How do you say "bargain basement" in French?
France-based aerospace giant Airbus landed $50 billion in new orders this week at the Dubai Air Show, making the company's attempt to retake the lead in passenger jets from archrival Boeing (NYSE: BA) a fait accompli. But that doesn't solve its financial problems.
As of the end of October, Airbus had landed 1,021 jetliner contracts in 2007 to just 956 for Boeing. If Airbus, which is a division of French-German conglomerate European Aeronautic Defense and Space (EADS) holds on, it will return to the top spot. Until last year, Airbus had held that spot since 2000.
While both companies compete with the likes of Lockheed Martin (NYSE: LMT), Embraer (NYSE: ERJ), United Technologies (NYSE: UTX), and Bombardier, they both leave their competition in the dust when it comes to large passenger jets. Current numbers give Airbus a 55% to 45% lead over Boeing in that market.
But Airbus' orders this year are reportedly coming with deep discounts, and this could damage the bottom line for a long time as those orders are fulfilled. Delays and charges related to the much-ballyhooed A380 super jumbo have already taken a $6.8 billion toll on profits, according to Bloomberg News.
For first nine months of 2007, EADS said Airbus lost roughly $1 billion before interest and taxes. EADS said it hopes to reach break-even EBIT for the full year. Further delays in A380 deliveries could mean more cancelled orders and defections to Boeing.
Boeing has had its own problems, including a delay on its 787 Dreamliner, but it looks like a well-oiled machine by comparison.
Airbus' problems are more serious. The company had to abandon an awkward co-CEO structure that split management between bosses in France and Germany, and officials recognize more drastic measures are necessary. This might be why aviation consultant Teal Group expects that Boeing could up its share of the passenger jet market from about 45% to 61% over the next 10 years.
To which Boeing shareholders might say: C'est magnifique!
Related Foolishness:
Closed for 15 months – opening 10 days only! Get notified ahead of time as our expert portfolio manager invests $1 MILLION in the best opportunities from across The Motley Fool’s premium investment services. This is the first open since August 2008, by invitation only. Enter email below.
Terms & Conditions
RSS Headlines
Fool UK