Outlook

As in many industries, the macro-economic environment, which includes the recent oil price increases, has impacted the financials of EADS’ commercial customers. The deterioration creates a risk on the commercial delivery outlook. Nevertheless, the Group is cautiously envisaging an improvement of the economic and market conditions in the next months.

Looking ahead to 2010, the Group is still cautiously monitoring its production rates in a soft market environment. Delivery of Power8 savings, a better aircraft pricing level and further progress in space and defence will be challenged by deterioration of hedge rates and uncertainties surrounding the A380 and if unresolved in 2009 the A400M.

October 2009 figures further confirm the bottoming out of the cycle for freight and passenger traffic, notably in emerging economies. Worldwide passenger traffic has increased for the first time since November 2008.

From an economic standpoint, the continuous weakening of the Dollar – although not an immediate threat in the short term thanks to the Group’s long-term hedging policy and cost-cutting initiatives – is challenging EADS’ performance because of a weakening hedge book over time. The long-term Dollar level is an important driver for EADS’ earnings power over the coming years.

In a challenging market, EADS maintains its estimate for new gross orders figure of up to 300 aircraft in 2009. Production rates remain stable. 2009 deliveries are expected to be around 490 aircraft. For 2010, EADS is still working with its customers to establish a total delivery outlook including the A380 programme. Using € 1 = $ 1.39 (used in the previous guidance) as the average spot rate, EADS 2009 revenues should be roughly in line with the 2008 level. However, further deterioration of exchange rates in the fourth quarter could lead to slightly lower Group revenues.

Due to ongoing uncertainties on the magnitude of the potential A400M and A380 charges in the fourth quarter, EADS is not able to give a guidance for EBIT* for the full year. Under a continuation scenario, which is deemed the most probable, the A400M provision for which € 2.4 billion in charges have already been accrued has a wide range of possible outcomes depending on the negotiation process and could substantially alter the financial statements of EADS in the future.

EBIT* before one-off for full-year 2009 should amount to around € 2 billion. In a difficult environment, the Group’s Cash Flow management continues to deliver better results than expected with a cash-flow consumption now expected to be less than € 1 billion (excluding A400M) including lower customer financing needs than anticipated.

Divisions: strong delivery patterns across all businesses

Effective as of 2009, the former Military Transport Aircraft Division has been fully integrated into Airbus and is now named Airbus Military.

Airbus’ consolidated revenues amounted to € 20,193 million (9m 2008 adjusted: € 20,565 million). The volume of commercial aircraft deliveries continued to achieve a record number of 358 commercial aircraft (9m 2008: 349). Revenues were burdened by price deterioration on aircraft delivered and lower revenue recognition in the A400M programme. Airbus' EBIT* of € 523 million (9m 2008 adjusted: € 1,464 million) was impacted by exceptional foreign exchange effects and an A400M charge. Before these exceptionals, EBIT* before one-off stood at € 1.1 billion (9m 2008 adjusted: € 1.9 billion). Compared to the previous year, higher volumes and Power8 savings were more than offset by hedge rate degradation, price deterioration on aircraft delivered and cost increases. Progress on the A380 is slower than expected. In 2009, the A380 programme has faced both continuing production instability and customer requests for delivery postponements. As a result, the production plan is under review and a couple of deliveries for year-end will likely shift into early 2010.

A lower level of commercial activity is reflected in the net order intake. However, 59 new firm gross orders were booked in the third quarter, demonstrating a continued demand for new aircraft, albeit at a lower level than last year. Cancellations remain at a low level with only 26 recorded in the nine month period. At the end of September, Airbus had received 149 gross orders (123 net orders) for commercial aircraft (9m 2008: 785 gross orders, 737 net orders).

In October, Airbus delivered its first A380 to a European airline, Air France, which increases the number of operators to four for this aircraft type.

As of 30 September 2009, Airbus’ consolidated order book was valued at € 332.0 billion (year-end 2008 adjusted: € 357.8 billion) after the negative foreign exchange revaluation of € 14 billion based on list prices. The order book for commercial aircraft amounted to € 319.5 billion, which equals 3,480 units (year-end 2008: 3,715 aircraft).

Airbus Military revenues accounted for € 1,637 million (9m 2008: € 1,949 million) of the Airbus total. Revenues benefited from an increase in tanker activity and the Medium and Light segment. They were more than offset by lower revenue recognition on the A400M programme, where 2008 figures included the Power On milestone and the first application of early stage accounting**. EBIT* stood at € -5 million (9m 2008: € -68 million).

Airbus Military booked ten Medium and Light military aircraft orders, two each for Thailand and Mexico, four for the Czech Republic and one each for Colombia and Botswana. Moreover, Airbus Military underscored its strong position in the tanker business with an order for three additional A330 Multi-Role Tanker Transport (MRTT) aircraft by Saudi Arabia. This brings the total Saudi-Arabian order to six A330 MRTT aircraft. At the end of September 2009, the order book of Airbus Military amounted to € 21.7 billion (year-end 2008: € 22.3 billion).

In the first nine months of 2009, revenues for the Eurocopter Division grew by 9 percent to € 3,039 million (9m 2008: € 2,781 million). Deliveries reached 392 helicopters compared to 404 in the same period of the previous year; revenue growth was achieved through a favourable mix in serial activities and an increase in customer services. The Division’s EBIT* remained stable at € 165 million (9m 2008: € 164 million). The effect of a favourable mix was offset by higher R&D expenses due to strong efforts on innovation and product investments, margin pressure on the NH90 programme and a negative foreign exchange impact.

In September, the British Ministry of Defence awarded a contract to Eurocopter for the Life Extension of 28 Puma helicopters, which will offer enhanced performance and operational capabilities to the Royal Air Force. During summer, the French Army dispatched three Tiger helicopters in operations to Afghanistan. Eurocopter is providing on-site technical assistance.

The trend of bookings over the first nine months has shown a significant slow-down with 179 net bookings registered compared to 605 last year. Current order intake is showing an average decrease of 70 percent in units across the civil product ranges compared to last year. Continuing cancellations demonstrate the decline in the civil market, mainly in the private and corporate segments. Eurocopter has booked 79 unit cancellations to the end of September. However, for the first time in the third quarter the number of cancellations has decreased. Production levels are being closely monitored and adapted accordingly. Important military contracts booked in 2009 should mitigate the decrease in civil bookings but only on a mid-term basis. Eurocopter also launched an internal restructuring programme, called SHAPE, to better face the economic crisis in the civil helicopter market. Eurocopter’s order book stood at € 13.5 billion (year-end 2008: € 13.8 billion) which is the equivalent of 1,304 helicopters (year-end 2008: 1,515 helicopters).

Astrium recorded a strong growth in revenues (up 17 percent) across all businesses in the first nine months. Revenues amounted to € 3,228 million (9m 2008: € 2,749 million). Main contributions came from an increase in navigation and Earth observation satellites, in defence activities and in services both for telecoms and Earth observation sales. Additionally, revenues include a positive one-time effect due to a revenue catch-up for in-orbit incentive schemes on commercial telecom satellites. EBIT* improved by 11 percent to € 155 million (9m 2008: € 140 million) which was driven by a ramp-up in productivity in defence and in Earth observation satellites manufacturing. However, this was partially offset by an unfavourable translation effect from the declining British Pound to the Euro foreign exchange rate.

Ariane 5 marked its 33^rd consecutive successful launch. In October, the first secure communications satellite for the German Armed Forces, SATCOMBw-1, and the Amazonas 2 satellite for the Spanish operator Hispasat were placed in orbit. With this, Ariane 5 recorded its 47^th launch. At the end of September 2009, the order book for Astrium stood at € 14.9 billion (year-end 2008: € 11.0 billion).

The Defence & Security Division’s revenues amounted to € 3,296 million compared to € 3,490 million in the first nine months in 2008. The revenues reflect growth from Eurofighter activities and the consolidation of PlantCML, roughly compensating the aerostructures carve-out to EADS subsidiary Premium AEROTEC of approximately € 280 million. EBIT* remained stable at € 220 million (9m 2008: € 219 million). Growth and margin improvements in core programmes were partially offset by higher R&D expenses for innovation and future growth areas such as radar, UAV (unmanned aerial vehicles) systems and the security markets. The segment will benefit from strong seasonality in both revenues and EBIT* performance in the last quarter.

Defence & Security further strengthened its leading role in the global fighter aircraft market. In July, the Eurofighter partner nations reached an agreement for the third production tranche which is split into two parts. The first – Tranche 3a, comprising a total of 112 aircraft – was officially awarded. In its UAV systems sector, Defence & Security successfully tested the Barracuda UAV demonstrator in July, which included four test flights under realistic conditions. This new system is equipped with substantially improved software and technologies. At the end of September, the Division’s order book stood at € 16.3 billion (year-end 2008: € 17.0 billion). New orders for the third quarter included Eurofighter Integrated Logistical Services. Recent contract awards for the Saudi Arabian border security project and the Eurofighter Tranche 3a are yet to be booked.