Challenges spark off change and renewal. Accordingly, you see EADS engaged in a far-reaching transformation process.

This Annual Report gives you the full picture. It shows you the great progress EADS has achieved at Eurocopter, in the space and the defence and security businesses. But it also depicts the challenges Airbus is facing – challenges that already strongly impacted last year’s overall performance.

For the first time, EADS did not deliver what it had promised. The Company’s 2006 financial results are disappointing. Revenues grew as expected, to €39.4 billion, but EBIT dropped to €399 million. The disappointment is also apparent in the stock price, which underwent a year of sharp swings and has suffered from the degraded outlook and the risks brought about by the crisis.

A focus on integration

Analysing the root causes of the A380 programme delays, we came to the conclusion that the degree of integration achieved to date – both within Airbus and across the Group – is by no means sufficient. With the Board of Directors, we undertook an unprecedented revision of our operations and organisation.

Concretely, EADS and Airbus now share the same Chief Executive and the same Chief Financial Officer. The Company Headquarters is being further streamlined. And innovation efforts now are organised into a network, lead by an entity which we call “EADS Innovation Works”.

Power8 – a must

Goal number one is to restore confidence. This certainly will not happen overnight, and will require considerable efforts, but it will put EADS back on the path to industry leadership.

Power8 – the comprehensive business re-engineering and competitiveness programme launched at Airbus – clearly lies at the very heart of this venture. We know the plan entails tough measures, yet there is no room for hesitation, nor is there another option. The task is concurrently to:

• Improve Airbus’s industrial set-up;
• Master the development and delivery of three key programmes – the A380, the A350XWB and the A400M; and
• Decrease our exposure to the Dollar exchange rate.

Strong fundamentals...

We can nonetheless rely on strong fundamentals. First, we can draw on the extraordinary commitment and ambition of our employees and management. Then, in 2006, EADS achieved again a book-to-bill ratio considerably over one – Airbus booked 824 new orders, roughly two years’ worth of production. And with over 600 units, Eurocopter registered a record order intake. Now, turning the huge order book into sustained profits and customer satisfaction is the top priority. Once again, delivery is the challenge.

Profitability doubled at our Space business and satellite orders increased. Divisions such as Eurocopter, Astrium and Defence have done their homework over the past years, and can now make a larger contribution to EADS’ financial stability.

...underscore the Company’s overall momentum

We will continue our profound internationalisation drive. In 2006, this produced major steps like the agreement to establish a final assembly line for the A320 in China and the strengthened helicopter cooperation with both South Korea and China. On the US defence market, we have witnessed a true breakthrough, being awarded for the first time ever a prime contractor role, with the UH-72A Lakota helicopter programme.

These successes demonstrate that even while we concentrate on getting the Company back on track, we are successfully pursuing growth opportunities. Once the necessary operational adjustments are completed, we will redouble the energy and resources that we focus on dynamic and profitable strategic business areas.

We are here to tell our customers, shareholders, and employees that they can count on a more integrated, more efficient and more effective EADS. We will make it your company of choice.

Thomas Enders Chief Executive Officer

Louis Gallois Chief Executive Officer