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No-fly zone at EADS?

January 28, 2010

At first, EADS was taken to task by political leaders for cost overruns and even costlier delays, but now two large investment companies are taking the European aerospace giant to court.

Airbus A380 jumbo jet
The A380 has been hobbled by delays and cost overrrunsImage: AP

In a truly European affair, two investment companies - one based in Ireland and the other in Germany - have asked a Dutch court to probe the operations of the European Aeronautic, Defense and Space Company (EADS), the parent company of aircraft-maker, Airbus, based in France.

"It is our position that EADS misled the market, or was late to inform it of significant delays, in the delivery of the A380 and A400M," said Flip Wijers, an attorney for EADS shareholder, Irish Life Investment Managers (ILIM).

The A380 is the Airbus 800-passenger super-jumbo jet and the A400M is the group's troubled military transport plane.

Is EADS becoming a no-fly zone?

"We believe that, when, as a company, every new model you introduce experiences two-to-three year delays, something is wrong with your management," Wijers said.

ILIM and Germany's Deka Investment Company have asked for an investigation into the policies and management affairs at EADS, a court spokesman in The Hague confirmed. EADS is incorporated in the Netherlands.

The A400M is two years behind scheduleImage: AP

According to Wijers, EADS stock fell 26 percent on the day in June 2006, when the company first announced delays in its A380 delivery.

Ruling could lead to damage lawsuit

A ruling could take several weeks. If the court finds evidence of wrongdoing or mismanagement, the plaintiffs could then sue for damages.

The company argues that it was not slow in publishing relevant information about technical problems.

Earlier this week, 30 individual lawsuits by EADS shareholders were filed in a Frankfurt state court alleging mismanagement and asking for damages.

An independent report on the Airbus A400M project last week blamed EADS for delays and cost overruns that have sorely tested the patience of the seven NATO countries that have ordered the plane.

EADS has demanded an extra 6.4 billion euros ($8.9 billion) to finish the project and has threatened to pull the plug, but buyers, including Germany and France, have flatly rejected that request and said they would not pay more than an additional 2 billion euros ($2.8 million) to get the transporter off the ground.

Three crisis meetings this month have failed to produce results. Meanwhile, international rating agencies have warned that if no agreement is reached it could lead to the downgrading of EADS' credit rating. Any ratings cut tends to increase borrowing costs, which would only add to EADS' troubles.

gb/dpa/AFP/AP
Editor: Rob Turner

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