS and the implementation of its strategy. – To deliver complete systems and service solutions, in order to meet the need of today’s defence forces and homeland security agencies for lead systems integration and service solutions. This is being driven by the US and European defence forces’ transformation to network-centric warfare, and the need for a more efficient use of defence budgets. – To maintain our focus on innovation and technology. Continuous innovation has been the basis of our past success. We are convinced it will be even more important in the future, as innovation cycles shorten and new competitors emerge. EADS has always invested more than its competitors in research and development – we are convinced that this is an important driver of long-term shareholder value. Chairman Chairman Manfred Bischoff Arnaud Lagardère EADS 2004 | Letter from the Chairmen of the Board 7

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    1 The EADS investment proposition 2 To invest in EADS is to buy a share in a global company with leading positions in growth markets in the aerospace and defence industry. We have a record for delivering on our targets for financial growth, and the goals that underpin them. As such, we have integrated many of Europe’s aerospace, defence and space businesses, merging them into unified and efficient trans-national organisations. With an order book increasingly balanced towards defence businesses, EADS is building resilience to civil aerospace 3 cycles and triggering more synergies from its businesses. EADS is pushing into the world’s fastest growing markets, becoming part of their industrial fabric, and securing revenue for the long term. Airbus enters the civil aviation upturn with more than 50% market share, and the most competitive portfolio of modern aircraft. Far-reaching reorganisation in the Space division has returned it to profitability, and there is the prospect of further growth. And across the defence 4 businesses, a strong product portfolio has led to a sizeable order book, the prospect of significant future orders to come and consequent revenue growth. 8 | EADS 2004 | The EADS investment proposition

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    We deliver We are balanced We are global We are positioned for growth EADS 2004 | The EADS investment proposition 9

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    1 We deliver 10 | EADS 2004 | The EADS investment proposition

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    Management is gaining a reputation that it can be trusted to deliver on its commitments. Helicopters such as the EC130 secured Eurocopter’s success as the world’s number one helicopter manufacturer in 2004. EADS 2004 | The EADS investment proposition 11

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    We deliver 1 EADS has delivered on its targets and its goals. In the five years since its creation, we have implemented an industrial reorganisation on a massive scale, merging a collection of national businesses into a global organisation that is a leader in international markets. We have increased the profitability of our businesses through both higher revenue and greater efficiency. All of these actions have led to the delivery of financial results that have met, or exceeded, publicly stated targets in 2 every year. 3 12 | EADS 2004 | The EADS investment proposition

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    4 Exceeding financial targets In the volatile half decade since inception, EADS has met or exceeded all financial targets every year. In 2004, EBIT of €2.4 billion, up 58% over a year ago, surpassed our target, as did key measures such as revenue and free cash flow. EADS has grown EBIT 75% from €1.4 billion at the end of its first year, 31st December 2000. Achieving industrial goals EADS has achieved its ambitious industrial goals. Leveraging the legacy of sometimes redundant investments from our founding companies, we have effectively organised competence centres throughout Europe with specific engineering, manufacturing and support specialisations. In each business area, there is now limited duplication and reinforced management control, regardless of national boundaries. As such, we have transformed a collection of national businesses into a pan-European integrated organisation. Airbus SAS was 1. With Air Berlin and Niki Luftfahrt a further major European low-cost alliance has decided in favour of created in 2001, MBDA in 2001 and Astrium in 2000. the A320 Family. 2. Arianespace placed an order for 30 Ariane 5 Building profitable businesses satellite launchers. Here, the Ariane 5 ECA flight on EADS has delivered strong performance and established 12th February 2005 in Kourou, French Guyana. global leadership in many of its businesses. The performance 3. The NetCOS (Network Centric Operations Simulation) of each division has improved, and all now turn a profit. demonstrator is a multifunctional simulation system Airbus has become the market leader in commercial aviation designed to develop and test new defence concepts. for orders received over the past five years. It has made the 4. At the Airbus final assembly line in Toulouse, highest number of deliveries since 2003. Furthermore, the the first A380s have been built and are progressing towards scheduled delivery in 2006. A380 is built and progressing towards delivery in 2006 – it completes the aircraft range, and sets a benchmark for 21st 5. The A400M military transport aircraft is an example of a successful transnational defence programme. Century aircraft technology. In Space, we have implemented a far-reaching and successful restructuring plan, involving a complete industrial reorganisation. The Division returned to profit in 2004. And in our defence businesses, we have secured major trans-national programmes such as A400M, Meteor, NH90, Eurofighter and Aster. These are now being 5 implemented, meeting milestones and performance targets. The defence businesses have been consolidated for better efficiency and competitiveness. Further profitability increases are expected as they progressively reap the rewards of the restructuring undertaken between 2001 and 2004. The EBIT of the Defence and Security Division increased more than threefold from 2000 to 2004. EADS 2004 | The EADS investment proposition 13

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    2 We are balanced 14 | EADS 2004 | The EADS investment proposition

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    EADS is a balanced leader in aerospace, defence and related services. The Eurofighter is the most advanced multi-role fighter aircraft. EADS 2004 | The EADS investment proposition 15

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    We are balanced 1 With revenue increasingly better balanced between civil and defence activities, EADS has built resilience to the civil aviation cycle. Defence businesses have accounted for a growing proportion of revenue during the past five years. In 2004, they made up 24% of total revenue. With a strong defence order book, EADS has established a firm foothold in businesses that evolve independently of the fortunes of airlines, so that defence is likely to account for a larger proportion of revenue in the next 2 commercial aviation downturn. Furthermore, there are other synergies between civil and defence sectors, with technology and expertise developed in one benefiting product development in the other. 3 16 | EADS 2004 | The EADS investment proposition

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    4 Increasing diversification The critical strategic rebalancing of our portfolio of civil and defence activities is in progress. The revenue of defence businesses have increased by more than 50% from approximately €5 billion in 2000 to €7.7 billion in 2004. Growth in defence has more than compensated for the impact of the civil aviation slowdown and US Dollar weakness. In 2004, it has supported EADS’ 5% revenue growth from €30.1 billion at year end 2003 to €31.8 billion. Further growth towards €10 billion defence revenue by 2006/2007 is underpinned by a full military order book. At year end 2004, there is an order book of €49.1 billion, up from €15 billion at year end 2000. Moderating economic cycles Rebalancing revenue between civil aviation and defence moderates the impact of civil aviation cycles. Civil aviation is highly cyclical, with pronounced peaks and troughs in demand, 5 while defence is a steady growth industry. In the past 30 years, the number of annual deliveries of aircraft with more than 100 seats has fluctuated from as much as 8% to 9% of the existing fleet at the top of the cycle, to as little as a third of that at the bottom. Unchecked, such variations could be a source of vulnerability. The civil aviation cycle is now in a strong upturn after reaching a trough in 2003. When the next downturn arrives, the negative impact of falling civil aviation revenue should be cushioned by the stream of defence revenue embedded in our order book. Exploiting synergies In developing the balance between civil and defence revenue, we have found ways in which the two sectors reinforce each other. We have identified and exploited clear synergies between the civil and military businesses. Through transferring Airbus’s competence in civil aviation, we have developed the Multi-Role Tanker Aircraft and military transport aircraft such as the 1. EADS will supply a fleet of five A330 Multi-Role A400M. And the M51 submarine-launched intercontinental Tanker Transport (MRTT) aircraft to the Royal Australian Air Force. ballistic missile, for which EADS received the series production contract early in 2005, shares technology developed for the 2. Eurofighter in final assembly line. Ariane civil launcher. 3. The first Tiger combat helicopters have been delivered following orders from France, Germany, Spain and Australia. 4. EADS’ space activities contribute to both the civil and defence business. 5. The A330-300 provides ultimate efficiency in the 300-seat class. EADS 2004 | The EADS investment proposition 17

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    3 We are global 18 | EADS 2004 | The EADS investment proposition

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    One integrated business with one culture today. EADS is supplying the Automated Transfer Vehicle (ATV), an unmanned transport system to deliver fuel and other supplies to the International Space Station (ISS). EADS 2004 | The EADS investment proposition 19

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    We are global EADS is a global leader, which reduces our 1 dependency on the economies of individual countries or regions. Through our Global Industrial Strategy, we are extending our activities in those countries with the greatest growth potential, tying our fortunes to theirs by building industrial presences there. In the future, this should secure our ambitions for growth in revenue and EBIT. Additionally, our global positioning helps to reduce exposure to the strong Euro. 2 3 20 | EADS 2004 | The EADS investment proposition

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    1. Eurocopter North America assembles and customises Global leader helicopters such as the EC130 in the United States. EADS is a global leader. In the aerospace and defence sector, 2. With programmes such as EuroMALE, EADS puts strong it ranks second in terms of revenue and first for orders. Our efforts in the field of Unmanned Aerial Vehicles (UAV). markets span the world and we generate revenue from all major 3. The popular A320 Family has played an important markets. In 2004, some 27% were from North America, 16% role in the restructuring of Aeroflot’s European fleet. from the Asia-Pacific region, 45% from Europe, and 12% 4. EADS provides key elements for the European satellite from the rest of the world. navigation system, Galileo. 5. Globally, EADS employs more than 110,000 people. Expanding in growth countries While our people and assets are mainly based in our four home countries – France, Germany, Spain and the UK – the Global Industrial Strategy project initiated in 2004 is extending our activities in those markets which show the best growth potential. We have identified six priority countries: the United States, Russia, China, Japan, India and South Korea. This sound and harmonised global strategy not only ensures long-term, sustainable access to key growth markets, it also draws on the 4 most motivated, best-suited technological, industrial, financial or human resources to promote local industry and serve our requirements. It fosters shared interests with these countries, their governments and their people. Cultural sensitivity We are sensitive to the different approaches required by different markets, and will adapt to whatever is practical. This might take the form of a cooperation agreement, local industrial presence or outright purchase. In the US, our new helicopter plant in Mississippi answers the needs of the US Coast Guards and strengthens the local economy. In China, the fastest- growing and most promising commercial aerospace market, we have invested in AviChina, a local manufacturer. In Russia, we have developed partnerships for space launchers and a research and technology centre. Natural hedging 5 A beneficial side effect of the Global Industrial Strategy is natural hedging. As the proportion of our costs denominated in currencies other than the Euro increases, so the Group’s exposure to the strong Euro is reduced. EADS 2004 | The EADS investment proposition 21

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    4 We are positioned for growth 22 | EADS 2004 | The EADS investment proposition

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    Growth throughout our industry is now accelerating. We are positioned to be the beneficiary of this. Airbus is benefiting from accelerating demand for aircraft from the growing markets in Asia-Pacific. EADS 2004 | The EADS investment proposition 23

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    We are positioned for growth EADS is positioned to reap the benefits of 1 both the upturn in civil aviation and greater internal efficiency. With more than 50% of the market for new commercial airplanes, Airbus is set to be the prime beneficiary of an upturn that is gathering momentum. In Space, increased efficiency is currently driving EBIT growth, but revenue will also do so. Defence is growing steadily, with major programmes driving increasing revenue. 1. The NH90 has become a major export success and is setting the standard for naval and tactical transport helicopters. 2. EADS CASA is contracted to supply CN-235 Medium Range Surveillance Maritime Patrol Aircraft to the US Coast Guard. 3. The A320 is the original member of Airbus’s single-aisle airliner family in this category. 4. The cryogenic upper stage of the Ariane 5 launcher. 5. Aircraft models are installed and tested in the anechoic chamber of the EADS Corporate Research Centre. 2 24 | EADS 2004 | The EADS investment proposition

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    3 Civil aviation upturn Airbus has confirmed its market leadership just as the commercial aviation market swings into an upturn. According to Airbus forecasts, airlines will need 17,000 new aircraft over the next 20 years. If Airbus maintains its leadership, it could win more than half of these orders, representing over 425 deliveries on average each year. Downturns would see lower numbers, while cycle peaks would show higher numbers. After delivering 303/305 aircraft in the trough of the cycle in 2002/2003, Airbus is clearly set to increase volume rapidly to 400 units and beyond. Our order book supports this forecast. Space turnaround In Space, increased efficiency will be the primary driver of profit growth. The far-reaching industrial reorganisation has been completed, and satellite programme cost controls have been implemented. Space is now poised to expand its operating 4 margins. Beyond this, Space is positioned for revenue growth. The order book has increased more than twice since 2000 to reach €11 billion at year end 2004. And we are seeing other growth opportunities from Paradigm (our secure communications service satellite company), which is winning export customers following the initial large contract from the UK Ministry of Defence in 2003, and from the future European navigation satellite system Galileo. Defence grows steadily In Defence, major programmes are driving strong organic growth. Some such as the A400M transport aircraft, NH90 transport helicopter, Tiger combat helicopter, Eurofighter and Aster missile represent a substantial proportion of our order book and are already producing revenue. Beyond our platform business, we are positioning ourselves in the fast-growth services and homeland security markets. Services has won early successes in Germany with the NH90 Training centre, 5 and in the United Kingdom where we are selected to provide air refuelling of fighter aircraft. Homeland Security is well-positioned to supply integrated systems and equipment to tackle terrorist threats, which have increased the need for effective border surveillance systems. We provide the full range of products to face this need, from Unmanned Aerial Vehicles, control and surveillance systems through radars, satellites and communication systems. In 2004, we won the prestigious order to supply Romania’s border surveillance system. EADS 2004 | The EADS investment proposition 25

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    Statement from the Chief Executive Officers A landmark year for EADS Dear employees, customers, shareholders and suppliers, EADS has been in existence for five years now, and we are proud to present the Company we have had the pleasure and honour to guide from its creation in July 2000 to the strong position it is in today. EADS is often cited as the model integrated European company, with a singular spirit and efficient structure. We are very pleased with the way vision has become reality. We believe that we have been able to achieve this because we, personally, have worked together in mutual confidence and transparency, bound by a common sense of mission and duty to the Group, its employees and shareholders. We are proud that EADS is now recognised by all its stakeholders as an industrial, technological, social and financial success. Industrial efficiency Five years ago, at EADS’ inception, we inherited a collection of impressive defence, space and aeronautics businesses. These diverse national assets, though promising, were far from being a unified company, with the efficiency needed to become a leader in global markets. Airbus was a European joint venture with no industrial assets, and no guiding strategy. The new EADS was a powerful driving force in the formation of the Airbus company, and it enabled Airbus to launch the A380, which is set to become the benchmark for airline technology in the 21st century. In space and defence, issues related to national interests and cultures made the realisation of synergies and the creation of an effective industrial group even more challenging. The willingness of European governments to design common defence and space policies had made great progress, but was not yet fully developed. The fantastic motivation of EADS people and the trans-national spirit of our management have overcome this resistance.We have transformed national organisations into integrated businesses which transcend Europe’s historical boundaries. 26 | EADS 2004 | Statement from the Chief Executive Officers

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    Left: Rainer Hertrich Chief Executive Officer Right: Philippe Camus Chief Executive Officer 27

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    Statement from the Chief Executive Officers Despite the difficulties, this has been achieved incredibly Technological excellence quickly in such areas as missiles and satellites. In 2001 we Since the creation of EADS, we have always devoted 6% to created MBDA (37.5% owned by EADS) with our fellow 7% of annual revenues to self-financed research and development shareholders. MBDA is now the global leader in missile systems, (R&D) – a far higher percentage than our peers. Taking into and LFK, the German missile manufacturer, is poised to merge account customer-financed R&D, the percentage is roughly with it. In the space sector, we established Astrium in 2000 as doubled. This heavy investment is a prerequisite to ensure the leading European satellite company. future competitiveness. At the same time, we have successfully extended our product We have given new means to the Corporate Research Centre, range. In only five years, EADS has matured from being mainly a centralised team of more than 600 people located in Paris, a platform and equipment manufacturer into a global player Toulouse, Hamburg, Munich and Moscow. With a single able to meet the evolving demands of governments through an management structure, all EADS R&D activities are coordinated integrated offer. We are prime contractors for Private Finance to allow the transfer of knowledge across businesses and to Initiative-type service contracts such as Paradigm and the avoid duplication. Future Strategic Tanker Aircraft in the United Kingdom; for integrated defence systems such as the Ground Based Air We also believe that international cooperation is a key to unlock Defence programme in the United Kingdom (for which we R&D success and affordability. In 2004, we launched the have been pre-selected); and Alliance Ground Surveillance for Advanced Technology Initiative, a global network which fosters NATO. Additionally, we provide homeland security solutions, innovation in technology, research and development all over contributing to the US Coast Guard Deepwater project and the world. Beyond Moscow, we have set up partnerships in supplying the Romanian border surveillance system. EADS Singapore and China for R&D projects. today covers the full spectrum of defence businesses. Moreover, Among the most notable technological breakthroughs since the we have effectively derived our civil successes into military creation of EADS, we would like to mention the increasing use products. The Multi-Role Tanker Aircraft and A400M military of composite materials in our civil aircraft, the development of transport aircraft are among the best examples. electronic fly-by-wire controls for aircraft refuelling booms and a hyper-sensitive electronic device that detects explosives. Social success Our successes of tomorrow will stem from the men and women working for EADS. We have carefully implemented a working environment which is both socially responsible and attracts the most talented individuals. From scratch, we have also created a group-wide Human Resource policy for people management, salary compensation and industrial relations. This is really cutting-edge because French, German, Spanish and UK social laws are very different, as are the rules for union representation. Before EADS, there was no existing legal framework – so we designed and implemented a structure to fit the need. A few months after the creation of EADS, unions and works councils from France, Germany and the UK established an unprecedented trans-national committee – the European Works Council. 28 | EADS 2004 | Statement from the Chief Executive Officers

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    EADS is now on an improved growth trajectory. EADS has proved resilient in the downturn. The actions taken during the past few years in terms of both restructuring and industrial integration have left EADS extremely well positioned to benefit from the market upturn. We are proud that EADS is an exemplary employer. It is, We leave EADS with an outstanding order book of €184 billion. according to an independent survey, one of the industrial groups Most particularly, our defence programmes have supported this, where European engineers most want to work. We have strived with their order book growing from around €15 billion at the for a better balance between men and women. Our personal end of 2000 to €49 billion at year end 2004. commitment was to raise the proportion of women to at least 20% of newly recruited engineers. In 2004, we have slightly The financial strength of EADS, its potential for growth and exceeded this commitment. the transparency of our financial communications have earned EADS broad recognition in financial markets. The EADS In total, EADS has created more than 10,000 new jobs across share price has increased by +22% between inception and the countries in which we operate over the past four and a 31st December 2004. In the same period, the CAC40 Index half years. has lost -41%. Financial progress Conclusion EADS is also a great financial success. All financial targets have In summary, we are very grateful to all the people who work consistently been met or exceeded. In a market environment for EADS or who have placed their confidence in EADS by burdened by terrorism and threats, and also by the global investing in our shares, selling to us, or purchasing from us. economic slowdown, we have performed better than expected Without them these industrial, technological, social and every year. financial successes would not have been possible. We have increased the operating margin from 5.8% in 2000 As we look to the future, we believe that EADS should continue to 7.7% in 2004. EBIT has increased by 75% from €1.4 billion to build on the strong foundations established during this initial to €2.4 billion, with every division contributing to this phase. EADS has gathered a powerful set of attributes: a highly outstanding growth. Defence & Security Systems has been motivated and skilled workforce, a complete and competitive the most notable success, increasing its pro forma EBIT more product range, a large and global customer base, a sound financial than three-fold since 2000. Space has accomplished a dramatic base and a unique trans-national spirit. turnaround. And Airbus, with its completed product range, is benefiting from the start of the market upturn and the favourable currency hedges initiated in the early years of EADS. EADS’ balance sheet is stronger than ever. We have not only maintained our net cash position but boosted it from €3.0 billion at the end of 2000 to €4.1billion at year end 2004. Furthermore, EADS is now on an improved growth trajectory. EADS has proved resilient in the downturn. The actions taken during the past few years in terms of both restructuring and industrial integration have left EADS extremely well positioned to benefit from the market upturn. Chief Executive Officer Chief Executive Officer Philippe Camus Rainer Hertrich EADS 2004 | Statement from the Chief Executive Officers 29

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    EADS at a glance A320 Family C-295 EADS Group Airbus Military Transport Aircraft A business under five Divisions Airbus is the world’s leading aircraft Military Transport Aircraft (MTA) designs, EADS is a global company with five manufacturer. Its customer focus, manufactures and sells modern transport Divisions focused on different segments commercial know-how, technological aircraft. It is responsible for the heavy of the aerospace and defence industry. leadership and manufacturing efficiency transport A400M programme, as well Airbus is the largest of the Divisions, have propelled it to the forefront of as Military Derivatives which combine accounting for more than 60% of total the industry. Today, Airbus consistently the efficiencies of Airbus aircraft with revenue. With a highly competitive captures half of all commercial airliner in-house innovations such as the state-of- product portfolio, it consistently captures orders and continues to broaden its the-art flight refuelling boom. MTA has half of the world’s orders for commercial scope and product range by applying the leading market share for Medium aircraft. The other Divisions all have solid its expertise to the military market. and Light transports, offering advanced positions in their markets, supported mission systems for purposes such as by portfolios of young and innovative 2004 key achievements maritime patrol. It also designs and products. EADS is the market leader – Consolidate market position as leading manufactures advanced aerostructures. in many areas of the commercial aviation, commercial aircraft manufacturer defence, homeland security and space – A380 milestones, e.g. A380 2004 key achievements markets. Many of its Business Units final assembly line inauguration – Single bidder status for FSTA programme carry widely recognised brand names. – Successful expansion of product line – First export commitment for A400M by offering A350 – Royal Australian Air Force contract – Initial benefits from Route 06 cost for five A330 MRTT saving programme – Official signature of the US Deepwater contract – Algerian Air Force order for six C-295s  www.eads.com 30 | EADS 2004 | EADS at a glance

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    EC135 Eurofighter Galileo Aeronautics Defence and Space Security Systems Aeronautics encompasses businesses that The Defence and Security Systems (DS) EADS Space is Europe’s pre-eminent space are leaders in their markets. These are Division was created in 2003 as the group and the third largest worldwide. Eurocopter in helicopters, EFW in aircraft main pole of EADS’ defence and security It has played a formative role in the conversion, and ATR in turboprops. activities. By combining Missile Systems consolidation of Europe’s space industry, Additionally, the Division includes Socata, (MBDA and EADS/LFK), Defence and is the lead European supplier of the light plane manufacturer and Sogerma, and Communications Systems (DCS), satellites (EADS Astrium), launchers the aircraft maintenance company. All of Defence Electronics (DE), Military Aircraft (EADS SPACE Transportation) and space the Division’s businesses have aerostructure (MA) – including EADS’ activities in services (EADS SPACE Services). Over activities, focusing on advanced technologies the Eurofighter programme – and Services the past two years, it has been extensively and innovative product design. within one Division, EADS has better reorganised and its order book has equipped its defence business to meet expanded substantially. 2004 key achievements the needs of customers requiring – Stable profitability in difficult integrated defence and security solutions. 2004 key achievements market conditions – Successful turnaround achieved, – Success in helicopter export 2004 key achievements paving way for profitable growth campaigns (Eurocopter) – Order book +21% thanks to Eurofighter – Major order intakes secure future activity – Robust passenger-to-freight orders (EFW) Tranche 2 order – Creation of true transnational – Good position of cabin interiors – Progress in UAV business organisation through in-depth integration (Sogerma) – Successful launch of homeland – Validation of Paradigm business model – Growth in regional turboprop security business of providing shared space services to second-hand aircraft market (ATR) – Progress in US through Racal acquisition multiple governmental bodies – Recovery of Socata and Lockheed Martin cooperation in radar business – Successful transatlantic cooperation in NATO AGS and MEADS EADS 2004 | EADS at a glance 31

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    EADS at a glance Revenue (€bn) Defence businesses' revenue (€bn) +5% +8% 31.8 7.7 29.9 30.1 7.1 6.0 Airbus and the defence businesses were the chief drivers of the increase in revenue, allowing growth across all Revenue from the defence five Divisions. With a constant businesses have increased by 8%. US Dollar, revenue growth They account for approximately would have been 7%. 2002 2003 2004 one quarter of EADS revenue. 2002 2003 2004 Revenue breakdown by geography in 2004 (%) Revenue in defence activities in 2004 (%) Europe 45 Missiles 23.4 North America 27 Military Aircraft 17.6 Asia Pacific 16 Military Transport Aircraft 13.6 Rest of the world 12 Eurocopter 15.6 27 45 Defence Communications 16 Systems 12.0 Defence Electronics 5.7 Space 10.0 Others 2.1 Revenue from the defence 10.0 businesses amounted to 23.4 5.7 2.1 €7.7 billion. The largest Europe accounts for the greatest contributors were helicopters, 12.0 percentage of revenue, with missiles (MBDA), Military Aircraft, 17.6 North America generating A400M and other mission 15.6 the second highest percentage, aircraft (MTA) and secure 13.6 closely followed by Asia Pacific. communication (DCS). Employees by country at year end 2004 (%) Employees by business sector at year end 2004 (%) France 38.7 Airbus 47.0 Germany 36.4 Military Transport Aircraft 3.5 UK 12.7 Aeronautics 16.5 Spain 7.6 Defence and Security US 2.0 Systems 21.9 Rest of the world 1.9 Space 10.0 Italy 0.7 HQ and Research Centre 1.1 2.0 0.7 1.1 7.6 10.0 1.9 There was a small increase 12.7 in employees during 2004, 38.7 21.9 mainly as a result of expansion 47.0 at Airbus and in spite of In total 97% of EADS’ total restructuring in the Space 3.5 workforce is located in Europe 36.4 Division. The total number 16.5 on more than 80 industrial sites. of employees is now 110,662. 32 | EADS 2004 | EADS at a glance

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    EBIT1 (€m) EBIT1 margin (%) +58% 2,444 7.7 5.1 1,543 4.8 The strong EBIT1 growth (+58%) 1,426 follows solid profit improvements EADS’ EBIT1 margin pre-R&D at Airbus and Space, which rose to over 14%, allowing respectively reaped the benefits the EBIT margin to climb from of the aviation market recovery 5.1% to 7.7% in 2004, an and increased efficiencies. 2002 2003 2004 unprecedented level for EADS 2002 2003 2004 Net income (€m) Self-financed R&D (€m) +60% 1,030 2,189 2,096 2,126 644 Net income was up 60% from R&D expenditure in 2004 €644 million in 2003. The 2003 reflected EADS’ continued high figure (reported at €152 million) level of investment in innovation. 212 was restated for comparison It accounted for nearly 7% following implementation of IFRS 3. 2002 2003 2004 of EADS revenue. 2002 2003 2004 Net cash position (€m) Free cash flow (€m) +31% 4,058 2,143 1,802 3,105 2,370 Free cash flow before customer EADS’ net cash position remained financing was again strongly strongly positive and expanded positive, thanks to solid results 578 by 31%, providing robustness and continuing reduction of and flexibility. 2002 2003 2004 working capital requirement. 2002 2003 2004 Order book (€bn) Order intake (€bn) +3% 184.3 61.2 179.3 168.3 44.1 The EADS order book increased by nearly 3% and would have The EADS order intake remained 31.0 increased by 7% at a constant considerably higher than the US Dollar exchange rate. level of revenue and amounted The defence businesses to €44.1 billion in 2004, portion has continued to including €11.4 billion from increase significantly. 2002 2003 2004 defence businesses. 2002 2003 2004 1 EBIT pre-goodwill amortisation and exceptionals EADS 2004 | EADS at a glance 33

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    The world in which we operate As global economic recovery develops into sustainable Commercial aviation recovers expansion, the upturn in aviation is gathering momentum. After three years of downturn, the commercial aviation upturn Airlines are ordering increasing numbers of new aircraft. is firmly under way. Traffic has now exceeded the levels reached In defence, there is steady growth in government spending at the previous peak in 2000, and airlines are ordering increasing and European institutional and defence space budgets are numbers of new aircraft. But high fuel prices are intensifying expanding from a low base.Yet there remain uncertainties the pressure on airlines caused by fierce competition, with the in the form of high fuel prices, pressures to rein in defence result that many are sustaining heavy losses. In this difficult spending and the volatile US Dollar. financial environment, demand for the aircraft with the greatest operational and fuel efficiencies is larger than ever. According to the International Civil Aviation Organisation (ICAO), scheduled traffic measured by revenue passenger kilometres increased by approximately 14% in 2004 compared with 2003. International traffic experienced the greatest recovery. The International Air Transport Association reports a 15.3% rebound after 2003 when Asia’s SARS epidemic and the war in Iraq suppressed activity. 34 | EADS 2004 | The world in which we operate

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    China has become one of the strongest air traffic growth markets. 2004’s spike in fuel prices caused airline industry losses to To recover financially, the airline industry needs to adapt to soar. US airline net losses for the 11 largest passenger airlines high fuel costs and the emergence of low-cost carriers. While (excluding ATA, which is in bankruptcy and has not reported fuel costs have fallen from their late 2004 levels, geopolitical financial results) soared to $9.2 billion in 2004, worsening from uncertainty and structural constraints mean they are likely $2.4 billion lost by the same carriers in 2003. The strong Euro to remain high by historical standards. Growing traffic, fuel has cushioned European airlines from the full impact of the ticket surcharges, fuel price hedging, higher productivity and fuel price rise. In Asia, robust recovery in traffic is driving operational cost reductions in areas such as labour are only airline profitability back to levels last seen before the 2003 partly mitigating the pressures on profitability. SARS epidemic. In this tough market, the low-cost carrier business model is increasingly successful. Airlines are becoming more efficient through improving their operational environments, and rationalising their fleets around cost-efficient and larger aircraft. The North American legacy airlines’ business model appears unsustainable, as these airlines shrink operations and focus on profitable routes, particularly international routes. Filing for Chapter 11 bankruptcy is enabling them to cut costs through restructuring their operations. Yet it may be prolonging intense competition by preventing the weakest airlines from disappearing. EADS 2004 | The world in which we operate 35

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    The world in which we operate On a global basis, traffic is gravitating to the most competitive airlines. Low-cost carriers are continuing to take market share, particularly on the short-to-medium haul routes, where cost- efficient medium-sized aircraft are required. One important success factor for low-cost carriers is their focus on the core function of transporting passengers while outsourcing non-core activities such as maintenance. Looking forward, the recovery in traffic is expected to continue. The ICAO forecasts traffic growth of 5.4% in 2005 and 5.2% in 2006. Orders for new aircraft will grow with rising traffic, and as older, less economical aircraft are retired sooner than expected. Aircraft manufacturers will need to be innovative both in product development and the way manufacturing is organised to remain competitive. Defence grows steadily With by far the biggest defence procurement budget, the Defence expenditures as % of gross domestic product United States dominates global defence spending. In 2004, (based on current prices and averages) EADS estimates the United States spent $125 billion on European NATO countries procurement and research, compared with Europe’s $55 billion United States and the rest of the world’s approximately $135 billion. In terms of growth, EADS expects US defence spending to expand by an average of approximately 5% per annum for the next five years. 6 Defence expenditure in Europe and the rest of the world will 5 move roughly in line with growth of Gross Domestic Product 4 (GDP), with Asian expenditure increasing the most. 3 In the United States, the need to rein in public sector expenditure and the experience of recent military campaigns is 2 leading to a shift in spending patterns. Expenditure on weapons 1 programmes such as F/A-22 Raptor fighter jets, warships and 0 stealth submarines is being cut back. At the same time, the 1980–84 1985–89 1990–94 1995–99 2000 2001 2002 2003 White House is seeking more money for elite special forces. Source: NATO Within Europe, the United Kingdom and France have the 1 biggest budgets and are expected to have the greatest growth. European governments are updating equipment as well as acquiring integrated systems and service contracts. In Asia, there is demand for procurement of sophisticated equipment such as helicopters, combat aircraft and unmanned aerial vehicles from western companies. In the Middle East, the combination of unrest and higher oil prices may lead to higher procurement. Europe’s defence companies are currently in the middle of a wave of consolidation as they build the scale needed to match their US peers. During 2004, there were mergers between the French defence companies Sagem and Snecma as well as the German shipyards of Thyssen Krupp and HDW. Meanwhile, UK company BAE Systems acquired land systems business Alvis, and Italy’s Finmeccanica acquired GKN’s part of UK helicopter company AgustaWestland. Additionally, Finmeccanica and BAE Systems agreed to merge their avionics businesses to form a new, larger company. 1. The increase in oil price strengthens the global need for highly efficient aircraft. The European Council’s establishment of the European Defence Agency in 2004 was an important step towards greater alignment and integration of defence and security policies. It is likely to lead to more pan-European, and better coordinated, procurement, with larger production runs. 36 | EADS 2004 | The world in which we operate

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    Rise of the Historic annual change in air traffic growth (%) low-cost carrier The business model is increasingly spreading 14 12 10 8 6 4 2 0 -2 -4 1980 1984 1988 1992 1996 2000 2004 Source: ICAO Within ten years, low-cost carriers will have further Procurement trends: increased their market share in the airline industry. The The largest shares of both European and US defence budgets competitive strength of their business model will force belong to air combat, missiles and mobility (helicopters and major changes on existing airlines. Legacy airlines can transport aircraft). There is also growing demand for Network choose to adapt or suffer the consequences. Enabled Capabilities which enable coordinated operations between air, naval, ground and space assets. This provides The strength of the low-cost carriers’ business model information dominance, minimal response times and precision lies in the way it focuses solely on carrying passengers, strike capabilities. Examples of current projects include: the enabling airlines to strip costs to the minimum. How US Coast Guard’s Deepwater programme, NATO’s Air-Ground they do so varies somewhat from one airline to another, Surveillance (AGS) programme, and the Medium Extended Air although there are some practices that many share. For Defence System (MEADS). The defence industry is currently legacy airlines, matching such low costs is difficult because repositioning itself to provide the required capabilities in they are encumbered with ageing fleets of comparatively concept development and experimentation, and system inefficient aircraft, expensive labour forces and routes architecture and design. It is simultaneously offering the that become uneconomic to operate. underlying technology for systems and electronics. Information technology companies will play an increasing role in providing There are three distinguishing features that low-cost key capabilities. carrier business models tend to share: Another important trend is the bundling of hardware products – Fleets built around one type of aircraft, which leads and service contracts. The UK’s Future Strategic Tanker Aircraft to lower pilot training and maintenance costs; (FSTA) contract, which involves outsourcing support activities – Point-to-point short-to-medium haul routes and to a private sector consortium, is pioneering this type of larger cabins, which minimises turnaround time; solution. Similar arrangements are expected to spread rapidly – Optimum efficiency in all operations, especially to continental Europe, with significant contract values and in the use of aircraft and labour. durations (up to 20 years). The industry faces a challenge in meeting customer requirements while simultaneously mastering Airbus estimates that by 2014, low-cost carriers will related risk assessment and allocation, long-term project account for approximately 40% of all intra-European management and legal structuring. and US traffic. That compares respectively with 15% and 22% today. In Asia, the rise of the low-cost carrier is only just beginning, but is equally swift. Already, the world’s two biggest airlines by stock market capitalisation are Southwest Airlines and Ryanair – both low-cost carriers. In short, low-cost carriers are the most dynamic and swiftly rising segment of the airline business. EADS 2004 | The world in which we operate 37

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    The world in which we operate Homeland security spending unpredictable Growth in homeland security spending is difficult to predict due to the arbitrary nature of threats. In the immediate aftermath of September 11, 2001, there was a remarkable increase in US Government spending. Since then, the growth trajectory has flattened. In 2005, it is estimated that spending will stand at €42.4 billion* globally, with more than half of that accounted for by the United States. Over the next five years, it is estimated that spending in the United States alone will be $115 billion*. Key growth sectors include intelligence, counter terrorism, crisis management, mass transportation security, border security, protection of infrastructure and large events. Governments are increasingly acquiring integrated security systems. Examples of this include Romania’s integrated border surveillance project and the security for Beijing’s 2008 Olympic Games. 1 Within Europe, initiatives in the areas of security research and technology, the European Gendarmerie Force and border control may generate further homeland security spending. Space environment remains difficult For the European space industry, the environment remains extremely tough. Recovery in the telecommunications satellite market has been limited, and severe budget constraints are holding back both defence and exploration expenditure. Additionally, the weakness of the US Dollar is undermining the competitiveness of European satellite manufacturers. Defence: In Europe, the total annual defence space budget is nearly €1 billion across all national programmes. It is mainly focused on telecommunications satellites (Skynet 5 Paradigm in the UK, Syracuse in France, Satcom BW in Germany, Sicral in Italy) and reconnaissance satellites (Helios 2 and Pleiades in 2 France, SAR-Lupe in Germany, Cosmo Skymed in Italy). Budgets are expected to double due to spending on new applications presently at demonstration stage such as early warning systems, signal intelligence and navigation. Export opportunities exist in image intelligence and secured communications services. The US annual defence budget is by far the largest worldwide at approximately $17 billion (according to official sources), but this market is closed to non-US companies. The country has completely integrated its military satellites into its defence systems, and is now developing new generation military space systems. 1. Eurocopter’s Tiger is designed to leading-edge engineering standards as a multimission helicopter. 2. The Skynet 5 system is a key project for secured satellite communications of the UK forces. * Source: Civitas Group, a strategic advisory and investment services firm serving the homeland security market 38 | EADS 2004 | The world in which we operate

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    European civil institutional programmes: Armed forces buy European spending on space is likely to grow over the next few bundled services years. The European Union is planning to increase its annual budget from a low level to approximately €1 billion to €1.5 billion Defence ministries from 2007. This will fund earth observation, navigation, seek greater efficiency meteorology and science programmes. The recommendation is expected to be endorsed by the end of 2005, giving a new impetus to Europe’s civil institutional space programmes. Additionally, ESA’s budget of approximately €2.5 billion is likely to remain stable. The ESA 2004 ‘European Guaranteed Access to Space’ programme (EGAS) is supporting the European launcher industry, and is funding production of 30 Ariane 5 ECA satellite launchers. Following the past few years’ downturn in commercial activity, European governments regard this as necessary in order to safeguard Europe’s independent access to space. As global defence budgets are squeezed, the procurement Commercial telecommunications: of complete service packages – design, build, finance EADS expects satellite orders to average 15–20 a year for the and operate – rather than of just equipment, is increasingly foreseeable future. In 2004, satellite operators ordered 14 new being viewed as a way of getting better ‘value for money’. satellites, down from 22 in 2003. Private equity funds have Governments believe that the private sector can offer now acquired most of the telecommunications satellite operators, greater efficiency than the public sector, provided which will limit levels of investment. Consequently, growth that contracts are signed in a true partnership spirit with related to development of high definition television could be at appropriate risk sharing. the low end of expectations, and commercial satellite orders will mainly be to replace satellites that have reached the end of their Therefore, defence expenditure on private sector services service life. This indicates a value of approximately $2 billion is expected to grow steadily over the next decade. While a year. the United Kingdom’s Ministry of Defence pioneered this approach, countries in Asia, Australasia, Europe and Exploration: North America are now following. In January 2004, President George W. Bush presented the new US Vision for Space Exploration, focusing the National While this approach may not be appropriate for the front Aeronautics and Space Administration (NASA) on manned line of battle, it is becoming widely accepted in the provision missions to the Moon, and then to Mars. The Space Shuttle of support services. Typically, this has already encompassed will be retired around 2010 following completion of the outsourcing of training, logistics and maintenance. But, in International Space Station (ISS). The United States plans the United Kingdom, recent high-profile long-term contracts to operate the ISS until 2016, and then to return astronauts include Future Strategic Tanker Aircraft (FSTA – worth to the Moon. £13 billion) for aerial refuelling and Paradigm Skynet 5 (worth over £2.5 billion) for satellites. This secures Europe’s contribution to the ISS (Columbus module and Automated Transfer Vehicle operations), although Defence companies are following this significant change the original schedule has been delayed. Additionally, it means in their customers’ procurement behaviour closely, as it Europe has to decide what connection it would like its space will provide them with stable long-term revenue. exploration programme to have with that of the United States. Finally, they may derive additional profit opportunites from third-party revenue. EADS 2004 | The world in which we operate 39

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    Operational review (€m) 2004 2003 Variation Revenues 20,224 19,048 6% Airbus EBIT 1,922 1,353 42% Order intake 25,816 39,904 –35% Order book 136,022 141,386 –4% In number of aircraft 2004 2003 Variation Deliveries 320 305 5% Order book 1,500 1,454 3% Revenues by markets Airbus consolidates (in % of external revenues) 100 Civil 100 market position Airbus is the world’s leading aircraft manufacturer. 1 Its customer focus, commercial know-how, technological leadership and manufacturing efficiency have propelled it to the forefront of the industry. Today, Airbus consistently captures half of all commercial airliner orders and continues to broaden its scope and product range by applying its expertise to the military market. Airbus benefits from aviation The success of the A330 long-range 2 market upturn aircraft prompted Airbus to offer airlines Airbus has recovered strongly from the a longer range sister-ship, the A350. aviation industry’s economic downturn, Programme launch is expected in 2005, with 2004 proving to be a year in with the first aircraft likely to enter which both orders and deliveries rose service by 2010. The new aircraft will substantially. Airbus consolidated its combine the most popular aspects of the market position, delivering more planes market-leading A330 with new features than its competitor for the second year in terms of cabins, engines, materials in a row (54% revenue market share-gross and aerodynamics. It will incorporate based on $ catalogue price), as well as new technologies developed for the A380, continuing to win the greatest number enabling fast and substantial improvements of orders. This success reflects Airbus’s in performance and economy at limited 1. The A340 takes off – in the long-range sector, the A330/A340 Family has confirmed its position strategy of using innovation and cost. Both variants of the aircraft – as market leader. technology to design high performance, the A350-800 and A350-900 – retain 2. Cockpit commonality is a unique feature of Airbus’s efficient aircraft that meet airline demands the commonality of the Airbus fly-by- new generation of jetliners. for greater flexibility and lower costs. wire family. Compared with its nearest competitor, it offers approximately 2004 was a significant year for Airbus. 10% more seats, similar range, a lower The first A380s were assembled ready fuel burn per seat mile and a lower cash for test flights in 2005 and entry into operating cost per seat. This programme service in 2006. As the world’s first fully continues the Airbus tradition of working double-deck commercial aircraft and closely with customers to develop the most technologically advanced civil products that best meet their needs. aircraft in production today, the A380 is set to become aviation’s flagship for the 21st century. Not only do the Airbus families of aircraft enable airlines to determine the optimum combination of both ‘hub-to-hub’ and ‘point-to-point’ routes, but, thanks to commonality, they give existing Airbus operators an unparalleled level of flexibility. 40 | EADS 2004 | Operational review

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    Airbus made substantial financial progress Long-range dominance 3 during the year. Higher deliveries – In the long-range sector (275–375 seats), 320 units compared to 305 in 2003 – were the A330-300 and A340 Family received the greatest factor in a 6% increase in 56 orders, giving it a 57% market share, revenue to €20.2 billion for the year to and confirming its position as market 31st December 2004 (€19.0 billion in leader. In addition, 23 orders were received 2003). EBIT grew by 42% to €1.92 billion for the A330-200. (€1.35 billion 2003). The EBIT margin expanded to 9.5% (7.1% in 2003). At the end of 2004, the A330 had the fastest-growing operator base, having Airbus won 370 firm orders during the gained 13 new operators in 16 months. year worth a total of $34 billion, equivalent Airbus achieved significant new orders to a market share of 57% by volume and from Turkish Airlines and China Eastern. 4 541% by value (based on $ catalogue price). It won repeat orders from Emirates, Iberia Thirty-seven customers chose Airbus, and Air Tahiti for the A340, and Qantas, 18 of which were new customers. Some Eva Air, Qatar and Cathay Pacific Airways 34% of new 2004 orders originated from for the A330. New operators for the A330 Europe; 21% from North America; during 2004 included Yemenia, China 28% from Asia; and 10% from the Airlines, Egyptair and Lufthansa, and for Middle East. At year end, the 1,500 units the A340, South African Airways and strong backlog included orders from over Air Canada. 11 low-cost carriers. Rapid expansion in the long-range sector is confirmed by Airbus’s Global Market The world’s best-selling aircraft Forecast, which predicts that over the next 3. The Australian airline Qantas placed a repeat order The single-aisle A320 Family, which ten years up to 60 new long-haul routes for the A330. comprises the A318, A319, A320 and could be opened profitably on the A321, is the preferred choice of both 4. The A320 Family is the right choice for the trans-Pacific market and between Europe low-cost market. full service and low-cost carriers. Some and Asia. This bodes well for the new A350. 279 A320 Family aircraft were ordered in 2004, accounting for 64% of its market segment overall and about 80% of the The most technologically advanced low-cost market. With crude oil prices commercial aircraft in production high for most of the year, the advantages In 2004, Thai Airways International and of these aircraft in terms of offering Etihad Airways joined the ever-growing the most favourable economics without list of A380 customers, taking the overall sacrificing comfort were even more tally of orders by the year end to 139. apparent. These efficient new-generation Six out of the nine most profitable airlines, aircraft typically consume 20% less fuel based on 2004 first half net profit margins, per seat than mid-generation aircraft and have ordered the A380. These include 40% less than older-generation aircraft. Emirates, Singapore Airlines, Qantas The Airbus Corporate Jetliner (ACJ), and Korean Air, all of which anticipate a vital part of the A320 Family targeting that big aircraft with low unit costs the top end of the business jet market, will maximise their future profitability. also enjoyed a successful year, providing Airlines such as Thai and Etihad fly key still more evidence of the aviation upturn. trunk routes, and see the A380 as the Both Azerbaijan Hava Yollari (AZAL), cornerstone for these routes with passenger buying on behalf of the Republic of preference in mind. Azerbaijan, and Eurofly have signed The A380 reinforces Airbus’s reputation contracts to buy the A319-based ACJ, for technological leadership. Its structure underlining the comfort of Airbus comprises 25% composites. Compared with cabins and benefits of the technologically its nearest competitor, it uses 12% less advanced single-aisle family. fuel to carry 35% more passengers further, with half the noise energy at take-off and 15% lower operating costs. EADS 2004 | Operational review 41

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    Operational review 1 Airbus The A380 met all its key deadlines through The project has met its targets for weight 2 the year, including the electrical and and cost within an acceptable level hydraulic powering up of the systems in of tolerance. In terms of performance the first A380, the first flight tests and guarantees, the A380 fulfils all certification of the Rolls-Royce Trent 900 – commitments to customers and was the launch engine. Furthermore, the huge within 1% of its internal target maximum industrial process that supports construction take-off weight at the year end. There is is now a reality. In France, the final a risk of costs exceeding the initial 1999 assembly line is in Toulouse, and the $10.7 billion programme estimate by central fuselage section is put together €1.5 billion. This is due to the unforeseen in Saint Nazaire. In Germany, structural development of two different layouts for assembly of the forward fuselage takes the A380 freighter; more ambitious noise place in Hamburg. In the UK, the wings reduction targets; an initial underestimate 1. FedEx ordered up to 60 new freighter conversions in 2004. are assembled at Broughton and the of the cost of systems development. These landing gear at Filton. Finally, in Spain, extra costs will have little impact on 2. A319 final assembly line in Hamburg. the horizontal tail planes are assembled at future profitability and to offset them, 3. The A380 successfully took to the skies on Puerto Real. Four aircraft were assembled management is concentrating on optimising 27th April 2005. during the year. recurring costs of series production. Airbus designed the A380 in collaboration Cost saving programmes with some 60 major airports, ensuring In order to retain price competitiveness airport compatibility and a smooth entry and increase profitability, there is an into service. San Francisco, Munich and ongoing programme to reduce unit cost Frankfurt are already fully equipped, and grow productivity. Called Route 06, New York has started work and Heathrow the programme’s target is to remove has plans under way. Los Angeles is also €1.5 billion from the cost base by 2006. gearing up to start work after having its The first significant savings are expected master plan approved by the City Council in 2005, when around 30% of the total at the end of 2004. savings target should be achieved. The programme is on schedule, with all necessary measures identified and under way. About two-thirds of the savings are expected to be generated by sourcing economies. These savings are being accompanied by a striking reduction in lead times. In 2003, there was a nine-month period between the buyer of a single-aisle aircraft stating its required specification, in terms of engines and cabins and so on, and delivery. At the end of 2004, this time had been reduced to seven and a half months. By 2006, the lead time will be six months. For long-range aircraft, the time was 12 months in 2003. It will be nine months by end 2007. 42 | EADS 2004 | Operational review

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    Adjusting to Dollar weakness Quality improvements have extended to 3 Route 06 is helping Airbus adjust to the customer support. There has been extensive low level of the US Dollar. The rising progress in the time taken to perform proportion of procurement priced in US major repairs on in-service aircraft in 2004. Dollars, from US and non-US suppliers, The number of pending major in-service is also a key factor. technical problems has been cut by 25% in 2004 alone. The objective is to cut Airbus is working on a far-reaching this number by as much again in 2005. transformation of procurement, seeking The reactivity of customer support has to achieve a better match between revenue improved significantly. By the end of 2004, earned and procurement in particular Airbus technicians were providing support countries. With China a major growth for grounded aircraft anywhere in the market for air travel, there is an initiative world within two hours. Strategic objectives to source more from the country. – Confirm leadership on global markets Between 2000 and 2006, the value of Also within the scope of customer support, – A380: ensure mature and on time Entry Into Service Airbus procurement from China will Airbus opened a new maintenance grow by four times. It will double again training centre at the single-aisle centre – Secure a robust launch of A350 by 2010. China should join Airbus in in Finkenwerder, Hamburg. The facilities – Continue ramp-up: deliver on time and on quality a risk-sharing partnership for up to 5% include mock-ups of auxiliary power units 350 aircraft or more in 2005 of the A350 programme, and Airbus as well as maintenance training devices. plans to open an engineering centre in The centre complements the main Airbus the country in 2005, which will employ training facilities in Toulouse, Miami up to 200 people by 2008. and Beijing. It underlines the global commitment to offering a premium service Similarly, Airbus has a ten-year $800 million level to Airbus operators. cooperation agreement with Russian Outlook industry, where it expects to expand Airbus has entered the commercial aviation activities at the Moscow engineering centre upturn as market leader, and is poised established as a joint venture with Kaskol. to continue the growth of its deliveries. In Japan, local industry expects to earn It currently has the most comprehensive about $4.6 billion over the next 20 years and modern range of aircraft, placing it in from the A380 programme. prime position to benefit from the recovery. Airbus also spends some $7 billion per year, Based on current firm orders, aircraft 40% of its annual procurement budget, deliveries should increase from 320 in in North America. This supports 2004 to more than 350 in 2005. Revenue approximately 140,000 North American should reflect this volume increase, but jobs and makes Airbus the US aerospace the effect will be moderated by Dollar industry’s largest export customer. weakness – should it persist. The proportion of Dollar revenue not hedged by financial instruments (although naturally Delivering quality hedged by Dollar denominated There has been considerable progress procurement) is converted to Euros at in the achievement of on-time, on-cost prevailing foreign exchange market rates. and on-quality deliveries. Through a programme of improvement stretching Self-financed research and development across all departments, 97% of deliveries is expected to continue at around the passed the quality threshold in these same level, mostly due to the continuing areas at the end of 2004. This compares development of the A380 – the passenger with just 90% in mid-2004, which itself and freighter versions are due for entry was a remarkable improvement on two into service in 2006 and 2008 respectively. years earlier. The new A350 project will only marginally impact the 2005 research and development budget, but is expected to increase in the following years. Airbus 2005 EBIT is anticipated to grow from 2004. It will benefit mainly from the increase in deliveries, and from the progressive benefits of the Route 06 cost savings plan. These factors should significantly over compensate for the negative impact of a slightly lower proportion of larger aircraft deliveries, and for the effect of a weaker US Dollar from the few aircraft not yet hedged and the maturing of less favourable hedges. EADS 2004 | Operational review 43

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    Operational review (€m) 2004 2003 Variation Revenue 1,304 934 40% Military Transport Aircraft EBIT 26 30 –13% Order intake 1,176 20,326 –94% Order book 19,897 20,007 –1% Revenue by markets Driving revenue and (in % of external revenue) 3 Civil 3 Defence 97 order book growth 97 2004 was a year in which recent product development 1 increased the Division’s forward momentum. The A400M new heavy transport aircraft was the main contributor to revenue growth, while the A330 Multi-Role Tanker Transport (MRTT) won a substantial export order. Meanwhile, the more mature products of the EADS-CASA Medium and Light aircraft business continued to expand market share, and Aerostructures also grew. The A400M programme’s accomplishment The most significant single order was the 2 of contractual and industrial milestones Australian Defence Forces December 2004 was the main contributor to the 40% contract for five A330 MRTT aircraft worth growth in revenue to €1.30 billion for €730 million. In the Medium & Light 2004 (€934 million in 2003). Growth in aircraft and Other Derivatives segment, revenue is not fully reflected in EBIT, 22 aircraft were ordered in 2004. MTA’s partly due to the fact that profit for A400M order book was €19.89 billion at the year and Military Derivatives is booked to end (€20.0 billion at year end 2003). the various EADS Divisions according to their participation. Additionally, A400M on track and campaigning the restructuring process initiated in 2003 for exports and completed in 2004 led to a cost of Leveraging the expertise of MTA and €28.0 million (€17.0 million in 2003). 1. The A400M is the only aircraft that provides Airbus, the A400M offers the world’s air strategic lift without sacrificing any tactical attributes. But for this one-off restructuring cost, forces a replacement for their ageing fleets EBIT would have grown rather than of heavy transport aircraft. Following the 2. The C-295 meets the expanded operational capabilities required by today’s military missions. falling slightly to €26.2 million compared order for 180 aircraft placed in May 2003 with 2003’s figure of €30.1 million. by OCCAR (Organisation Conjointe 3. The A330 MRTT is the tanker/transport solution for the 21st century. de Coopération en Matière d’Armement), Following the restructuring, MTA is more acting on behalf of seven European streamlined with the skills required for nations, the A400M already has a large the new A400M and Military Derivative order book stretching 20 years. programmes. While approximately 500 staff typically in support functions have left, approximately 200 skilled employees such as engineers have been recruited to improve productivity and contribute to new programmes. 44 | EADS 2004 | Operational review

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    The South African government is set to Medium and Light transport aircraft 3 become the first export customer, following and Other Derivatives consolidate its late 2004 selection of the A400M as market position its next-generation heavy transport aircraft. EADS CASA consolidated its leading South Africa has signed a Declaration of market position in the Medium and Intent for purchasing at least eight aircraft Light transport aircraft and Other worth more than €750 million. As part Derivatives segment. of the agreement, South African industry will receive high-value work packages In February 2004, the US Coast Guard relating to the A400M, so becoming officially signed orders for two CN-235 a key participant in the programme. Medium Range Surveillance Maritime Patrol Aircraft for its Integrated Deepwater In total, the potential export market is System Programme. Additionally, Strategic objectives estimated to be more than 200 aircraft in November 2004, the US Coast Guard – Gain global leadership in military transport markets over the next 20 years. ordered one of the six aircraft options. with a complete family of aircraft The value of the Deepwater contract – Deliver A400M on time and to stated Construction of the final assembly line programme for MTA, including all the quality specifications was started in Seville, Spain and the options, spare parts and integrated logistic – Continue to win contracts for Airbus aircraft’s first flight will take place in support, is approximately $300 million. Military Derivatives 2007. In the meantime, revenue from – Penetrate US tanker and military transport market this programme will steadily grow. Aerostructures grows – Confirm leadership in Medium-Light Military Through technological excellence in Derivatives segment Military Derivatives gains its the use of composite materials, as well first contract for the A330 and as in advanced automation processes, refuelling boom Aerostructures continues to grow its Outlook Military Derivatives such as tanker aircraft revenue. The Business Unit designs, Looking forward, the Division’s prospects have all the advantages of the Airbus manufactures and certifies complex appear increasingly bright. Investment in commercial aircraft on which they are based, aeronautical structures. Programmes such the development of the A400M and the combined with in-house innovations as the A380 Fan Cowls and Belly Fairing A330 MRTT is beginning to be rewarded designed for military applications, such as together with Falcon F7X Horizontal Tail by large contracts stretching over the next the state-of-the-art flight refuelling boom. Plane were particularly active during the 20 years, and current negotiations may The Australian Defence Forces contract year. First deliveries for the A380 lead to additional orders. Longer term was the first for both the A330 MRTT, Fan Cowls and Belly Fairing took place opportunities for tanker aircraft include and the refuelling boom currently during 2004. France, NATO and the United States. under development in the Division. Meanwhile, the EADS CASA Medium Additionally, it was an export order. Contribution to A380 In accordance with its expertise in and Light aircraft and Other Derivatives The A330 MRTT is a derivative of the businesses, as well as Aerostructures, Airbus A330 passenger plane. The total composite materials and in advanced automation processes, MTA is developing are continuing to sustain the performance contract, including the Qantas through- of the division. life-support, amounts to €1.2 billion. and manufacturing key elements for the A380 programme such as: Revenue are expected to grow significantly Through its role as 40% shareholder in in 2005, boosted mainly by the next the Air Tanker consortium, EADS is also – Fan cowls for the Trent900 and steps of the A400M programme. Other negotiating to supply the A330 MRTT GP7200 engines; businesses, including the beginning of the to the UK’s Royal Air Force. The UK – Belly-fairing and metallic parts A330 MRTT Australian contract, Medium Government selected Air Tanker in of the main landing gear doors. and Light aircraft deliveries, as well as the January 2004 to take forward negotiations modernisation of Brazilian P3 Orion, are for its Future Strategic Tanker Aircraft expected to contribute overall revenue programme (FSTA). The whole contract slightly above the 2004 level. could be worth over €10.0 billion and stretches until 2027. If it proceeds, Higher revenue and the early benefits of MTA will deliver 17 A330 MRTTs restructuring will feed through to increased to Air Tanker. EADS has been awarded EBIT in 2005. the preferred bidder status in early 2005. The first two A310 MRTT aircraft were delivered to the German and Canadian air forces during the year. EADS 2004 | Operational review 45

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    Operational review (€m) 2004 2003 Variation Revenue 3,876 3,803 2% Aeronautics EBIT 206 217 –5% Order intake 4,339 3,661 19% Order book 10,171 9,818 4% Revenue by markets Helicopters (in % of external revenue) Civil 65 Defence 35 propel Aeronautics 35 65 2004 was another successful year for Aeronautics. Eurocopter, 1 the Division’s largest business, is in the beginning of further strong growth. Profit improvement at Eurocopter was offset by the weakness at Sogerma, which was impacted by the MRO (maintenance, repair and overhaul) market uncertainties, and by the weakness of the US Dollar at year end. There were also strong orders at EFW which converts civil aircraft to freighters, and ATR, the leading 40 to 70 seat turboprop manufacturer. Eurocopter represents 72% of the Division’s Robust export demand for helicopters 2 revenue, which increased by 2% to Demand for helicopters from outside €3.87 billion during 2004 (€3.80 billion Eurocopter’s home markets of France, in 2003). Both civil/parapublic and Germany and Spain was robust, military customers such as Germany and representing approximately 70% of the France contributed to higher helicopter year’s orders by value. The NH90 military activities. Aeronautics EBIT remained transport helicopter is a good example at a high level, achieving €206 million, of export success. With its fly-by-wire down from €217 million in 2003. electronic control system, which improves Overall, the EBIT margin of 5.3% was handling, it has now become the reference slightly lower than 2003’s 5.7% largely machine for tactical and naval transport due to Sogerma’s weakness. helicopters. The Sultanate of Oman ordered 20 NH90s in July 2004. 1. The NH90 military helicopter is a growing Eurocopter once again won orders that export success. secured its leading position. New orders In the United States, Eurocopter won 2. The EC135 is the preferred helicopter for police for Eurocopter increased by 26% compared a major homeland security contract in and emergency medical service missions as well October 2004. The Integrated Coast Guard as for corporate and VIP transport. to 2003. Some 295 helicopters were sold. EFW and ATR increased their orders. Systems joint venture company awarded 3. EFW increased production in order to meet a growing At €4.34 billion, the Division’s new a contract to provide reengineering kits number of orders for freighter conversions. orders were 18.5% higher than in 2003, for 95 HH-65 Dauphin surveillance and expanding the order book substantially to search-and-rescue helicopters for the €10.17 billion at the year end (€9.82 billion US Coast Guard. Eurocopter is also 31st December 2003). preparing to bid for a Department of Homeland Security requirement with 55 EC120 light single engine helicopters, with options for five more. 46 | EADS 2004 | Operational review

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    EADS has a stated strategy of growing Focus on efficiency 3 through becoming part of the industrial Aeronautics aerostructure activities are fabric of its customers’ home markets, benchmarked at a world-class level, and through forming equitable industrial and are participating in the productivity partnerships. In 2004, Eurocopter requirements of Airbus’s Route 06 progressed this strategy in the United programme. Productivity improvements States and China. In the United States, are being achieved through greater it opened a 2,400-acre production site automation and the involvement of strategic in Columbus, Mississippi. The facility countries with lower cost structures. employs 100 engineers, technicians and Aeronautics is continuing to increase administrative staff to assemble and its performance and competitiveness customise helicopters for US customers for the future. such as the Department of Homeland Strategic objectives Security and the US Coast Guard. A new CEO and CFO were appointed – Maintain leadership in the civil helicopters market. Furthermore, Eurocopter and the China at Sogerma recently, to oversee a return – Leverage EADS’ role as an original equipment Aviation Industry Corporation II (AVIC II) to profitability. Seat activities increased manufacturer (‘OEM’) to benefit from the steadily agreed to develop and manufacture a new and a new cooperation with Hamilton growing conversion and customer service markets advanced 6–7 tons helicopter. Sundstrand was founded for Auxiliary Power Unit activities. EFW, ATR, Socata experience upturn Within the EFW and ATR Business Units, Contribution to A380 orders increased. FedEx granted EFW – Nose lower structure (Socata). a large order for up to 60 freighter – Nose landing gear doors (Socata). conversions in September 2004. A light recovery in the turboprop market benefited – Airbus doors (Eurocopter). Outlook ATR (50% owned by EADS) as airlines Looking forward, the Aeronautics Division – Floor panels (EFW), has a considerable medium-term accepted that these planes are more cockpit panels (Sogerma). economical and more environmentally momentum. There is a substantial order friendly than jets on short haul flights. – Pilots seats (Sogerma). book and a number of major sales Twelve turboprops were ordered in 2004, campaigns are under way. New military compared to seven in 2003, which was models such as the NH90 transport and a particularly difficult year. Both EFW Tiger combat helicopters are reaching and ATR increased production to meet the market. Meanwhile, aircraft models the growing volume of orders. In 2004 like regional turboprop aircraft (ATR-42/ eight passenger aircraft were converted ATR-72) and general aircraft (TBM), to freighters and 13 new ATR were or activities like aircraft conversion, are delivered. Socata delivered 34 TBM light resisting to the competition. Furthermore, aircraft, the highest number for several the volume of the many aerostructure years, while 14 TB aircraft were delivered. activities sold by all Business Units are The light aircraft manufacturer is now benefiting from the civil aerospace upturn. back on a profitable growth track. Overall, revenue should grow significantly The growth of Airbus, and the production in 2005, mostly driven by Eurocopter. 2005 ramp-up of the A380, drove an upturn in Aeronautics’ EBIT is expected to reflect aerostructure orders at all of the Division’s the continuing improvement of Eurocopter Business Units. The whole Division performance, offset by the impact of received approximately 8.6% of revenue a weaker US Dollar and by ongoing from Airbus business in 2004. recovery programmes, namely in the Sogerma business. EADS 2004 | Operational review 47

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    Operational review (€m) 2004 2003 Variation Revenue 5,385 5,165 4% Defence and Security Systems EBIT 228 171 33% Order intake 8,457 6,288 34% Order book 17,276 14,283 21% Revenue by markets Networking (in % of external revenue) 6 Civil 6 Defence 94 the future 94 In its first full year of operation, the Defence and Security 1 Systems (DS) Division succeeded in significantly expanding its order book, while making progress in the integration of its businesses. The Division also advanced its ability to provide Network Enabled Capabilities that use information technology to develop integrated defence and homeland security solutions. Revenue increased by 4.2% to €5.39 billion There was progress in many of the areas 2 in 2004, mainly driven by the deliveries identified as strategically important of the Storm Shadow/Scalp long-range to the Division, including Unmanned cruise missile to the United Kingdom and Aerial Vehicles (UAVs) and transatlantic France, and the Acropol communications cooperation. In UAVs, successes included network deployment for the French police. the September 2004 Request for Proposal EBIT increased by 34% to €228 million, for the procurement of EuroHawk; up from €171 million in 2003, helped industrial participation in the Dassault-led by the release of the Euromissile litigation Unmanned Combat Air Vehicle (UCAV) provision (€106 million). Overall, the project NEURON; and appointment as EBIT margin improved to 4.2% in 2004, prime contractor for the EuroMALE drone up from 3.3% in 2003. demonstrator programme. The best example of successful transatlantic cooperation was 1. The Eurofighter Tranche 2 contract was signed in The order book ended the year at an all- the September 2004 contract for design December 2004. time high of €17.3 billion, growing by and development of the MEADS (Medium 2. EADS provides integrated systems for 21%. New orders were 35% higher than Extended Air Defence System) programme. Homeland Security. 2003, mainly due to Eurofighter Tranche 2 3. The Aster surface-to-air missile meets both land and contract received in December 2004, naval requirements. that will be worth €4.3 billion to EADS. Other notable contributors were Acropol contract, border surveillance system contracts and A400M sub-contracts. 48 | EADS 2004 | Operational review

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