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Market Scan
Airbus' A380: Millstone, Not 'Milestone'
Lionel Laurent, 10.15.07, 5:15 PM ET
LONDON -

The first delivery of European plane-maker Airbus' double-decker A380 to Singapore

Airlines on Monday may have been labeled a "milestone" by the company's Chief
Executive Tom Enders, but for much of the plane's history it's been more like a
millstone.

After all, the last time Airbus said it had reached a "milestone" in the development of its
super-jumbo was in January of this year, when it revealed that first customer Singapore
Airlines (other-otc: SPAAF - news - people ) would receive its order in October--18 months
behind schedule.

And since then, more bad news has piled on the pressure at Airbus' parent company
European Aeronautic Defense and Space (other-otc: EADSF - news - people ): U.S. rival
Boeing (nyse: BA - news - people ) has racked up a breathtaking 700 orders for its mid-sized
787 Dreamliner--nearly four times more than the A380--while EADS and top shareholders
Lagardere (other-otc: LGDDF - news - people ) and Daimler (nyse: DAI - news - people )
are facing intense scrutiny from market regulators over an alleged wave of insider trading
between late 2005 and mid-2006.

Shares in EADS closed down 18 eurocents (26 cents), or 0.8%, to 23.59 euros ($33.50).

Credit Suisse analyst Steve East said on Monday that the company's woes would continue, as
the company's dollar hedging would fail to cover the strength of the euro relative to the
greenback. "Hedging profits will disappear over time," he told clients. "Research and
development needs to rise to restore the competitiveness of the Airbus product portfolio."

Delivery delays for the A380 started to pile up in mid-2005, as Airbus blamed wiring
installation problems. Skeptical commentators, however, pointed to larger design issues like
weight. Customers, including Qantas (other-otc: QUBSF - news - people ) and Emirates, saw
the delivery date slip from six months behind schedule to a year-and-a-half.

Worse, EADS' clumsy Franco-German dual management structure mishandled the entire
situation, only announcing the full extent of the delays in June 2006. Following the news
EADS' share price plummeted 26% in one day, resulting in the early exit of co-Chief
Executive Noel Forgeard. (See "Ex-Airbus Boss' Rough Landing")

Those dark days still haunt EADS, as new investigations from French market regulators
Autorite des Marches Financiers into alleged insider trading may put more top execs into hot
water.

According to French newspaper Le Figaro, a preliminary note from the AMF accused EADS
top management of inside knowledge of the mounting A380 delays. This reportedly informed
a wave of EADS insider sales between late 2005 and early 2006, raising questions over
Lagardere and Daimler's stake reductions before the bad news became public in June. (See
"Lagarde On Guard Over EADS" )

Even though EADS is attempting to trim jobs, sell plants and streamline management, the
future is far from uncertain, with the A400 military transport program still suffering from
major delays.