Airbus hurt by weak dollar

Airbus, the European aircraft manufacturer, has warned that the weak dollar could send it bankrupt. The firm said it could not afford investments set for 2008. Furthermore, the group is axing 10,000 French jobs with fears rising that British jobs are at risk. It has 13,000 UK staff in Broughton, North Wales and Filton, near Bristol. Unions have vowed to fight cuts.

The sharp decline in the dollar is life-threatening for Airbus said Tom Enders, chief executive. He added that the dollar exchange rate has gone beyond the pain barrier. The difficulty for Airbus is that while much of its costs in Europe are in euros, it sells its aircraft in an industry which is priced in dollars. This means a catastrophic wipeout of profit margins for the planemaker.

The announcement from Airbus is seen as a warning for investors in British and European companies doing business with the US or in dollar-denominated industries.

The Airbus A380 double-decker super jumbo should have been launched in 2005, the $300 million retail price for this would have brought in the equivalent of around £170 million. However, the weakness of the dollar means that the list price is now worth £145 million, indicating a loss on the depreciation in the exchange rate of around 15% or £25 million per aircraft.

Delays in the A380 and in the giant A400M military aircraft has already meant that billions of euros have been wiped off Airbus’ profits. Mr Enders told employees that the time for ‘reasonable adjustments’ at the manufacturer are now gone and that more radical measures will be required.

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