[yarita]

And here's today's WSJ article about the redesigned A350 being up in the air due to the A380 problems. If the A350 slips its schedule, Boeing will start eating Airbus's lunch with the Dreamliner.

Why EADS's Growing Pressures
Can Further Hamstring the Firm
By DANIEL MICHAELS
October 5, 2006; Page A2

PARIS -- Already saddled with cost overruns for delays on the A380 superjumbo, Airbus parent EADS now faces additional costs implementing a new restructuring plan and possible penalty payments on another jetliner program, the long-haul A350.

European Aeronautic Defence & Space Co., which owns 80% of Airbus, has already slashed its operating-profit forecast by €4.8 billion ($6.11 billion) through 2010 because of a two-year delay in production and delivery of the A380 two-deck plane. Trying to draw a line under Airbus's industrial problems, EADS this week announced a sweeping restructuring plan aimed at improving the European plane maker's operations.

But implementing the plan is likely to increase the financial squeeze EADS faces in the next four years. EADS plans to give details on its eight-point plan, called Power8, early next year. Yet steps to boost long-term efficiency, such as layoffs, factory closures and manufacturing overhauls, usually increase short-term charges, analysts say. Such measures may face resistance from European politicians concerned about job losses and labor unrest.

Airbus also faces other, and unquantified, expenses related to delays on another plane project -- the proposed A350 long-range wide-body plane. Initial plans for the proposed A350, which was marketed to compete against Boeing Co.'s strong-selling 787 "Dreamliner," disappointed many potential customers. By spring, Airbus signed firm contracts for 150 A350s, which was supposed to enter service in 2010. But customer dissatisfaction with the original A350 design prompted Airbus to redesign it. In July, the company announced a revised version of the plane, called the A350 XWB.

At the time, Airbus said EADS would give the green light to production of the plane this month and that it would enter service with airlines in 2012. The delay could trigger penalties on the 150 firm orders, industry analysts say. Now, amid the current turmoil, it is also unclear whether the new A350 schedule will be maintained. An EADS spokesman declined to comment.

Analysts can only estimate what slippage in the A350 schedule might cost EADS. They predict from €300 million in potential A350 contract losses to €500 million.

As the extent of EADS's troubles grew clearer, shareholders in Britain's BAE Systems PLC overwhelmingly approved the sale of its 20% stake in Airbus to EADS for €2.75 billion, as expected.

BAE Chairman Dick Olver told a meeting of BAE shareholders that the board is concerned about the possible cash requirements for the Airbus business in the medium term. EADS acknowledges its financial squeeze. EADS's sudden drain on cash presents "a significant challenge," EADS Finance Chief Hans Peter Ring said. EADS, which has little debt and has kept a positive cash position since its creation in 2000, is set to hold an investor conference Oct. 19 to update its financial outlook.

The Power8 plan has met political resistance. German Finance Minister Peer Steinbrueck called on EADS not to upset the national parity inside Airbus. "The European balance of the company, with regard to its production and the existing jobs, must not be changed to the disadvantage of Germany," he said yesterday.

--Rod Stone in London and Andrea Thomas in Berlin contributed to this article.