Interview with the Chief Exective Officers
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| A380 production line | |
Left: |
Philippe Camus, Chief Executive Officer |
Right: |
Rainer Hertrich, Chief Executive Officer |
A successful 2003? Confident forecasts for 2004? What’s the story behind the figures? We put some of the key questions on the EADS Group’s progress and prospects to Philippe Camus and Rainer Hertrich.
Why are you pleased with the results for 2003?
There are a number of very good reasons. Clearly, we lead the commercial aviation market. Airbus has in fact for the first time beaten the competition, delivery-wise; and this success will be a lasting one, thanks to the current Airbus order book. Besides, we have turned into the global number two defence player in terms of order book. We are increasingly accredited by the more exacting defence customers who value our complete range of competitive and young products. Overall, the Group order intake increased from €31 billion in 2002 to €61.2 billion in 2003, with half of these new orders emanating from the defence business.
In short, we have passed a clear milestone on the road mapped out for us by the Board. We have achieved great progress in balancing our portfolio among the defence and commercial businesses. Also, we have enhanced our leadership in all markets.
Can the defence businesses live up to your high expectations?
Yes, we are convinced they can. First, our defence products are already achieving huge successes – like the Tiger and NH90 military helicopter selection by Spain and Greece, and the Austrian purchase of the Eurofighter. On the Space side, we won the £2.5 billion Skynet 5 military satellite contract from the UK. There was also MBDA’s great achievement in winning orders from France, Italy and the UK for the Aster missile. And the largest ever defence contract came from the A400M military transport aircraft that was ordered by eight nations and will be worth €19.7 billion. Second, to support the strategic move towards defence growth, we have reorganised our defence activities, and created a new Defence and Security Division.
Surely you had some concerns in 2003?
The conflict in the Gulf and the SARS epidemic weighed down the financial situation of the airlines and we had to monitor our delivery planning carefully throughout the year. Apart from this, the weakness of the dollar could be an area of concern if it were to remain very weak for a very long time. In fact, there is no medium-term impact on our results because we actively hedged our currency exposures and will continue to do so in 2004, of course. Beyond our hedging horizon we are expecting to get the benefit from the productivity measures that we are currently implementing.
How did all this affect the financial outcome?
For the third year running, we’ve exceeded our financial targets, with an EBIT figure of €1.5 billion against a projected €1.4 billion. We have moved forward significantly, with, as anticipated, all divisions except Space being profitable. We generated more cash than expected, too. And we are looking forward to making even more progress in 2004.
What was especially encouraging, was that we achieved this while keeping up our investment in programmes, like the Airbus A380. That’s what we promised; that’s what we delivered. This is another demonstration of our high standard of financial discipline.
What exactly is the situation in Space?
The Division recorded heavy losses for the third year in a row due to a depressed Space market and restructuring costs. However, we purchased BAE Systems’ 25% shareholding in EADS Astrium and we’ve now reorganised the Division to lay the foundations for the turnaround in 2004. We’re also laying emphasis on efficiency of all the plants, strict programme control, cost savings and improved procurement functions, all of which are contributing to the turnaround.
What’s on the agenda for this current year?
Regarding business acquisition, we have several key programmes that are expected to be booked. One of them is for example the FSTA programme for the UK Royal Air Force, where the Air Tanker team in which we are key partner, is in final negotiations; we will achieve a contract fulfilling our customers’ needs and thereby successfully expanding our businesses.
We have also some important industrial milestones coming up in 2004. The A400M programme will pick up speed, and we’re planning the first assembly of the A380 in Toulouse. We’ll also be delivering the first units of the Tiger and NH90 helicopters, and the Ariane 5–ten tonnes version launcher should resume flights.
Our strategy is to build on our strong competitive position in commercial aircraft, helicopters, missiles and commercial launchers and to significantly grow our defence activities. We shall work at developing EADS’ capabilities in the fields of ‘system-of-systems’ and services to support its programme leadership. We also want to expand our global reach through industrial engagement in the US, Asian and Russian markets. And we will keep on building on our broad portfolio of activities and technologies, combining civil and military products in order to lead the market with innovative and cost-competitive products.
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| Eurofighter |
And how do you see 2004 from the financial point of view?
The immediate outlook is very encouraging. We’re targeting an increase in EBIT to €1.8 billion for 2004, largely due to the defence programmes’ ramp up and the Space turnaround: this could be slightly offset by a possible decline in the contribution from Airbus arising from the continuing softness of the market. Defence programmes, especially missiles and helicopters, will increase deliveries, while at the same time we will be implementing efficiency plans in some defence businesses. Looking further ahead, we expect growth in all sectors – fuelled by the upturn in commercial aviation, benefits from productivity and cost savings, and an exceptionally strong order book in all businesses.
Are there any encouraging signs in the year so far?
Yes, there are! In the past few months, many airlines have reported strong signs of air traffic recovery, supporting the International Civil Aviation Organisation forecast of about 4% air traffic growth in 2004. For defence, we are progressing with important programmes like the GBAD demonstration in the UK, or with the FSTA following our down-selection in January 2004. These programmes and others will help us expand our defence business and enhance our overall competitive position in coming years.
Given the state of the world economy, is that a rash prediction?
You know, it is our mission to prepare the Group to face uncertainty. We have the flexibility, strength and resilience to surmount upcoming issues and to achieve our goals; not least, thanks to the quality, skills and commitment of our employees, who are probably among the strongest teams in the industry today. Let’s remember that they’ve managed to deliver solid returns even in the weak markets of recent years, while maintaining important investment programmes for the future. We’d like to express our admiration and appreciation of what they’ve done. We look forward to working with them in 2004.
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| “We are increasingly known to the world as a company that does what it promises to do. That’s a priceless asset for all of us.” | “Excellent products, a clear strategy and the best people in the business. Can you think of a better formula for success in tomorrow’s world?” |
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| Philippe Camus Chief Executive Officer | Rainer Hertrich Chief Executive Officer |
