New Airbus CEO Appointed, Possible Cuts And Currency Concerns

New CEO says currency is bigger problem than delayed A380.

Paris (AP) — The new head of Airbus pledged Tuesday to go ahead with plans for a mid-sized jet and with cost savings identified by former CEO Christian Streiff, who quit amid a leadership struggle after more than three months in the job.

Louis Gallois, appointed to succeed Streiff at Airbus while also staying on as EADS co-chief executive, said he was in favor of pressing ahead with the planned A350 jet to rival Boeing Co.’s 787.

“I believe that Airbus has to be present across the whole market, and the A350 is the middle of the market,” Gallois said in an interview broadcast by Europe-1 radio on Tuesday, the morning after his appointment was announced. The A350’s mid-size category accounts for “40 percent of the market” by value, he added.

Gallois also said the Airbus turnaround plan will involve “painful” job cuts, without giving details. French financial daily La Tribune reported on its web site that Airbus managers are discussing measures to cut 10,000 of the company’s 56,000 European employees.

After concentrating massive resources on its 555-seater flagship A380, Airbus has been outmaneuvered by Boeing’s two-engine 787, which delivers better fuel economy than older four-engine Airbus jets in the same size category — a sales argument that has grown more persuasive as fuel prices rise. Boeing has more than tripled the number of orders taken by Airbus so far this year.

Doubts had been growing over the $10 billion A350 XWB program announced by Streiff in July as a competitor for Boeing’s 787 and 777 jets. EADS is facing a financial crunch as a result of the A380 program’s soaring costs and a weaker US dollar, which hits revenue in euros from Airbus’ dollar-denominated jet sales.

Airbus stunned investors in June by doubling A380 production delay to one year, then doubled it again to two years earlier this month, saying the problems will wipe $6.1 billion euros off EADS profits over four years. To counter the hit, it pledged $2.5 billion in annual cost cuts by the end of that period.

But Gallois, who headed France’s state-owned SNCF railway company before joining EADS in July, said the costly two-year A380 delay was not Airbus’ biggest problem.

“The main handicap to Airbus’ competitiveness against Boeing is the weakening of the dollar,” Gallois said.

The U.S. currency has fallen 41 percent against the euro since the A380 was launched, Gallois said. EADS is about to feel most of the impact as hedging positions progressively expire in coming months and years. Currency hedges effectively offer time-limited insurance policies against adverse exchange rate movements.

Gallois pledged to push ahead with the cost-cutting strategy drawn up by Streiff, who had won support for the plan from EADS directors but clashed with the board over how it could be implemented and how much control he would exercise.

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