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EADS Rebrands and Revamps

July 31, 2013
"The renaming simply gathers the entire company under the best brand we have, one that stands for internationalization, innovation and integration – and also for some two thirds of our revenues," said the company's chief executive, Tom Enders.

PARIS - European aerospace giant EADS (IW 1000/52) announced Wednesday it would change its name to Airbus Group and reorganize its defense and space activities to boost competitiveness as it posted yet another profit leap.

This re-branding and re-positioning was more of an evolution than a revolution, the company assured.

"The renaming simply gathers the entire company under the best brand we have, one that stands for internationalization, innovation and integration – and also for some two thirds of our revenues," said the company's chief executive, Tom Enders.

"It reinforces the message that 'we make things fly'."

The European Aeronautic Defense and Space Company (EADS) reported a 14% jump in second-quarter net profits to 518 million euros ($686 million), exceeding expectations.

Operating profit in the quarter rose by 23% to 887 million euros.

In the first six months of the year, net profit soared by 31% from the equivalent figure last year to 759 million euros.

Over the six months, sales rose by 6% to 26.3 billion euros.

The broad aerospace group stood by its forecasts for the year, apart from raising its outlook for sales by airliner maker Airbus to more than 1,000 aircraft from more than 800 forecast in May.

The price of shares in the group rose by 1.65% to 45.0 euros in initial trading, outperforming the overall French market which was showing a fall of 0.41%.

Strategy Review

The group, which earns most of its income from Airbus, has been working on a new strategy to revamp and reposition the business since the high-profile failure of a merger project with British aerospace group BAE Systems (IW 1000/167).

Airbus is in a phase of rapid growth, as is the airliner division of rival Boeing of the United States, and both companies had a spectacularly successful Air Show in Paris in June.

For the second quarter EADS raised sales by 3% from the comparable figure last year to 13.9 billion euros.

Analysts had expected net profit at 469.5 million, about 10% less than what EADS posted, and slightly lower sales of 13.7 billion euros, according to a poll by Dow Jones Newswires.

However the group warned that Airbus was entering the most critical phase of its program for the A350 XWB plane which remained "very ambitious," and that any delays would have an increasing effect on provisions.

The A350 is the future long-haul Airbus which is due to enter service before the end of 2014.

In the first half of the year the group achieved an underlying margin, excluding exceptional items, of 6.1%. Enders has set a target of 10% in 2015.

Media coverage of the attempted merger with BAE Systems raised the brand image of EADS, but with the decision on Wednesday the board showed that on balance it believes the group will benefit from a re-branding operation.

Under the reorganization to take effect on January 1 next year, the group will have three divisions instead of four.

In the face of cutbacks in national defense budgets, EADS said that it would group its space division Astrium and defense arm Cassidian with the arm of Airbus which makes military transport aircraft, Airbus Military based in Spain.

Airbus, which is the biggest part of the group, will be responsible for all commercial aircraft, while Airbus Helicopters will be the new name for the Eurocopter division which is the biggest maker of helicopters in the world.

The new Airbus Defense and Space arm, with annual sales of nearly 14.0 billion euros, will be based in Munich.

One of the main reasons why the merger between EADS and BAE Systems fell through is believed to have been concern by the German government that German interests and notably the struggling Cassidian arm, would be sidelined since BAE Systems is particularly strong in defense and has close links to the U.S. defense industry.

London-based aeronautics analyst Howard Wheeldon said many investors were likely to express "a sense of relief that this more simplified and efficient structure will remove much of the confusion that has dogged EADS and various subsidiaries since the company was founded in its present form in July 2000."

EADS shares were showing a gain of 1.7% to 45.03% in afternoon trading in a Paris market up 0.47%.

Patrick Rahir, AFP

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