European plane maker Airbus, owned by EADS, needs a capital increase of more than €2 billion ($2.5 billion) for its national units, but that will be achieved through a simplification of the company’s legal structure, an Airbus spokesman said on Friday.
“Expenses for running programs are with the national companies and profits with the parent Airbus group. This created an equity imbalance that will be solved through these legal and financial means,” he said. He was commenting after French newspaper Les Echos said EADS would need to provide the cash next year to cover deficits at national Airbus units unless EADS simplified Airbus’s legal structure to allow for an internal redistribution of funds.
The move will involve merging national entity Airbus France SAS with an existing French holding company within the Airbus group, Airbus Holding SA, the spokesman said. The structures of the other national entities will remain unchanged -- Airbus Germany, Airbus Spain and Airbus UK. “This new Airbus is a step towards further integration. It will help us to become more efficient” the spokesman quoted chief executive Tom Enders as saying. EADS later said the impact of the move on EADS itself would be “completely neutral”.
Brokerage Oddo Securities also said the move was unlikely to affect EADS’s own capital requirements. “The (Airbus restructuring) operation will take place through intra-group transfers of capital. EADS has €14.2 billion in funds available which, to our mind, excludes the need for a cash call,” Oddo analyst Yann Derocles said. However, he noted that there could be a need for the EADS group to seek a capital increase in about a year’s time.
EADS’s shares were down 5.7% at €11.69 by 0859 GMT, extending a 43% decline so far this year.
The change in legal structure will be carried out in the coming months, the Airbus spokesman said, adding that other changes would be made to also restore equity at other national Airbus units. “It is a reallocation of resources to restore the equity balance at national company level” he said, adding; “There is no impact on day-to-day operations and it will help to simplify governance support integration”.
Les Echos had said several national entities of Airbus had negative equity with Airbus France needing €1.2 billion, Airbus Deutschland €800 million and Airbus UK €600 million. Airbus has been hit by cost overruns on its A380 super jumbo plane, delivery delays and a strong euro versus the dollar.
EADS in November edged up its 2008 profit goal and also made a new €341 million provision for delays in a military project. European Aeronautic Defence and Space Company N.V. (EADS) was formed by the July 2000 merger of DaimlerChrysler Aerospace AG (DASA) of Germany, Aerospatiale-Matra of France, and Construcciones Aeronáuticas SA (CASA) of Spain.
Airbus itself was created 30 years ago to challenge US dominance of the passenger aircraft market. It remained a multinational European consortium with the industrial partners operating as national companies -- Airbus France, Airbus Germany, Airbus UK and Airbus Spain until 2001 when it became a single integrated company owned by EADS and UK partner, BAE Systems BA.L. Five years later EADS became sole owner when BAE sold its 20% stake. (Reuters)