Consolidated Cost of Sales

For 2006, consolidated cost of sales increased by 26.1%, from €27.5 billion for 2005 to €34.7 billion for 2006. Besides the higher sales activity that occurred in 2006, the increase was primarily due to cost overruns relating to the A380 programme and transition costs related to the A350 programme, as described above. Asset impairment charges and restructuring provisions recorded at EADS Sogerma also had a negative effect. Mainly as a result of the above stated items and negative dollar effect at Airbus in respect of revenues, the gross margin decreased from 19.5% in 2005 to 11.9% in 2006.

For 2005, consolidated cost of sales increased to €27.5 billion from €25.5 billion for 2004. Gross margin remained relatively unchanged as compared to 2004 at 19.5%.

Consolidated Selling and Administrative Expenses

For 2006, consolidated selling and administrative expenses increased slightly, from €2.2 billion for 2005 to €2.3 billion for 2006, primarily reflecting higher expenses at the DS division (perimeter effect, higher restructuring expenses and Eurofighter marketing campaign costs), Eurocopter division (higher marketing expenses) and Airbus (tanker campaign costs at EADS North America and expanding Airbus subsidiaries in Japan and the Middle East).

For 2005, consolidated selling and administrative expenses increased slightly, from €2.1 billion for 2004 to €2.2 billion for 2005, primarily reflecting an overall increase in selling activities across most of EADS’ businesses.

Consolidated Research and Development Expenses

For 2006, consolidated research and development (“R&D”) expenses increased by 18.5%, from €2.1 billion for 2005 to €2.5 billion for 2006. Most of the increase was attributable to higher expenses at Airbus, due to development on the former A350, and later in the year on the new A350XWB. A380-related R&D expenses continued to decrease from their peak of €1,082 million in 2003 to €771 million in 2006 (as compared to €813 million in 2005), excluding continuing development costs. The MTA and DS Divisions recorded slightly lower R&D expenses in 2006, whereas Eurocopter and Astrium spent slightly more than in 2005. These changes also reflect the continued application of IAS 38 at EADS, which resulted in the capitalisation of an additional €411 million of R&D in 2006, of which €335 million related to Airbus for the A380. See “Critical Accounting Considerations, Policies and Estimates — Research and Development Expenses”.

For 2005, EADS’ consolidated R&D expenses remained stable as compared to 2004, at €2.1 billion. Airbus R&D expense decreased by €75 million from 2004 levels. Other consolidated R&D expenses outside Airbus totalled €416 million — an increase of €24 million from 2004 — related primarily to the development of (i) Eurocopter’s EC 175 programme in China and (ii) Military Air Systems’ ISR business. These changes reflect in part the application of IAS 38 at EADS, which resulted in the capitalisation of an additional €293 million of R&D in 2005, of which €259 million related to Airbus for the A380.

Consolidated Other Income and Other Expenses

Consolidated other income and other expenses represent gains and losses on disposals of investments in fixed assets, income from rental properties and certain provisions.

For 2006, the net of other income and other expenses was positive €109 million as compared to positive €69 million for 2005. The increase was mainly attributable to capital gains of €127 million recorded in the DS division primarily relating to the sale of LFK GmbH and TDW GmbH to MBDA during 2006.

For 2005, the net of other income and other expense was positive €69 million as compared to positive €137 million for 2004, primarily reflecting the non-recurrence of the €106 million release of a provision in the DS Division relating to the Thales Euromissiles litigation reported in consolidated other income for 2004.

Consolidated Share of Profit from Associates Accounted for under the Equity Method and Other Income (Expense) from Investments

Consolidated share of profit from associates accounted for under the equity method and other income (expense) from investments principally includes results from companies accounted for under the equity method and the results attributable to non-consolidated investments.

For 2006, EADS recorded €189 million in consolidated share of profit from associates accounted for under the equity method and other income (expense) from investments as compared to €225 million for 2005. The €36 million decrease primarily relates to the results of EADS’ equity investment in Dassault Aviation, including the non-recurrence of a positive catch-up in income of €64 million recorded in 2005 relating to Dassault Aviation’s income of 2004. See “Notes to Consolidated Financial Statements (IFRS) — Note 9: Share of profit from associates accounted for under the equity method and other income (expense) from investments”.

For 2005, EADS recorded €225 million in consolidated share of profit from associates accounted for under the equity method and other income (expense) from investments as compared to €84 million for 2004. The €141 million increase primarily reflects the results of EADS’ equity investment in Dassault Aviation, including a €64 million positive catch-up in 2005 of 2004 income related to EADS’ investment in Dassault Aviation, versus a negative €(33) million catch-up in 2004.

Consolidated Interest Result

Consolidated interest result reflects the net of interest income and expenses arising from financial assets and liabilities, including interest expense on refundable advances provided by European governments to finance research and development activities.

For 2006, EADS reported a consolidated net interest expense of €121 million, as compared to €155 million of consolidated net interest expense for 2005. The improvement is primarily due to more favourable interest rates. See “Liquidity and Capital Resources — Consolidated Financial Liabilities”.

For 2005, EADS reported a consolidated net interest expense of €155 million, as compared to €275 million of consolidated net interest expense for 2004. The improvement in consolidated net interest result primarily reflects the improving net cash position of EADS as well as the increased interest income from sales financing.

Consolidated Other Financial Result

For 2006, consolidated other financial result deteriorated to negative €(123) million from negative €(22) million for 2005. This negative €101 million change primarily results from the €136 million negative effect in 2006 from valuation changes of U.S. Dollar-denominated cash balances on the Euro-denominated balance sheets of Group companies, which had generated a positive €147 million in other financial results in 2005. See “Critical Accounting Considerations, Policies and Estimates — Foreign Currency Translation”. This negative factor was partially offset by a positive €46 million effect from the mark-to-market valuation of “embedded derivatives”. “Embedded derivatives” are financial instruments that, for accounting purposes, are deemed to be embedded in U.S. Dollar-denominated purchase orders of equipment, where the U.S. Dollar is not conclusively the currency in which the price of the related equipment is routinely denominated in international commerce and is not the functional currency of the parties to the transaction.

For 2005, consolidated other financial result increased to negative €(22) million from negative €(55) million for 2004. This positive €33 million change primarily results from the €147 million positive effect in 2005 from valuation changes of U.S. Dollar-denominated cash balances on the Euro- or British Pound-denominated balance sheets of Group companies, which had generated negative other financial results in 2004. This positive factor was partially offset by a negative €(108) million effect from the mark-to-market valuation of “embedded derivatives”.

Consolidated Income Taxes

In 2006, income taxes yielded a positive €81 million, compared to an expense of €(825) million in 2005. The change was due primarily to a significant reduction in tax expense during 2006, reflecting the group’s reduced profit before income taxes, as well as a tax-free gain on the sale of LFK GmbH and TDW GmbH to MBDA in 2006. This decrease was partially offset by higher valuation allowances on deferred tax assets at Airbus. See “Notes to the Consolidated Financial Statements (IFRS) — Note 11: Income taxes”.

Consolidated Minority Interests

For 2006, consolidated minority interests were €16 million, as compared to €34 million for 2005, reflecting primarily the interests of Finmeccanica (€25 million) and DaimlerChrysler Luft — und Raumfahrt Holding AG (“DCLRH”) (€15 million) in the results of MBDA and EADS Germany GmbH, respectively. The decrease in total minority interests for 2006 relates to a consolidation impact from the sale of LFK GmbH and TDW GmbH to MBDA, which amounted to €(27) million in 2006.

For 2005, consolidated minority interests were €34 million, as compared to €18 million for 2004, reflecting primarily the interests of Finmeccanica (€24 million) and DCLRH (€11 million) in the results of MBDA and EADS Germany GmbH, respectively. The 20% share of BAE Systems in Airbus’ net income was restated in accordance with the application of IAS 32 “Financial Instruments: Disclosure and Presentation”, resulting in a €185 million adjustment to minority interests in 2004. As from 1^st January 2005, consolidated minority interests no longer includes BAE Systems’ 20% ownership in Airbus. See “Critical Accounting Considerations, Policies and Estimates — Scope of and Changes in Consolidation Perimeter” and “Notes to Consolidated Financial Statements (IFRS) — Note 2: Significant accounting policies — Liability for puttable instruments”.

Consolidated Net Income (Profit for the Period Attributable to Equity Holders of the Parent)

As a result of the factors discussed above, EADS recorded consolidated net income of €99 million for 2006 as compared to €1,676 million for 2005 and €1,203 million for 2004. It should also be note d that if EADS had not changed its accounting policy in relation to revised IAS 19, its consolidated net income would have been lower by €25 million in 2006. See “Critical Accounting Considerations, Policies and Estimates — Employee Benefits — IAS 19”.

In 2005, net income for 2004 was restated to reflect the retrospective application of IAS 32 “Financial Instruments: Disclosure and Presentation” in respect of BAE Systems’ put option for its 20% stake in Airbus. In addition, net income for 2004 was restated to reflect the retrospective application of IFRS 2 “Share-based Payments”, which required the recognition of an expense in respect of employee stock option plans.

The table below illustrates the adjustments made in 2005 to 2004 net income as a result of the application of the accounting principles described in the preceding paragraph.

Earnings per Share (EPS)

Basic earnings per share decreased by €1.99 per share, from €2.11 per share in 2005 to €0.12 per share in 2006. If EADS had not changed its accounting policy in relation to revised IAS 19, its basic earnings per share in 2006 would have been lower by €0.03. See “Critical Accounting Considerations, Policies and Estimates — Employee Benefits — IAS 19”. The number of outstanding shares at 31^st December 2006 was 802,130,993. The denominator used to calculate EPS was 800,185,164 shares, reflecting the weighted average number of shares outstanding during the year. In 2004, EADS reported basic earnings per share of €1.50 (after the restatement of net income described above).

Diluted earnings per share decreased by €1.97 per share, from €2.09 per share in 2005 to €0.12 per share in 2006. If EADS had not changed its accounting policy in relation to revised IAS 19, its diluted earnings per share in 2006 would have been lower by €0.03. The denominator used to calculate diluted EPS was 804,315,663, reflecting the weighted average number of shares outstanding during the year, adjusted to assume the conversion of all potential ordinary shares. In 2004, EADS reported diluted earnings per share of €1.50 (after the restatement of net income described above). See “Notes to Consolidated Financial Statements (IFRS) — Note 20: Total equity” and “Note 35: Earnings per share”.