The consolidated net cash position at 31^st December 2006 was €4.2 billion, a 23.0% decrease from 31^st December 2005. The decrease primarily reflects: (i) the payment related to the liability for puttable instruments, following BAE Systems’ exercise of its put option of €2.75 billion in relation thereto, (ii) investing activities that consumed €1.4 billion and (iii) the dividend payment amounting to €536 million. This decrease was partially offset by a solid €3.5 billion gross cash flow from operations.

Gross Cash Flows from Operations

Gross cash flow from operations was less impacted than EBIT* in 2006 by one time effects, and amounted to €3,541 million in 2006, compared to €3,868 million in 2005 and €2,858 million in 2004.

Changes in Other Operating Assets and Liabilities (Working Capital)

Working capital is comprised of trade receivables, inventory, other assets and prepaid expenses netted against trade liabilities, other liabilities (including customer advances) and deferred income.

Changes in working capital resulted in a negative impact on the net cash position for 2006 (€(0.1) billion) and a positive impact on the net cash position for 2005 (€1.2 billion). In 2006, the main net contributor to the negative working capital variation was the change in gross inventory (€(1.9) billion), primarily reflecting the ramp-up of Airbus production of the A380, partially offset by the inflow of overall pre-delivery payments from customers (€1.6 billion). In 2005, the main net contributor to the positive working capital variation was the further inflow of overall pre-delivery payments from customers (approximately €4.2 billion), partially offset by the change in gross inventory (approximately €(3.3) billion), primarily reflecting the ramp-up of Airbus production of the A380.

European Government Refundable Advances. As of 31^st December 2006, total European government refundable advances received, recorded on the balance sheet in the line items “non-current other liabilities” and “current other liabilities”, amounted to €5.4 billion, including accrued interest.

For 2006, new receipts of European government refundable advances totalled €0.3 billion and reimbursements totalled €0.4 billion. Related accrued interest for 2006 of €0.3 billion was recorded on the balance sheet in the line items “non-current other liabilities” and “current other liabilities”.

Set out below is a breakdown of total amounts of European government refundable advances outstanding, by product/project.

Cash Used for Investing Activities

Management categorises cash used for investing activities into three components: (i) industrial capital expenditures, (ii) customer financing and (iii) others.

Industrial Capital Expenditures. Industrial capital expenditures (investments in property, plant and equipment and intangible assets) amounted to €2.7 billion for 2006 as compared to €2.8 billion for 2005. A380-related capital expenditure totalled €0.7 billion for 2006, as compared to €0.8 billion for 2005 (including capitalised research and development costs). See “Part 2/Airbus — Products and Services”. To date, total A380-related capital expenditures is €5.2 billion.

The remaining portion of capital expenditures in 2006 related to other programmes at Airbus of €0.9 billion (including €0.2 billion for the A400M programme) and additional programmes in the other divisions of €1.1 billion, including the build-up of Skynet 5 satellites at Paradigm Secure Communications Ltd. Excluding Airbus and Paradigm-related expenditures, EADS’ other divisions incur approximately €0.5 billion annually in capital expenditures related to ongoing businesses. Investments in aircraft leases are included in customer financing, and not in industrial capital expenditures, even though the underlying assets are eventually recorded in property, plant and equipment.

For the period 2007 to 2008, it is estimated that the majority of EADS’ capital expenditures will occur in connection with Airbus activities — in particular, for the A380, the A350XWB and the A400M programmes, as well as for construction of an A320 final assembly line in China. See “Part 2/Airbus — Products and Services”.

Customer Financing. Consolidated cash flows generated by customer financing amounted to an exceptionally high level of €1,160 million for 2006. EADS aims to structure financing so as to facilitate the future sell-down or reduction of its exposure. The cash inflow of €1,160 million primarily results from the payments received on sell-downs and repayments of outstanding finance leases and loans over the course of the year more than offsetting additions to customer sales financing. See “Sales Financing”.

Others. For 2006, the positive €179 million figure primarily reflects the sale of LFK GmbH to MBDA and other asset sales.

Free Cash Flows

As a result of the factors discussed above, positive free cash flows amounted to €2.0 billion for 2006, as compared to €2.4 billion for 2005 and €1.6 billion for 2004. Positive free cash flow before customer financing was €0.9 billion for 2006, as compared to €2.2 billion for 2005 and €1.8 billion for 2004.

Other Changes in Financial Position

In 2004 and 2005, the cash outflows of €(239) million and €(295) million in 2005, respectively, primarily reflects the impact of non-recourse customer financing. The cash inflow of €67 million in 2006 generally mirrors the currency effects on financial liabilities.