UPDATE 2-EADS limits profitability hit from A350, shares jump
* EADS sees 7-8 pct 2015 EBIT margin after A350 dilution
* EADS dividend policy sees payout ration of 30-40 pct
* EADS expects to be free cashflow-positive in 2014, 2015
* CEO says loss-making A400M airlifter remains a burden
* Shares up 7.5 pct in heavy volume (Adds details, quotes)
By Tim Hepher and Alexandre Boksenbaum-Granier
PARIS, Dec 11 (Reuters) - Airbus parent EADS said its new A350 jet would be a less significant drag on 2015 profits than investors feared, sending its shares higher as Europe's largest aerospace company sharpens its focus on buoyant civil markets.
EADS, which plans to change its name to Airbus Group in 2014 to reflect the dominance of its planemaking subsidiary, updated its mid-decade forecasts to take account of early deliveries of its first all-new wide-body jet in a decade.
Chief Executive Tom Enders said the A350, designed to compete with the Boeing 787 and 777 jetliners, was "progressing well" towards a first delivery as planned in the second half of 2014.
EADS has until now excluded the A350 from its main financial target, in which it aims to double operating margins to 10 percent by 2015, based on a euro exchange rate of $1.30.
EADS said it was sticking by the 10 percent overall goal and added this would translate into a margin of 7-8 percent once the first full year of A350 deliveries in 2015 was included - higher than the market forecast of 6 percent.
"We believe that expectations for A350 dilution had been cautious heading into the event, and so this is rightly being seen as a positive surprise," said RBC Capital Markets analyst Rob Stallard in a note.
Shares in EADS rose 7.5 percent in three times their normal trading volume to 52.86 euros, the top gainer on the French blue-chip CAC 40 index, and reversing a 7.4 percent decline in the previous six days.
In a further boost, EADS said it expected to meet a breakeven target on the Airbus A380 superjumbo in 2015 following a deal to sell 50 of the world's largest jetliner to Emirates, according to a webcast of an investor event.
There had been doubts over whether Airbus would meet the goal due to a shortage of orders.
Although the A380 target has a muted impact on overall profits, any shortfall in deliveries could exacerbate recent volatility in EADS's cashflow.
The company also announced a target to be above breakeven in terms of free cash flow in 2014 and 2015 and promised investors "a sustainable growth in the dividend within a payout ratio of 30-40 percent".
The focus at Europe's largest aerospace company turned to financial goals after EADS said earlier this week it would cut 5,800 jobs as part of a three-year reorganisation of its stagnant defence and space activities.
In a new two-tier strategy, EADS is banking on continued growth in commercial aerospace and streamlining defence and space activities in a shift from previous efforts to balance its civil and defence portfolios.
Although defence and space revenues are expected to be broadly flat throughout the remainder of the decade, EADS aims to boost profits by merging two units and sees an 8 percent margin in 2015, rising to 10 percent in 2016 or 2017.
One weak spot is the Airbus A400M military airlifter's losses. Without those EADS said it would be within reach of its 10 percent margin target in 2015 even after the A350 dilution.
"The A400M is a burden," Enders said, adding it still needed to cut costs. Budget overruns and delays led to a bailout from seven European NATO buyer nations in 2010.
"The margins are impacted quite significantly by the burden of the A400M but what is a burden today, as we saw with Eurofighter, becomes a huge asset tomorrow as we expect the A400M to be produced, modified, upgraded over many decades."
The job cuts include 1,300 temporary staff and a further 1,500 to be redeployed to Airbus or Eurocopter, the world's largest commercial helicopter maker.
The plan nonetheless includes a rare provision for 1,000 to 1,450 compulsory job cuts, drawing fire from French and German politicians and unions. EADS officials say these could be reduced if unions agree extra productivity measures.
Founded in 2000 from a merger of French, German and Spanish aerospace activities, EADS said it would change its stock symbol to "AIR" once it drops the parent company title in 2014. (Additional reporting by Blaise Robinson; Editing by James Regan and Elaine Hardcastle)
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