Year-end order backlog represents firm future revenues from contracts signed up to that date. EADS uses order backlog as a measure of commercial performance, and growth of EADS’ order backlog is an ongoing goal of Management. Only firm orders are included in calculating order backlog — for commercial aircraft, a firm order is defined as one for which EADS receives a non-refundable down payment on a definitive contract not containing a “walk-away” provision. Defence-related orders are included in the backlog upon signature of the related procurement contract (and the receipt, in most cases, of an advance payment). Commitments under defence “umbrella” or “framework” agreements by governmental customers are not included in backlog until they are officially notified to EADS.

For civil market contracts, amounts of order backlog reflected in the table below are derived from catalogue prices, escalated to the expected delivery date and, to the extent applicable, converted into Euro (at the corresponding hedge rate for the hedged portion of expected cash flows, and at the year-end spot rate for the non-hedged portion of expected cash flows). The amount of defence-related order backlog is equal to the contract values of the corresponding programs.

The €69 billion increase in the 31st December 2005 order backlog reflects a record order intake at EADS in 2005 (representing a 110% increase over 2004) well in excess of revenues accounted for in the same year (8% increase over 2004). Also contributing to the increase was the effect of the stronger U.S. Dollar spot rate used for conversion of the non-hedged portion of the backlog into Euro.

The amounts recorded under “Headquarters / Consolidation” primarily reflect the elimination of Airbus’ work share in the A400M program. The Military Transport Aircraft (“MTA”) Division’s order backlog includes 100% of the value of the A400M order to reflect the Division’s prime-contractor responsibility over the program. The effect of internal subcontracting (corresponding to the work share of other EADS divisions in the A400M) is therefore eliminated in EADS’ consolidated order backlog.

Airbus’ net order intake was 1,055 aircraft in 2005 (€78.3 billion), including 20 new orders for the A380, bringing the total firm order backlog for the A380 to 159 aircraft. These increases were bolstered by positive net foreign currency adjustments to the backlog, reflecting the year-end valuation of the non-hedged portion of Airbus’ order backlog. At the end of 2005, Airbus’ order backlog included 2,177 aircraft (as compared to 1,500 aircraft at the end of 2004).

The backlog of the Military Transport Aircraft Division increased from 2004, reflecting the strong order intake in 2005 (€1.8 billion) driven by the South African order of eight A400M aircraft and the Brazilian orders of twelve C−295s and eight upgraded P3 Orion aircraft. This order intake more than offset 2005 revenues, which were impacted by the shift of revenue recognition for the A400M programme until the first quarter of 2006 (with no anticipated impact on the overall programme schedule).

Backlog at the Eurocopter Division increased from 2004, with a €3.5 billion order intake (in excess of revenues) reflecting 401 total new orders, including 12 new orders for the NH90 from Australia and 6 new orders for the Tiger from Spain. 71% of the new orders originated from outside of EADS’ home markets of France, Germany and Spain.

The DS Division’s backlog increased by €1.2 billion from 2004, mainly reflecting an order intake of €6.7 billion driven by new orders for MEADS and other equipment for the Eurofighter Tranche 2.

The Space Division’s backlog decreased by €0.4 billion in 2005, reflecting a “book to bill” ratio of less than one for 2005, following the recognition of revenues in 2005 in relation to the sizeable Ariane 5 launcher orders recorded in the division’s backlog in 2004.

The table below illustrates the proportion of commercial and defence backlog at the end of each of the past two years.

Management remains focused on the target of achieving €10 billion of defence-related revenues in 2007. In addition to organic growth, EADS may explore possible mergers and acquisitions in the defence sector.