Year-end order backlog (valued at catalogue prices for commercial aircraft activities) consists of 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 to the extent consistent with profitability criterion. 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 period-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 €9.6 billion increase in the 31^st December 2006 order backlog, to €262.8 billion, reflects an order intake at EADS in 2006 (€69.0 billion) that was well in excess of revenues accounted for in the same year (€39.4 billion). However, this favourable book-to-bill ratio was partially offset by the effect of the weaker U.S. Dollar spot rate used for conversion of the non-hedged portion of the backlog into Euro, which had a negative impact of €17.3 billion at year end.

The Airbus Division’s backlog increased by €8.1 billion from 2005, to €210.1 billion, reflecting a book-to-bill ratio of more than two with net order intake of 790 aircraft in 2006 (€53.4 billion). Total order backlog amounted to 2,533 aircraft at the end of 2006 (as compared to 2,177 aircraft at the end of 2005). However, the positive book-to-bill ratio was largely offset by negative net foreign currency adjustments to the backlog, reflecting the year-end valuation of the non-hedged portion of Airbus’ order backlog.

The MTA Division’s backlog decreased by €0.7 billion from 2005, to €20.3 billion, reflecting a book-to-bill ratio of less than one. Revenues were driven by the attainment of five contractual milestones in respect of the A400M programme during 2006 (including one milestone that was shifted from the last quarter of 2005 to the first quarter of 2006), compared to only one in 2005. Revenues recognised in the MTA Division (€2.2 billion) were partially offset by a strong order intake in 2006 (€1.6 billion) driven by the Malaysian order of four A400M aircraft as well as orders for seventeen C-295s, two CN-235s and one C-212.

The Eurocopter Division’s backlog posted a solid €1.0 billion increase from 2005, to €11.0 billion, reflecting a book-to-bill ratio of more than one with new orders of €4.9 billion. This strong order intake consisted of 615 total new orders in 2006 (as compared to 401 in 2005), bringing its order backlog to 1,074 helicopters at the end of 2006 (as compared to 840 helicopters at the end of 2005).

The DS Division’s backlog decreased by €0.9 billion from 2005, to €17.6 billion, primarily reflecting the sale of LFK GmbH to MBDA during 2006. Nevertheless, new order intake amounted to €5.2 billion and was driven by orders for military air systems, missile systems and secured communication networks.

Astrium’s backlog posted a solid €1.3 billion increase from 2005, reflecting a book-to-bill ratio of more than one with new orders of €4.4 billion, especially in satellites (with 8 new telecom satellite orders, including 2 satellites for the Satcom BW military communication system) and M51 missile systems.

The amounts recorded under “Headquarters/Consolidation” primarily reflect the elimination of Airbus’ work share in the A400M program. The 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.

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

In 2006, Management achieved its target of €10 billion in defence-related revenues (which it had initially set for 2007), after taking into account the positive €0.5 billion impact of the shift of revenue recognition for one A400M milestone from 2005 to the first quarter of 2006.