EADS lifted by historic Airbus plane order

LES MUREAUX, France Wed Jan 12, 2011 6:19pm GMT

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LES MUREAUX, France (Reuters) - Airbus basked in the world's biggest commercial plane order on Wednesday, with shares in parent EADS EAD.PA lifted by its $15.6 billion 180-aircraft deal with Indian airline IndiGo.

The agreed purchase underlines India's development as a major aviation market and provides a welcome boost to EADS Chief Executive Louis Gallois, who has been pushing expansion into emerging markets as traditional markets falter.

It also gets an early blow in for Airbus in the annual battle with U.S. rival Boeing (BA.N) for sales supremacy.

EADS shares rose as much as 6 percent to a three-year high and closed up 2.2 percent at 20.5 euros.

"It is the best way to start the year," Gallois said at an annual news conference, during which he also set the tone for a strong showing in orders when Airbus meets the press on January 17.

"There are at least 500 orders and deliveries and there are more orders than deliveries for 2010," Gallois said.

Airbus is chasing Boeing which sold a net 530 planes and delivered 462 in 2010, but leads in the number of planes built each year. It is close to achieving its 10,000th plane order.

It reported 388 net plane orders up to the end of November, or 440 before cancellations. It delivered 461 jets.

In December, Airbus announced a Chilean order for 50 planes and on January 4 another for 15 from Easyjet (EZJ.L). Whether that new year announcement is included in the 2010 tally could help determine how close Airbus comes to matching Boeing.

A backlog of draft orders announced in 2010 which have yet to be finalised includes up to 60 planes for Virgin America.

The results of the annual order race are not only a question of pride between fierce rivals, but have become mired in wider issues as they confront each other over a potential large U.S. air tanker order and a trade row over aircraft subsidies.

Boeing backers say Airbus should be barred from the $50 billion tanker contest because its sales are boosted by unfair aid in developing planes, a charge which EADS denies. Mutual subsidy claims are being aired at the World Trade Organisation.

PROFITS UNSATISFACTORY

Both Airbus and Boeing fared better than first predicted last year as lessors and many airlines saw global recession easing.

But Airbus's success in winning orders delivers a poisoned chalice to other divisions in space, defence and helicopters. They must run faster to meet a goal of rebalancing the share of income, now dominated by Airbus, across the group by 2020.

"Airbus growth is making the targets more difficult to reach, but I can't complain. It is a problem of rich people. I prefer to have this problem than a problem with the growth of Airbus," Gallois said.

Gallois said EADS profits were unsatisfactory due to poor currency hedges and high costs. He said profitability would be similar in 2011 to 2010 targets before recovering from 2012.

EADS targets operating profit of at least 1.1 billion euros ($1.4 billion) in 2010 after a 322 million loss in 2009.

Analysts at DZ bank, which has a sell recommendation, said investors would remain nervous about profitability at EADS for a while amid European defence cuts and the threat of production delays to the next Airbus plane, the mid-sized A350.

Indian airlines are adding planes as demand booms. While passenger traffic grew by 19 percent through November, India has only 400 commercial planes against China's 2,600.

Indian budget carrier IndiGo's provisional purchase includes the first order for a revamped jet, the A320neo, designed to help airlines weather oil prices near $100.

Gallois outlined plans to build the company around "three pillars" -- Europe, the United States and emerging markets.

He projected production of two A380s a month in 2011, compared with below-target deliveries of 18 superjumbos in 2010.

Engine checks on the world's largest airliner following last year's Qantas (QAN.AX) emergency scuppered Airbus's hopes of meeting a target of delivering 20 A380 superjumbos in 2010.

Gallois played down who would succeed him in his politically sensitive post in 2012, saying this wasn't an issue at present.

EADS was formed in 2000 from a merger of French, German and Spanish interests in a bid to create a European rival to larger U.S. giants such as Boeing and Lockheed Martin (LMT.N).

It has been rocked by frequent in-fighting over the Franco-German power balance. Secret U.S. cables leaked by the Wikileaks website suggested tensions over ownership of sensitive technology had resurfaced inside its Astrium space division.

Astrium Chief Executive Francois Auque said a German space executive who was reported to have run down French space efforts in private talks with U.S. diplomats faced internal questioning.

(Additional reporting by Blaise Robinson; Writing by Alexander Smith, Tim Hepher; Editing by Andrew Callus and Erica Billingham)

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