Integration of the Airbus Activities

EADS has an 80% interest in Airbus S.A.S., and has effective management control over its operations, while BAE Systems, holding the remaining 20%, enjoys specific minority rights. Certain strategic decisions, such as acquisitions and divestitures valued at more than U.S.$500 million, approval of the three-year Business Plan (but not the annual budgets or the launch of new programmes) as well as certain actions which would dilute the ownership interest of BAE Systems in Airbus S.A.S., require unanimous agreement.

Following the integration of Airbus in 2001, the shareholders of Airbus agreed to grant BAE Systems an option to sell its Airbus S.A.S. shares at market value to EADS, either for cash consideration or in exchange for EADS shares, as determined by EADS. However, BAE Systems may elect to receive cash where the issue of EADS shares would require prior burdensome regulatory authorisations impacting significantly the allocation of the EADS shares. EADS benefits from a call option at market value on the Airbus S.A.S. shares in case of a change of control of BAE Systems in certain circumstances. Likewise, under certain circumstances, BAE Systems can require EADS to purchase its Airbus S.A.S. shares at market value in the event of a change in control of BAE Systems or EADS.

Beginning with the 2003 financial year, BAE Systems became entitled to receive enhanced dividends, subject to deliveries of A340−500/600 aircraft exceeding an agreed target rate. The enhanced dividends, which are indexed to Airbus’ future growth, could represent a non-indexed value from zero up to a cap of €237.5 million (based on current economic conditions) over the following ten years.

Shareholder and strategic matters relating to Airbus S.A.S. are decided by a shareholders’ committee, to which EADS has appointed five members and BAE Systems two members. Mr. Noël Forgeard, Chief Executive Officer of EADS, is the chairman of the Shareholders’ Committee. Mr. Gustav Humbert, as President and Chief Executive Officer of Airbus S.A.S., is responsible for the operational management of the Airbus business, together with the Executive Committee, consisting of himself and up to ten other members, two of whom are members proposed by BAE Systems, all of whom are agreed upon by the President and Chief Executive Officer of Airbus S.A.S. and appointed by the Shareholders’ Committee.

As a consequence of its majority interest in Airbus S.A.S. and of the control provided by the shareholders’ agreement related to Airbus S.A.S., EADS consolidates 100% of the integrated Group in its financial statements as from 1st January 2001.