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Annual Report - EADS 2011


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Annual Report - EADS 2011

  1. 1. 211 mm 20 211 mm 10 210 mm REGISTRATION FINANCIAL EUROPEAN AERONAUTIC DEFENCE AND SPACE COMPANY EADS N.V. STATEMENTS 2011 European Aeronautic Defence and Space Company EADS N.V. DOCUMENT 2011 FINANCIAL STATEMENTS Mendelweg 30 2333 CS Leiden The Netherlands In France 37, boulevard de Montmorency 75781 Paris cedex 16 – France In Germany 81663 Munich – Germany In Spain Avenida de Aragón 404 28022 Madrid – Spain Registration Registration Document – Financial Statements Document 2010 Financial Statements 2011 9EADS_UK_2011_chemise_couv_Ref-doc new.indd 1 04/05/12 11:03
  2. 2. 9 mm Photographs © by EADS: Airbus/Fixion - Astrium - Eurocopter/Deulin - Eurofighter/G.Lee All rights reservedEADS_UK_2011_Financial_S_A4_couv_9mm.indd 4,6 27/04/12 17:04
  4. 4. 11 mm Company” or “EADS Group”) is a Dutch company, which is listed in France, Germany and Spain. The applicable regulations with respect to public information and protection of investors, as well as the commitments made by the Company to securities and market authorities, are described in this Registration Document (the “Registration Document”). In addition to historical information, this Registration Document includes forward-looking statements. The forward-looking statements are generally identified by the use of forward-looking words, such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “predict”, “will”, “should”, “may” or other variations of such terms, or by discussion of strategy. These statements relate to EADS’ future prospects, developments and business strategies and are based on analyses or forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements represent the view of EADS only as of the dates they are made, and EADS disclaims any obligation to update forward-looking statements, except as may be otherwise required by law. The forward-looking statements in this Registration Document involve known and unknown risks, uncertainties and other factors that could cause EADS’ actual future results, performance and achievements to differ materially from those forecasted or suggested herein. These include changes in general economic and business conditions, as well as the factors described in “Risk Factors” below. approved by, the Autoriteit Financiële Markten April 2012 in its capacity as competent authority under the Wet op het financieel toezicht (as amended) pursuant to Directive 2003/71/EC. This Registration Document may be used in support of a fi if it is supplemented by a securities note and a summary approved by the AFM. 2 I EADS REGISTRATION DOCUMENT 2011EADS_UK_2011_REGISTRATION_DOC_11mm_.indd 4-6 27/04/12 16:10EAD020 2011 RD EV LIVRE.indb 2 23/04/12 18:25
  5. 5. EADS REGISTRATION DOCUMENT 2011 Risk Factors 1 Information on EADS’ Activities 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 3 General Description of the Company and its Share Capital 4 Corporate Governance 5 Entity Responsible for the Registration Document EADS REGISTRATION DOCUMENT 2011 I 3
  6. 6. EADS REGISTRATION DOCUMENT 2011 Management’s Discussion1. Risk Factors Financial Market Risks 7 8 2 and Analysis of Financial Condition and Results of Operations 612. Business-Related Risks 113. Legal Risks 16 2.1 Operating and Financial Review 624. Industrial and Environmental Risks 18 2.1.1 Overview 62 2.1.2 Critical Accounting Considerations, Policies and Estimates 63 Information1 on EADS’ Activities 21 2.1.3 Measurement of Management’s Performance 2.1.4 Results of Operations 68 72 2.1.5 Changes in Consolidated Total Equity1.1 Presentation of the EADS Group 22 (Including Non-Controlling Interests) 771.1.1 Overview 22 2.1.6 Liquidity and Capital Resources 781.1.2 Airbus 27 2.1.7 Hedging Activities 851.1.3 Eurocopter 36 2.2 Financial Statements 871.1.4 Astrium 39 2.3 Statutory Auditors’ Fees 881.1.5 Cassidian 44 2.4 Information Regarding1.1.6 Other Businesses 48 the Statutory Auditors 881.1.7 Investments 491.1.8 Insurance 501.1.9 Legal and Arbitration Proceedings 51 General Description of the Company1.1.10 Research and Technology, Intellectual Property 52 3 and its Share Capital 911.1.11 Environmental Protection 541.1.12 Employees 57 3.1 General Description of the Company 921.1.13 Incorporation by Reference 58 3.1.1 Commercial and Corporate Names, Seat and Registered Office 921.2 Recent Developments 58 3.1.2 Legal Form 92 3.1.3 Governing Laws and Disclosures 92 3.1.4 Date of Incorporation and Duration of the Company 94 3.1.5 Objects of the Company 94 3.1.6 Commercial and Companies Registry 94 3.1.7 Inspection of Corporate Documents 95 3.1.8 Financial Year 95 3.1.9 Allocation and Distribution of Income 95 3.1.10 General Meetings 95 3.1.11 Disclosure of Holdings 97 3.1.12 Mandatory Offers 984 I EADS REGISTRATION DOCUMENT 2011
  7. 7. GENERAL TABLE OF CONTENTS Corporate3.2 General Description of the Share Capital3.2.1 Issued Share Capital 100 100 4 Governance 1193.2.2 Authorised Share Capital 100 4.1 Management and Control 1213.2.3 Modification of Share Capital or Rights Attached to the Shares 100 4.1.1 Board of Directors, Chairman and Chief Executive Officer 1223.2.4 Securities Granting Access to the Company’s Share Capital 100 4.1.2 Board Committees 1323.2.5 Changes in the Issued Share Capital since 4.1.3 Executive Committee 133 Incorporation of the Company 101 4.1.4 Enterprise Risk Management System 1353.3 Shareholdings and Voting Rights 102 4.1.5 Compliance Organisation 1393.3.1 Shareholding Structure 102 4.2 Interests of Directors and Principal3.3.2 Relationships with Principal Shareholders 103 Executive Officers 1403.3.3 Form of Shares 107 4.2.1 Remuneration Granted to Directors and Principal Executive Officers 1403.3.4 Changes in the Shareholding of the Company Since its Incorporation 108 4.2.2 Long-Term Incentives Granted to the Chief Executive Officer 1433.3.5 Persons Exercising Control over the Company 109 4.2.3 Related Party Transactions 1443.3.6 Simplified Group Structure Chart 109 4.2.4 Loans and Guarantees Granted to Directors 1443.3.7 Purchase by the Company of its Own Shares 111 4.3 Employee Profit Sharing3.4 Dividends 114 and Incentive Plans 1443.4.1 Dividends and Cash Distributions Paid 4.3.1 Employee Profit Sharing Since the Incorporation of the Company 114 and Incentive Agreements 1443.4.2 Dividend Policy of EADS 114 4.3.2 Employee Share Ownership Plans 1453.4.3 Unclaimed Dividends 115 4.3.3 Long-Term Incentive Plans 1453.4.4 Taxation 1153.5 Annual Securities Disclosure Report 116 Entity Responsible 5 for the Registration Document 153 5.1 Entity Responsible for the Registration Document 154 5.2 Statement of the Entity Responsible for the Registration Document 154 5.3 Information Policy 155 5.4 Undertakings of the Company regarding Information 155 5.5 Significant Changes 155 EADS REGISTRATION DOCUMENT 2011 I 5
  8. 8. 1 2 3 4 5 Back to Contents RISK FACTORS6 I EADS REGISTRATION DOCUMENT 2011
  9. 9. 1 2 3 4 5 Back to ContentsRisk Factors1. Financial Market Risks 82. Business-Related Risks 113. Legal Risks 164. Industrial and Environmental Risks 18 EADS REGISTRATION DOCUMENT 2011 I 7
  10. 10. RISK FACTORSFINANCIAL MARKET RISKS 1 2 3 4 5 Back to ContentsEADS is subject to many risks and uncertainties that may affect its financialperformance. The business, results of operation or financial condition ofEADS could be materially adversely affected by the risks described below.These are not the only risks EADS faces. Additional risks and uncertaintiesnot presently known to EADS or that it currently considers immaterial may alsoimpair its business and operations.1. Financial Market RisksEU Sovereign Debt CrisisEADS’ operations and performance depend significantly on equity markets. This could have a number of effects on EADS’economic conditions in Europe, the US and the rest of the business, including:world. Economic and market conditions may deteriorate O requests by customers to postpone or cancel orders forsignificantly due to, among other things, crises affecting credit aircraft due to, among other things, lack of adequate creditor liquidity markets, regional or global recessions, sharp supply from the market to finance aircraft purchases or weakfluctuations in commodity prices (including oil), currencyexchange rates or interest rates, inflation or deflation, sovereign levels of passenger demand for air travel and cargo activitydebt and bank debt rating downgrades, restructurings or more generally;defaults, or adverse geopolitical events (including those in the O an increase in the amount of sales financing that EADSMiddle East, North Africa and other regions). Sharp economic must provide to its customers to support aircraft purchases,downturns may develop quickly and could affect EADS’ thereby increasing its exposure to the risk of customerbusiness for short or extended periods and have a negative defaults despite any security interest it might hold in theeffect on EADS’ future results of operation and financial underlying aircraft;condition. O further reductions in public spending for defence, homelandEuropean financial markets have recently experienced security and space activities, which go beyond those budgetsignificant disruptions as a result of concerns regarding the consolidation measures already proposed by governmentsability of certain countries in the euro-zone to reduce their public around the world;deficits and refinance or pay their debt obligations as they comedue. Banks with exposure to these countries and which must O insolvency or financial instability of outsourcing partnersalso comply with stricter regulations have faced funding issues or suppliers or their inability to obtain credit to financeand have started to reduce their balance sheets accordingly. development and / or manufacture products, resulting inSuch disruptions have contributed to increased volatility in product delays;the exchange rate of the euro against other major currencies,affected the credit markets and created uncertainty regarding O continued de-leveraging as well as mergers and bankruptciesthe near-term economic prospects of countries in the EU as well of banks or other financial institutions, resulting in a smalleras the quality of loans to sovereign debtors and banks in the universe of counterparties and lower availability of credit,EU. There has also been an indirect impact on financial markets which may in turn reduce the availability of bank guaranteesworldwide. If economic conditions in the relevant European needed by EADS for its businesses or restrict its ability tocountries or in Europe more generally were to deteriorate or implement desired foreign currency hedges; andif more pronounced market disruptions were to occur, therecould be a new or incremental tightening in the credit markets, O default of investment or derivative counterparties and other financial institutions, which could negatively impact EADS’low liquidity, and extreme volatility in credit, currency and treasury operations including the cash assets of EADS.8 I EADS REGISTRATION DOCUMENT 2011
  11. 11. RISK FACTORS FINANCIAL MARKET RISKS 1 2 3 4 5 Back to ContentsEADS’ financial results could also be negatively affected fair value of derivative instruments. Increased volatility in thedepending on gains or losses realised on the sale or exchange financial markets and overall economic uncertainty wouldof financial instruments; impairment charges resulting increase the risk of the actual amounts realised in the future onfrom revaluations of debt and equity securities and other the Company’s financial instruments differing significantly frominvestments; interest rates; cash balances; and changes in the fair values currently assigned to them.Foreign CurrencyA significant portion of EADS’ revenues is denominated revenues that is not hedged in accordance with EADS’ hedgingin US dollars, while a substantial portion of its costs is incurred strategy will be exposed to changes in exchange rates, whichin euro, and to a lesser extent, in pounds sterling. Consequently, may be the extent that EADS does not use financial instruments Currency exchange rate fluctuations in those currenciesto hedge its exposure resulting from this foreign currency other than the US dollar in which EADS incurs its principalmismatch, its profits will be affected by market changes in manufacturing expenses (mainly the euro) may have the effect ofthe exchange rate of the US dollar against these currencies, distorting competition between EADS and competitors whoseand to a lesser extent, by market changes in the exchange costs are incurred in other currencies. This is particularly truerate of pound sterling against the euro. EADS has therefore with respect to fluctuations relative to the US dollar, as manyimplemented a long-term hedging portfolio to help secure the of EADS’ products and those of its competitors (e.g., in therates at which a portion of its future US dollar-denominated defence export market) are priced in US dollars. EADS’ ability torevenues (arising primarily at Airbus and in the commercial compete with competitors may be eroded to the extent that anysatellite business) are converted into euro or pound sterling, in of EADS’ principal currencies appreciates in value against theorder to manage and minimise this foreign currency exposure. principal currencies of such competitors.There are complexities inherent in determining whether and EADS’ consolidated revenues, costs, assets and liabilitieswhen foreign currency exposure of EADS will materialise, denominated in currencies other than the euro are translatedin particular given the possibility of unpredictable revenue into the euro for the purposes of compiling its financialvariations arising from order cancellations, postponements statements. Changes in the value of these currencies relativeor delivery delays. EADS may also have difficulty in fully to the euro will therefore have an effect on the euro value ofimplementing its hedging strategy if its hedging counterparties EADS’ reported revenues, costs, earnings before interest andare unwilling to extend further credit, and is exposed to the risk taxes, pre-goodwill impairment and exceptionals (“EBIT*”), otherof non-performance or default by these hedging counterparties. financial result, assets and liabilities.The exchange rates at which EADS is able to hedge its foreigncurrency exposure may also deteriorate, as has been the case See “Management’s Discussion and Analysis of Financialduring the past several years with the steady appreciation of the Condition and Results of Operations — 2.1.7 Hedging Activities”euro against the US dollar. Accordingly, EADS’ foreign currency for a discussion of EADS’ foreign currency hedging strategy. Seehedging strategy may not protect it from significant changes in “Management’s Discussion and Analysis of Financial Conditionthe exchange rate of the US dollar to the euro and the pound and Results of Operations — Accounting for Hedgedsterling, in particular over the longer-term, which could have a Foreign Exchange Transactions in the Financial Statements” fornegative effect on its results of operation and financial condition. a summary of EADS’ accounting treatment of foreign currencyIn addition, the portion of EADS’ US dollar-denominated hedging transactions.Sales FinancingIn support of sales, EADS may agree to participate in the and asset value exposure, and transfers of exposure to thirdfinancing of customers. As a result, EADS has a significant parties. No assurances may be given that these measuresportfolio of leases and other financing arrangements with will protect EADS from defaults by its customers or significantairlines and other customers. The risks arising from EADS’ decreases in the value of the financed aircraft in the resalesales financing activities may be classified into two categories: market.(i) credit risk, which concerns the customer’s ability to perform EADS’ sales financing arrangements expose it to aircraftits obligations under a financing arrangement, and (ii) aircraft value risk, because it generally retains security interests invalue risk, which primarily relates to unexpected decreases in aircraft for the purpose of securing customers’ performancethe future value of aircraft. Measures taken by EADS to mitigate of their financial obligations to EADS, and because it maythese risks include optimised financing and legal structures, guarantee part of the market value of certain aircraft duringdiversification over a number of aircraft and customers, credit limited periods after their delivery to customers. Under adverseanalysis of financing counterparties, provisioning for the credit EADS REGISTRATION DOCUMENT 2011 I 9
  12. 12. RISK FACTORSFINANCIAL MARKET RISKS 1 2 3 4 5 Back to Contentsmarket conditions, the market for used aircraft could become Management department or as a result of past financingilliquid and the market value of used aircraft could significantly transactions, EADS is the owner of used aircraft, exposing itdecrease below projected amounts. In the event of a financing directly to fluctuations in the market value of these used aircraft.customer default at a time when the market value for a used In addition, EADS has several outstanding backstopaircraft has unexpectedly decreased, EADS would be exposed commitments to provide financing related to orders on Airbus’to the difference between the outstanding loan amount and and ATR’s backlog. While past experience suggests it is unlikelythe market value of the aircraft, net of ancillary costs (such that all such proposed financing actually will be implemented,as maintenance and remarketing costs, etc.). Similarly, if an EADS’ sales financing exposure could rise in line with futureunexpected decrease in the market value of a given aircraft sales growth depending on the agreement reached withcoincided with the exercise window of an asset value guarantee customers. Despite the measures taken by EADS to mitigate thewith respect to that aircraft, EADS would be exposed to losing risks arising from sales financing activities as described above,as much as the difference between the market value of such EADS remains exposed to the risk of defaults by its customersaircraft and the guarantee amount. No assurances may be or significant decreases in the value of the financed aircraft ingiven that the provisions taken by EADS will be sufficient to the resale market, which may have a negative effect on its futurecover these potential shortfalls. Through the Airbus Asset results of operation and financial condition.Counterparty CreditIn addition to the credit risk relating to sales financing as exposure lines to counterparties of financial transactions,discussed above, EADS is exposed to credit risk to the based on a minimum credit rating threshold as published byextent of (i) non-performance by its counterparties for Standard & Poor’s, Moody’s and Fitch Ratings, on a minimumfinancial instruments, such as hedging instruments and cash amount of total assets and a maximum tolerable price to buyinvestments, and (ii) price risks arising from the credit spreads credit protection against the default of such counterparty. Theembedded in cash investments. However, the Group has respective limits are regularly monitored and updated, butpolicies in place to avoid concentrations of credit risk and to there can be no assurances that despite these limits and theensure that credit risk is limited. diversification of counterparties, EADS will not lose the benefit of certain derivatives, or cash investments, in case of a systemicCash transactions and derivative counterparties are contracted market disruption. In such circumstances, the value and liquiditywith a large number of financial institutions worldwide, but of these financial instruments could decline and result in aonly if they meet certain high credit quality criteria. EADS significant impairment, which may in turn have a negative effecthas set up a credit limit system to actively manage and limit on EADS’ future results of operation and financial condition.its credit risk exposure. This limit system assigns maximumEquity Investment PortfolioEADS holds several equity investments for industrial or strategic and that of other associated companies. For equity investmentsreasons, the business rationale for which may vary over the life other than associates, which make up only a fraction of EADS’of the investment. Equity investments are either accounted for total assets, EADS regards the risk of negative changes in fairusing the equity method (associated companies), if EADS has value or impairments on these investments as non-significant.the ability to exercise significant influence, or at fair value. If fair Treasury shares held by EADS are not considered to be equityvalue is not readily determinable, the investment is measured at investments. Additionally, treasury shares are not regarded ascost. being exposed to risk, as any change in value of treasury sharesEADS’ principal investment in associates is Dassault Aviation. is recognised directly in equity only when sold to the market andThe net asset value of this investment was € 2.6 billion as of never affects net income. Treasury shares are primarily held to31 December 2011. EADS is exposed to the risk of unexpected hedge the dilution risk arising from employee stock ownershipmaterial adverse changes in the fair value of Dassault Aviation plans and the exercise by employees of stock options.10 I EADS REGISTRATION DOCUMENT 2011
  13. 13. RISK FACTORS BUSINESS-RELATED RISKS 1 2 3 4 5 Back to ContentsPension CommitmentsEADS participates in several pension plans for both executive pension liabilities, (ii) the performance of the asset classesas well as non-executive employees, some of which are which are represented in the pension assets, and (iii) additionalunderfunded. For information related to these plans, see cash injections contributed by EADS from time to time to the“Management’s Discussion and Analysis of Financial Condition pension assets. EADS has taken measures to limit potentialand Results of Operations” and “Notes to the Consolidated losses on the pension assets and to better match theFinancial Statements (IFRS) — Note 25B: Provisions for characteristics of the pension liabilities with those of the pensionretirement plans”. Although EADS has recorded a provision assets as a long-term objective. Nevertheless, any requiredin its balance sheet for its share of the underfunding based additional provisions would have a negative effect on EADS’on current estimates, there can be no assurance that these total equity (net of deferred taxes), which could in turn have aestimates will not be revised upward in the future, leading EADS negative effect on its future financial record additional provisions in respect of such plans. For further information relating to financial market risks andNecessary adjustments of such provisions are driven by (i) the the ways in which EADS attempts to manage these risks, seediscount factor (dependent in part on interest rates) and the “Notes to the Consolidated Financial Statements (IFRS) —inflation rate applied to calculate the net present value of the Note 34A: Financial risk management”.2. Business-Related RisksCommercial Aircraft Market CyclicalityHistorically, the market for commercial aircraft has shown (iii) passenger and freight load factors, (iv) airline pricing policies,cyclical trends, due in part to changes in passenger demand (v) airline financial health and the availability of outside financingfor air travel and cargo activity, which are in turn primarily for aircraft purchases, (vi) deregulation and (vii) environmentalinfluenced by economic or gross domestic product (“GDP”) constraints imposed upon aircraft operations. EADS expectsgrowth. Other factors, however, play an important role in that the market for commercial aircraft will continue to bedetermining the market for commercial aircraft, such as (i) the cyclical, and that downturns in broad economic trends mayaverage age and technical obsolescence of the fleet relative to have a negative effect on its future results of operation andnew aircraft, (ii) the number and characteristics of aircraft taken financial condition.out of service and parked pending potential return into service,Terrorism, Pandemics and Catastrophic EventsAs past terrorist attacks (such as in New York and Madrid) security and safety measures. In response to such events, andand the spread of pandemics (such as H1N1 flu) have the resulting negative impact on the airline industry or particulardemonstrated, terrorism and pandemics may negatively affect airlines, EADS may suffer from a decline in demand for allpublic perception of air travel safety and comfort, which may or certain types of its aircraft or other products, and EADS’in turn reduce demand for air travel and commercial aircraft. customers may postpone delivery or cancel orders.The outbreak of wars, riots or political unrest in a given region Moreover, EADS’ business may be disrupted by the occurrencemay also affect the willingness of the public to travel by air. of these and other events, including information technologyFurthermore, major airplane crashes may have a negative effect or infrastructure attacks or failures, damaging weather or actson the public’s or regulators’ perceptions of the safety of a of nature and other crises. Any such disruptions could affectgiven class of aircraft, form of design, airline or air traffic. As a EADS’ internal operations or services provided to customers,result of terrorism, geopolitical instability, pandemics and other and could have a significant adverse effect on EADS’ futurecatastrophic events, an airline may be confronted with sudden results of operations and financial condition as well as itsreduced demand for air travel and be compelled to take costly reputation. EADS REGISTRATION DOCUMENT 2011 I 11
  14. 14. RISK FACTORSBUSINESS-RELATED RISKS 1 2 3 4 5 Back to ContentsDependence on Key Suppliers and SubcontractorsEADS is dependent on numerous key suppliers and the extent that EADS decides in the future to provide financialsubcontractors to provide it with the raw materials, parts and or other assistance to certain suppliers in financial difficulty inassemblies that it needs to manufacture its products. Certain of order to ensure an uninterrupted supply of materials and parts,these suppliers may experience financial or other difficulties in it could be exposed to credit risk on the part of such suppliers.the future, in particular those with a significant foreign currency Finally, if the macro-economic environment leads to higher thanmismatch between revenues denominated in US dollars and historic average inflation, the labour and procurement costs ofa substantial portion of costs incurred in euro. Depending EADS may increase significantly in the future. This may lead toon the severity of these difficulties, some suppliers could be higher component and production costs which could in turnforced to reduce their output, shut down their operations or file negatively impact EADS’ future profitability and cash flows,for bankruptcy protection, which could disrupt the supply of to the extent EADS is unable to pass these costs on to itsmaterials and parts to EADS. customers or require its suppliers to absorb such costs. EADS’It may be difficult for EADS to find a replacement for certain suppliers or subcontractors may also make claims or assertionssuppliers without significant delay, thereby impacting its ability against it for higher prices or other contractual compensation,to complete its customer obligations satisfactorily and in a timely in particular in the event of significant changes to developmentmanner. These events could in turn have a negative impact on or production schedules, which could negatively affect EADS’EADS’ future results of operation and financial condition. To future profitability.Industrial Ramp-UpAs a result of the large number of new orders for aircraft performance by suppliers and subcontractors (particularlyrecorded in recent years, EADS intends to accelerate its suppliers of buyer-furnished equipment) who may experienceproduction in order to meet the agreed upon delivery schedules resource or financial constraints due to ramp-up. Managementfor such new aircraft (including helicopters). As it nears full of such factors is also complicated by the development ofcapacity, EADS’ ability to further increase its production rate new aircraft programmes in parallel, in particular at Airbus,will be dependent upon a variety of factors, including execution which carry their own resource demands. Therefore, the failureof internal performance plans, availability of raw materials, of any or all of these factors could lead to missed deliveryparts (such as aluminium, titanium and composites) and skilled commitments, and depending on the length of delay in meetingemployees given high demand by EADS and its competitors, delivery commitments, could lead to additional costs andconversion of raw materials into parts and assemblies, and customers’ rescheduling or terminating their orders.Dependence on Public Spending and on Certain MarketsIn any single market, public spending (including defence and EADS’ future results of operations and financial condition. In thesecurity spending) depends on a complex mix of geopolitical case where several countries undertake to enter together intoconsiderations and budgetary constraints, and may therefore defence or other procurement contracts, economic, political orbe subject to significant fluctuations from year to year and budgetary constraints in any one of these countries may havecountry to country. In particular, the significant deterioration in a negative effect on the ability of EADS to enter into or performpublic finances and high debt levels of the main industrialised such contracts.countries have led several of them recently to seek to reduce Further, a significant portion of EADS’ backlog is concentratedtheir public spending. This is especially true with respect in certain regions or countries, including the US, China, Indiato defence and security budgets, where certain countries and the United Arab Emirates. Adverse economic and politicalhave either proposed or already implemented substantial conditions as well as downturns in broad economic trends inreductions. Depending on how future budget reductions are these countries or regions may have a negative effect on EADS’finally implemented, the termination or reduction of funding for future results of operation and financial condition.existing or new programmes may have a negative effect on12 I EADS REGISTRATION DOCUMENT 2011
  15. 15. RISK FACTORS BUSINESS-RELATED RISKS 1 2 3 4 5 Back to ContentsAvailability of Government and Other Sources of FinancingSince 1992, the EU and the US have operated under an In prior years, EADS and its principal competitors have eachagreement that sets the terms and conditions of financial received different types of government financing of productsupport that governments may provide to civil aircraft research and development. However, no assurances canmanufacturers. In late 2004, however, the US sought to be given that government financing will continue to be madeunilaterally withdraw from this agreement, which eventually led available in the future, in part as a result of the proceedingsto the US and the EU making formal claims against each other mentioned above. Moreover, the availability of other outsidebefore the World Trade Organization (“WTO”). While both sides sources of financing will depend on a variety of factors such ashave expressed a preference for a negotiated settlement that market conditions, the general availability of credit, EADS’ creditprovides for a level playing field when funding future aircraft ratings, as well as the possibility that lenders or investors coulddevelopments, they have thus far failed to reach agreement on develop a negative perception of EADS’ long- or short-termkey issues. The terms and conditions of any new agreement, financial prospects if it incurred large losses or if the level ofor the final outcome of the formal WTO proceedings, may limit its business activity decreased due to an economic downturn.access by EADS to risk-sharing-funds for large projects, may EADS may therefore not be able to successfully obtainestablish an unfavourable balance of access to government additional outside financing on favourable terms, or at all, whichfunds by EADS as compared to its US competitors or may may limit EADS’ future ability to make capital expenditures,theoretically cause the European Commission and the involved fully carry out its research and development efforts and fundgovernments to analyse possibilities for a change in the operations.commercial terms of funds already advanced to EADS.Competition and Market AccessThe markets in which EADS operates are highly competitive. In addition, the contracts for many aerospace and defenceIn some areas, competitors may have more extensive or products are awarded, implicitly or explicitly, on the basis ofmore specialised engineering, manufacturing and marketing home country preference. Although EADS is a multinationalcapabilities than EADS. In addition, some of EADS’ largest company which helps to broaden its domestic market, it maycustomers may develop the capability to manufacture products remain at a competitive disadvantage in certain countries,or provide services similar to those of EADS. This would result especially outside of Europe, relative to local contractorsin these customers supplying their own products or services for certain products. The strategic importance and politicaland competing directly with EADS for sales of these products or sensitivity attached to the aerospace and defence industriesservices, all of which could significantly reduce EADS’ revenues. means that political considerations will play a role in the choiceThere can be no assurance that EADS will be able to compete of many products for the foreseeable future.successfully against its current or future competitors or thatthe competitive pressures it faces in all business areas will notresult in reduced revenues or market share.Technologically Advanced Products and ServicesEADS offers its customers products and services that are Certain of EADS’ contracts require it to forfeit part of itstechnologically advanced, the design and manufacturing of expected profit, to receive reduced payments, to provide awhich can be complex and require substantial integration and replacement launch or other products or services, to providecoordination along the supply chain. In addition, most of EADS’ cancellation rights, or to reduce the price of subsequent salesproducts must function under demanding operating conditions. to the same customer if its products fail to be delivered on timeEven though EADS believes it employs sophisticated design, or to perform adequately. No assurances can be given thatmanufacturing and testing practices, there can be no assurance performance penalties or contract cancellations will not bethat EADS’ products or services will be successfully developed, imposed should EADS fail to meet delivery schedules or othermanufactured or operated or that they will be developed or will measures of contract performance – in particular with respectperform as intended. to new development programmes such as the A350 XWB or A400M, for example. EADS REGISTRATION DOCUMENT 2011 I 13
  16. 16. RISK FACTORSBUSINESS-RELATED RISKS 1 2 3 4 5 Back to ContentsIn addition to any costs resulting from product warranties, have a negative effect on EADS’ future results of operation andcontract performance or required remedial action, such financial condition. Any problems in this respect may also haveproblems may result in increased costs or loss of revenues – a significant adverse effect on the competitive reputation ofin particular as a result of contract cancellations – which could EADS’ products.Major Research and Development ProgrammesThe business environment in many of EADS’ principal operating Successful development of new programmes also dependsbusiness segments is characterised by extensive research and on EADS’ ability to attract and retain aerospace engineers anddevelopment costs requiring significant up-front investments other professionals with the technical skills and experiencewith a high level of complexity. The business plans underlying required to meet its specific needs. Demand for such engineerssuch investments often contemplate a long payback period may often exceed supply depending on the market, resultingbefore these investments are recouped, and assume a certain in intense competition for qualified professionals. There can belevel of return over the course of this period in order to justify no assurances that EADS will attract and retain the personnel itthe initial investment. There can be no assurances that the requires to conduct its operations successfully. Failure to attractcommercial, technical and market assumptions underlying such and retain such personnel or an increase in EADS’ employeebusiness plans will be met, and consequently, the payback turnover rate could negatively affect EADS’ future results ofperiod or returns contemplated therein achieved. EADS expects operation and financial condition.that its consolidated research and development expenses mayincrease significantly in future years in connection with theramp-up of new programmes across all Divisions, in particulardevelopment of the A350 XWB.Restructuring, Transformation and Cost Saving ProgrammesIn order to improve competitiveness, offset rising procurement may not generate the level of cost savings it expects goingcosts and achieve profitability targets, among other things, forward, could negatively affect its future results of operationEADS and its Divisions have launched several restructuring, and financial condition.transformation and cost saving programmes over the past In addition to the risk of not achieving the anticipated level ofseveral years. These include Group-wide programmes such as cost savings from the programmes above, EADS may also incurPower8 Plus and “Future EADS”, as well as Division-specific higher than expected implementation costs. In many instances,programmes. there may be internal resistance to the various organisationalAnticipated cost savings under these programmes are based restructuring and cost reduction measures contemplated.on estimates, however, and actual savings under these Restructuring, closures, site divestitures and job reductions mayprogrammes may vary significantly. In particular, EADS’ cost also harm EADS’ labour relations and public relations, and havereduction measures are based on current conditions and do led and could lead to work stoppages and/or demonstrations.not take into account any future cost increases that could In the event that these work stoppages and/or demonstrationsresult from changes in its industry or operations, including new become prolonged, or the costs of implementing thebusiness developments, wage and cost increases or other programmes above are otherwise higher than anticipated,factors. EADS’ failure to successfully implement these planned EADS’ future results of operation and financial condition may becost reduction measures, or the possibility that these efforts negatively affected.Acquisitions, Joint Ventures & Strategic AlliancesAs part of its business strategy, EADS may acquire businesses the expected synergies once integrated. In addition, EADS mayand form joint ventures or strategic alliances. Acquisitions are incur significant acquisition, administrative and other costs ininherently risky because of difficulties that may arise when connection with these transactions, including costs related tointegrating people, operations, technologies and products. integration of acquired businesses. While EADS believes thatThere can be no assurance that any of the businesses that it has established appropriate and adequate procedures andEADS acquires can be integrated successfully and as timely processes to mitigate these risks, there is no assurance thatas originally planned or that they will perform well and deliver these transactions will be successful.14 I EADS REGISTRATION DOCUMENT 2011
  17. 17. RISK FACTORS BUSINESS-RELATED RISKS 1 2 3 4 5 Back to ContentsPublic-Private Partnerships and Private Finance InitiativesDefence customers, particularly in the UK, increasingly request EADS is party to PPP and PFI contracts, for example throughproposals and grant contracts under schemes known as Paradigm with Skynet 5 and related telecommunicationspublic-private partnerships (“PPPs”) or private finance initiatives services, and in the AirTanker (FSTA) project. One of the(“PFIs”). PPPs and PFIs differ substantially from traditional complexities presented by PFIs lies in the allocation of risks anddefence equipment sales, as they often incorporate elements the timing thereof among different parties over the lifetime of thesuch as: project.O the provision of extensive operational services over the life of There can be no assurances of the extent to which EADS the equipment; will efficiently and effectively (i) compete for future PFI or PPP programmes, (ii) administer the services contemplated underO continued ownership and financing of the equipment by the contracts, (iii) finance the acquisition of the equipment and a party other than the customer, such as the equipment the on-going provision of services related thereto, or (iv) access provider; the markets for the commercialisation of excess capacity. EADSO mandatory compliance with specific customer requirements may also encounter unexpected political, budgetary, regulatory pertaining to public accounting or government procurement or competitive risks over the long duration of PPP and PFI regulations; and programmes.O provisions allowing for the service provider to seek additional customers for unused capacity.Programme-Specific RisksIn addition to the risk factors mentioned above, EADS also A400M programme. In connection with the A400Mfaces the following programme-specific risks (while this list does programme, EADS faces the following main challenges:not purport to be comprehensive, it highlights the current risks (i) ensuring that the aircraft is both civilly certified and meetsbelieved to be material by management): the initial military certification and qualification requirements (initial operational clearance (IOC)) of programme customers,A350 XWB programme. In connection with the A350 XWB (ii) developing a full set of in-service support goods andprogramme, EADS faces the following main challenges: services that deliver mission success to programme customers,(i) ensuring the maturity of technology linked to the use of (iii) finalising aircraft development (engine, cargo systems,composite materials, (ii) meeting the technical performance defensive aids, etc.), (iv) preparing entry into service of the firsttargets for the aircraft and respecting the development aircraft together with the necessary set of support elements,schedule, (iii) ensuring the production ramp-up and the ramp- (v) managing the anticipated difficulties on the productionup of key skilled personnel, e.g. for composite stress and ramp-up concurrently with the delivery of progressivelydesign, (iv) securing the achievement of recurring cost targets, enhanced aircraft capabilities (standard operational clearance(v) ensuring the performance of the risk sharing partners, (SOC) 1 to 3), and (vi) meeting the contractual time schedule;including those selected for sites divested by Airbus and thoseinvolved in the extended enterprise framework, (vi) maintaining A320neo programme. In connection with the A320neocustomer satisfaction with a new customisation policy which is programme, EADS faces the following main challenges:a key enabler for the production ramp-up, and (vii) managing (i) management of stress in the supply chain as a result of thecustomer contracts in coherence with the industrial delivery industrial ramp-up, (ii) meeting the engine development statusplan; and its schedule, and (iii) ensuring the availability of skilled personnel for the programme;A380 programme. In connection with the A380 programme,EADS faces the following main challenges: (i) management of NH90 programme. In connection with the NH90 programme,stress in the supply chain as a result of the steep ramp-up in EADS faces the following main challenges: (i) meeting theproduction in coming years, (ii) making continued improvements development schedule, the cost objectives and the technicalto lower the resources and costs associated with designing content (full operational configuration of the NATO Frigateeach customised “head of version” aircraft for new customers, Helicopter (NFH) version), (ii) continuing to proceed with thein order to allow a higher number of heads of version to be industrial ramp-up on the programme, (iii) mastering thecompleted each year, (iii) managing maturity in service, and contract renegotiations with governments and addressing(iv) mastering the root causes of, and launching the required requests to reduce contractually binding orders, andaction to fix, the hairline cracks discovered in the wing rib feet (iv) assuring support readiness in connection with multiple fleetsof certain A380 aircraft, and limiting associated costs to repair entering into service; andcosts only; EADS REGISTRATION DOCUMENT 2011 I 15
  18. 18. RISK FACTORSLEGAL RISKS 1 2 3 4 5 Back to ContentsLead systems integration. In connection with lead systems COTS products (radars, cameras, sensors) with their interfacesintegration projects (in particular Saudi border surveillance into the system, (ii) assuring an efficient project and staffingcontract), EADS faces the following main challenges: (i) meeting ramp-up, and (iii) managing the rollout including subcontractorsthe schedule and cost objectives with a high number of sites as well as training and organisational adaptation of thewith complex local infrastructure to deliver and the integration of customer.3. Legal RisksDependence on Joint Ventures and Minority HoldingsEADS generates a substantial proportion of its revenues EADS exercises varying and evolving degrees of control inthrough various consortia, joint ventures and equity holdings. the consortia, joint ventures and equity holdings in which itThese arrangements include primarily: participates. While EADS seeks to participate only in ventures in which its interests are aligned with those of its partners, the riskO the Eurofighter and AirTanker consortia; of disagreement or deadlock is inherent in a jointly controlledO three principal joint ventures: MBDA, ATR and Atlas entity, particularly in those entities that require the unanimous Electronik; and consent of all members with regard to major decisions and specify limited exit rights. The other parties in these entities mayO investment in associates: Dassault Aviation. also be competitors of EADS, and thus may have interests thatThe formation of partnerships and alliances with other market differ from those of EADS.players is an integral strategy of EADS, and the proportion In addition, in those holdings in which EADS is a minorityof sales generated from consortia, joint ventures and equity partner or shareholder, EADS’ access to the entity’s booksholdings may rise in future years. This strategy may from time and records, and as a consequence, EADS’ knowledge of theto time lead to changes in the organisational structure, or entity’s operations and results, is generally limited as comparedrealignment in the control, of EADS’ existing joint ventures. to entities in which EADS is a majority holder or is involved in the day-to-day management.Product Liability and Warranty ClaimsEADS designs, develops and produces a number of high profile products fails to perform as designed. While EADS believes thatproducts of large individual value, particularly civil and military its insurance programmes are adequate to protect it from suchaircraft and space equipment. EADS is subject to the risk of liabilities, no assurances can be given that claims will not ariseproduct liability and warranty claims in the event that any of its in the future or that such insurance cover will be adequate.Intellectual PropertyEADS relies upon patent, copyright, trademark and trade in Europe and the US. Therefore, in certain jurisdictions EADSsecret laws, and agreements with its employees, customers, may be unable to protect its proprietary technology adequatelysuppliers and other parties, to establish and maintain its against unauthorised third-party copying or use, which couldIntellectual property rights in technology and products adversely affect its competitive position.used in its operations. Despite these efforts to protect its In addition, although EADS believes that it lawfully compliesIntellectual property rights, any of EADS’ direct or indirect with the Intellectual property rights granted to others, it hasIntellectual property rights could be challenged, invalidated been accused of infringement on occasion and could haveor circumvented. Further, the laws of certain countries do not additional claims asserted against it in the future. These claimsprotect EADS’ proprietary rights to the same extent as the laws16 I EADS REGISTRATION DOCUMENT 2011
  19. 19. RISK FACTORS LEGAL RISKS 1 2 3 4 5 Back to Contentscould harm its reputation, cost it money and prevent it from to enter into licensing arrangements. EADS might not be able tooffering certain products or services. Any claims or litigation enter into these licensing arrangements on acceptable terms. Ifin this area, whether EADS ultimately wins or loses, could be a claim of infringement were successful against it, an injunctiontime-consuming and costly, injure EADS’ reputation or require it might be ordered against EADS, causing further damages.Export Controls and Other Laws and RegulationsThe export market is a significant market for EADS. In addition, EADS is also subject to a variety of other laws and regulations,many of the products EADS designs and manufactures for including among others, those relating to commercialmilitary use are considered to be of national strategic interest. relationships, the use of its products and anti-bribery provisions.Consequently, the export of such products outside of the In addition, EADS’ ability to market new products and enterjurisdictions in which they are produced may be restricted new markets may be dependent on obtaining governmentor subject to licensing and export controls, notably by the certifications and approvals in a timely manner. AlthoughUK, France, Germany and Spain, where EADS carries out EADS seeks to comply with all such laws and regulations, evenits principal military activities as well as by other countries unintentional violations or a failure to comply could result inwhere suppliers come from, notably, the US. There can be no administrative, civil or criminal liabilities resulting in significantassurance (i) that the export controls to which EADS is subject fines and penalties or result in the suspension or debarment ofwill not become more restrictive, (ii) that new generations of EADS from government contracts for some period of time orEADS products will not also be subject to similar or more suspension of EADS’ export privileges.stringent controls or (iii) that geopolitical factors or changing In addition, EADS is sometimes subject to government inquiriesinternational circumstances will not make it impossible to obtain and investigations of its business and competitive environmentexport licenses for one or more clients or constrain EADS’ due, among other things, to the heavily regulated nature ofability to perform under previously signed contracts. Reduced its industry. Any such inquiry or investigation could result inaccess to military export markets may have a significant an unfavourable ruling against EADS, which could have aadverse effect on EADS’ business, results of operation and negative effect on its business, results of operation and financialfinancial condition. condition.LitigationEADS is currently engaged in a number of legal proceedings. EADS is unable to predict the outcome of these proceedings,See “Information on EADS’ Activities — 1.1.9 Legal and it is possible that they will result in the imposition of damages,Arbitration Proceedings”. EADS expects to continue to incur fines or other remedies, which could have a negative effect ontime and expenses associated with its defence, regardless EADS’ business, results of operation and financial condition.of the outcome, and this may divert the efforts and attention An unfavourable ruling could also negatively impact EADS’of management from normal business operations. Although stock price and reputation. EADS REGISTRATION DOCUMENT 2011 I 17
  20. 20. RISK FACTORSINDUSTRIAL AND ENVIRONMENTAL RISKS 1 2 3 4 5 Back to Contents4. Industrial and Environmental RisksGiven the scope of its activities and the industries in which it the environment (including natural resources). Further, liabilityoperates, EADS is subject to stringent environmental, health under some environmental laws relating to contaminated sitesand safety laws and regulations in numerous jurisdictions can be imposed retroactively, on a joint and several basis, andaround the world. EADS therefore incurs, and expects to without any finding of non-compliance or fault. These potentialcontinue to incur, significant capital expenditure and other liabilities may not always be covered by insurance, or may beoperating costs to comply with increasingly complex laws and only partially covered. The obligation to compensate for suchregulations covering the protection of the natural environment damages could have a negative effect on EADS’ results ofas well as occupational health and safety, including costs operation and financial prevent, control, eliminate or reduce emissions into the In addition, the various products manufactured and soldenvironment, releases of air pollutants into the atmosphere, by EADS must comply with relevant environmental, healthdischarges to surface and subsurface water and soil, usage and safety and substances / preparations related laws andof certain substances and the content of EADS’ products, the regulations in the jurisdictions in which they operate. Althoughdisposal and treatment of waste materials, and costs to comply EADS seeks to ensure that its products meet the highestwith reporting or warning regulations. Moreover, new laws and quality standards, increasingly stringent and complex laws andregulations, the imposition of tougher licence requirements, regulations, new scientific discoveries, delivery of defectiveincreasingly strict enforcement or new interpretations of existing products or the obligation to notify or provide regulatorylaws and regulations may cause EADS to incur increased authorities or others with required information (such as undercapital expenditure and operating costs in the future in relation the EU regulation known as “REACH”, which addresses theto the above, which could have a negative effect on its results of production and use of chemical substances) may force EADSoperation and financial condition. to adapt, redesign, redevelop, recertify and / or eliminate itsIf EADS fails to comply with these environmental, health products from the market. Seizures of defective products mayand safety laws and regulations, even if caused by factors be pronounced, and EADS may incur administrative, civil orbeyond its control, that failure may result in the assessment criminal liability. In the event of an accident or other seriousof civil or criminal penalties and fines against it. Regulatory incident involving a product, EADS may be required to conductauthorities may require EADS to conduct investigations and investigations and undertake remedial activities. Employees,undertake remedial activities, curtail operations or close customers and other third parties may also file claims forinstallations or facilities temporarily to prevent imminent personal injury, property damage or damage to the environmentrisks. In the event of an industrial accident or other serious (including natural resources). Any problems in this respectincident, employees, customers and other third parties may may also have a significant adverse effect on the competitivefile claims for personal injury, property damage or damage to reputation of EADS’ products.18 I EADS REGISTRATION DOCUMENT 2011
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  22. 22. 1 2 3 4 5 Back to Contents 120 I EADS REGISTRATION DOCUMENT 2011
  23. 23. 1 2 3 4 5 Back to ContentsInformation on EADS’ Activities1.1 Presentation of the EADS Group 221.1.1 Overview 221.1.2 Airbus 271.1.3 Eurocopter 361.1.4 Astrium 391.1.5 Cassidian 441.1.6 Other Businesses 481.1.7 Investments 491.1.8 Insurance 501.1.9 Legal and Arbitration Proceedings 511.1.10 Research and Technology, Intellectual Property 521.1.11 Environmental Protection 541.1.12 Employees 571.1.13 Incorporation by Reference 581.2 Recent Developments 58 EADS REGISTRATION DOCUMENT 2011 I 21
  24. 24. INFORMATION ON EADS’ ACTIVITIESPRESENTATION OF THE EADS GROUP 1 2 3 4 5 Back to Contents1.1 Presentation of the EADS Group1.1.1 OverviewDue to the nature of the markets in which EADS operates and the confidentialnature of its businesses, any statements with respect to EADS’ competitive positionset out in paragraphs 1.1.1 through 1.1.7 below have been based on EADS’ internalinformation sources, unless another source has been specified below.With consolidated revenues of € 49.1 billion in 2011, EADS year. This success was driven mainly by the A320neo (new engineis Europe’s premier aerospace and defence company and option), which received 1,226 firm orders. The new aircraft isone of the largest aerospace and defence companies in the designed to deliver fuel savings of 15% compared to the currentworld. In terms of market share, EADS is among the top A320 single-aisle family and is due to enter into service in 2015.two manufacturers of commercial aircraft, civil helicopters, The A350 XWB programme progressed, with the first majorcommercial space launch vehicles and missiles, and a leading airframe sections delivered to the A350 XWB final assembly linesupplier of military aircraft, satellites and defence electronics. in Toulouse at the end of 2011. Maturity of the A350 XWB mainIn 2011, it generated approximately 76% of its total revenues components at final assembly start remains one of the Group’sin the civil sector and 24% in the defence sector. As of top priorities. Entry into service is currently targeted for the first31 December 2011, EADS’ active headcount was 133,115. half of 2014, with the aim of achieving an appropriate maturity level at each step. As the A380 series production gained in maturity,2011 Highlights deliveries on that programme increased to 26 in 2011, from 182011 was a year of growth and progress for EADS, with in 2010. The A400M series production was launched early instrengthening momentum in the commercial aircraft market, 2011 and final assembly of the first aircraft for customer deliveryreflected in new order and delivery records at Airbus. In the began in November 2011. The Ariane 5 launcher completedface of pressure on defence and public spending, EADS’ its 46th consecutive successful take-off, while the EurofighterDivisions took further steps to strengthen their competitive programme achieved its 300th delivery in 2011, making it theposition by investing in new products and capacities as well as only new-generation multi-role aircraft to reach this milestone. Indriving efficiency programmes. EADS successfully steered the addition, EADS’ subsidiary ATR recorded 119 net orders in 2011.Group’s growth by managing several acquisitions in the services In the framework of its Vision 2020 goals, EADS conductedbusiness during the year. several important acquisitions to expand the servicesRevenues in 2011 amounted to € 49.1 billion. They increased by business across its Divisions. Airbus acquired the aviation7.4% compared to 2010 due to growth from both volume and parts distributor Satair. Astrium acquired Vizada, a leadingmix effects at Airbus and the increase of commercial activity at independent provider of global satellite-based communicationEurocopter. These increases more than offset a slight decrease services, and Eurocopter purchased Canada-based Vectorat Astrium and Cassidian. The overall 2011 revenue contribution Aerospace, a specialist in helicopter maintenance.from the first-time consolidation of major acquisitions was In 2011, the global economic recovery remained uneven, with keyaround € 300 million, mainly Vector Aerospace and Satair, while issues still to be addressed such as the European sovereign debtthe EBIT* (1) impact was insignificant. crisis, the high level of US public debt and volatile capital inflowsEBIT* in 2011 amounted to € 1.7 billion. As of 31 December 2011, to emerging economies. Continued financial market volatilitythe order book of EADS reached € 541.0 billion. The net cash showed how fragile economic recovery still remains in developedposition of € 11.7 billion at year-end was higher than anticipated markets, with the capital markets questioning the ability ofdue to improved performance and higher order intake. sovereign nations to repay their debts. Also, despite some short- term exchange rate improvement in 2011, persistent US dollarIn 2011, order intake amounted to € 131.0 billion, driven by the weakness has continued to disadvantage EU companies with astrong momentum in commercial aviation and the rebound cost base mainly in euros whereas US manufacturers continue toin the commercial helicopter market. Institutional markets derive benefit from more attractively priced exports.including defence and public spending have to be monitoredgoing forward in the context of budget pressure. In 2011, the commercial aviation business experienced continued growth in passenger demand and positive profitability, despiteThe commercial success of the Airbus civil aircraft business, with the effects of the tsunami in Japan, unrest in the Middle East1,419 net orders in 2011, represented one of the highlights of the and North Africa and a high oil price level. However, regional (1) Unless otherwise indicated, EBIT* figures presented in this report are Earnings before Interest and Taxes, pre-goodwill impairment and exceptionals.22 I EADS REGISTRATION DOCUMENT 2011