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New Airbus CEO plans job cuts

By ASSOCIATED PRESS
Published October 11, 2006

PARIS - The new head of Airbus pledged Tuesday to go ahead with plans for a mid-sized jet and cost reductions identified by his predecessor, who quit after a leadership struggle.

Louis Gallois, appointed Monday to succeed former chief executive Christian Streiff, said he was in favor of pressing ahead with the planned A350 jet to rival Boeing Co.'s 787.

"I believe that Airbus has to be present across the whole market, and the A350 is the middle of the market," Gallois told Europe-1 radio. The A350's mid-sized category accounts for "40 percent of the market" by value, he added.

Gallois also said the Airbus turnaround plan will involve "painful" job cuts, without giving details.

French financial daily La Tribune reported on its Web site that Airbus managers are discussing measures to cut 10,000 of the company's 56,000 European employees. The company has denied that report.

After concentrating major resources on its 555-seater flagship A380 superjumbo, Airbus has been outmaneuvered by Boeing's two-engine 787, which delivers better fuel economy than older four-engine Airbus jets in the same size category - a sales argument that has grown more persuasive as fuel prices rise. Boeing has more than tripled the number of orders won by Airbus so far this year.

Doubts had been growing over the $10-billion A350 XWB program announced by Streiff in July as a competitor to Boeing's 787 and 777 jets. Airbus' parent company, the European Aeronautic Defence and Space Co., is facing a financial crunch as a result of the A380 program's soaring costs and a weaker U.S. dollar, which hits revenue in euros from Airbus' dollar-denominated jet sales.

Tom Enders, the German co-chief executive of EADS, suggested last week that the A350 might not be built at all. "We will discuss intensively in the next weeks whether we have the financial and engineering resources to actually take on this program," Enders said Thursday.

Gallois will stay on as co-chief executive of EADS.

Airbus stunned investors in June by doubling A380 production delay to one year - then doubled it again to two years earlier month, saying the problems will wipe $6.1-billion off EADS profits over four years. To counter the hit, it pledged $2.5-billion in annual cost cuts by the end of that period.

Streiff quit after leading Airbus for a little more than three months.

Gallois, who headed France's state-owned SNCF railway company before joining EADS in July, said Tuesday that the costly two-year A380 delay was not Airbus' biggest problem.

"The main handicap to Airbus' competitiveness against Boeing is the weakening of the dollar," Gallois said.

The U.S. currency has fallen 41 percent against the euro since the A380 was launched, Gallois said. EADS is about to feel most of the impact as hedging positions progressively expire in coming months and years. Currency hedges offer time-limited insurance policies against adverse exchange rate movements.

Gallois pledged to push ahead with the cost-cutting strategy drawn up by Streiff, who had won support for the plan from EADS directors but clashed with the board over how it could be implemented and how much control he would exercise.

[Last modified October 10, 2006, 23:26:30]