Airbus completes overhaul, says major projects on track

AMSTERDAM Tue May 27, 2014 2:16pm EDT

Tom Enders, Chief Executive Officer of Airbus Group, attends the Airbus Group 2013 annual results presentation in Toulouse February 26, 2014. REUTERS/Regis Duvignau

Tom Enders, Chief Executive Officer of Airbus Group, attends the Airbus Group 2013 annual results presentation in Toulouse February 26, 2014.

Credit: Reuters/Regis Duvignau

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AMSTERDAM (Reuters) - Airbus Group (AIR.PA) completed an overhaul of Europe's largest aerospace group on Tuesday by changing its name from EADS and reaffirming a pledge to deliver on existing projects before embarking on risky new ventures.

Shareholders adopted the name change to Airbus Group by a 99.99 percent margin, bringing the company's legal title into line with that of its planemaker subsidiary and ending what Chief Executive Tom Enders called the "Babylonian confusion" of several brands.

"There is clearly a positive implication for our ... acceptance in the market and for integration within Airbus," Enders told reporters after the vote, which endorsed the name already being used by the group since January.

Airbus Group shares rose 1.9 percent to 52.74 euros.

EADS was founded in 2000 from a merger of French, German and Spanish assets to create a counterweight to U.S. aerospace and defence giants and quickly embarked on a project to build the world's largest passenger plane, the A380 superjumbo.

By the middle of that decade, delays in Europe's largest industrial project were pushing the company towards a financial crisis and added to in-fighting between French and German shareholders, represented at that time by the French state and French and German industrial groups.

Last year, the company agreed sweeping changes in its corporate governance to limit the power of the French and German governments, which now own 11 percent each, and allow the market to own a majority with an increased float of 73 percent.

"I have seen a sea change. We were something in between a joint venture and a listed company," the company's French Chairman Denis Ranque told the annual shareholder meeting of the changes brought about by the changes in corporate governance.

Now, Airbus is delivering its next project, the A350, with relatively few glitches compared with previous projects and executives said the first delivery of Europe's answer to the high-tech Boeing 787 Dreamliner would be by the end of this year as planned.

Enders however warned the A350 was entering a "red hot phase" in which efforts to ramp up production have to co-exist with design changes stemming from ongoing flight testing.

"MILK CASH COW"

After building the world's first carbon-fibre passenger jets, Airbus and Boeing (BA.N) have both signalled a break from pioneering but risky new projects while upgrading older planes and returning more cash to shareholders.

However, at the first shareholder meeting organised fully under the new corporate structure - which gives a stronger voice to individual shareholders - Airbus executives also faced calls from some of those investors to share profits more generously.

"It is time to milk the cash cow," a Dutch shareholder said.

Airbus Group raised its dividend for 2013 to 75 cents from 60 cents, but kept the payout ratio unchanged at 40 percent.

Finance Director Harald Wilhelm said the company needed to set aside money for increases in working capital to allow it to lift production of its new A350 jet - from the first two in the last quarter of this year to 10 a month in 2018.

Executives said they expected to decide in coming months whether to go ahead with plans to upgrade the Airbus A330 jetliner with new engines to help it compete with the new 787.

An earlier project to upgrade the best-selling medium-haul A320 with new engines is going according to plan, Enders said.

Airbus Group, meanwhile, pledged to bolster efforts to stabilise its traditionally volatile free cashflow, after missing the breakeven targets originally set for 2013.

Adding to the cautious industry tone, Enders said Airbus Group does not currently plan any major M&A activity, referring to deals worth at least 1 billion euros.

But he said the company hoped to raise some money from disposals driven by a restructuring of its defence and space activities, which it expects to finalise this summer.

EADS attempted to buy Britain's BAE Systems (BAES.L) in 2012 but saw the defence deal halted by German government opposition.

(Editing by Pravin Char)

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