European Aeronautic Defence
and Space Company EADS N.V.
Le Carré, Beechavenue 130–132
1119 PR Schiphol-Rijk
The Netherlands

This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.

1

www.eads.com

In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France

European Aeronautic Defence and Space Company EADS N.V.

In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain

EADS
Annual Review
2005

Leading
Edge

EADS Annual Review 2005

Welcome

The complete EADS Annual Report Suite2005 consists of:Annual Review
2005 (1)

EADS is a global leader in aerospace,defence and related services.
Financial Statements andCorporate Governance2005 (2)Business, Legal andCorporate Responsibility
2005 (3)(available on request)The online version of the Annual
Report Suite 2005 is available atwww.reports.eads.com

May this ‘EADS at a glance 2005’
supplement serve you as a log bookof a journey around the world of EADS.

Designed and produced by williams and phoa.
Printed by Kriechbaumer.
Copywriting by The Clerkenwell Consultancy.

Cover image
Airbus A380EADS at a glance 2005
EADS Group
Financial highlights 2005
Key indicators 2005
Owning EADS shares
EADS around the world

EADS Groupwww.eads.com

AirbusAirbus is a leading commercial aircraft manufacturer.
Its customer focus, commercial know-how, technologicalleadership and manufacturing efﬁciency consistently
win it half of all orders for planes of 100 seats or more.

Military Transport
AircraftMilitary Transport Aircraft designs, manufacturesand sells some of the world’s most advanced transport
aircraft. Products include heavy, medium and lighttransports, as well as Airbus military derivatives, whichleverage all the efﬁciencies of Airbus commercial planes.

Eurocopter

Eurocopter is the world’s leading helicopter manufacturer.
It captures more than 50% of sales for civil andparapublic helicopters, and has a strong and growing
military business.

Defence &Security Systems

Defence & Security Systems is the main pole for EADS’
military and global security activities. It has a wide
range of platforms, including EADS’ role in Euroﬁghter,missile systems, defence communication systems,
defence electronics and services.

Space

EADS Space is Europe’s pre-eminent space groupand the third-largest worldwide. It is the lead
European supplier of satellites, launchers and space
services. It is playing a key role in Europe’s institutional
space programmes.

II

EADS at a glance 2005

EADS GroupEADS sets the standard for innovationin many areas of commercial aviation,
defence, global security and space.

A320— Best year ever in terms of deliveries, orders
and proﬁtability— First ﬂight of A380, the world’s largest and mosteconomical aircraft— Launch of A350, a technologically advanced plane
for fuel-efﬁcient long-range travel

A330 MRTT— Increase in EBIT, reﬂecting successful operations
and restructuring of previous year
— Eight orders for A400M transporters from South
Africa in 2005 on top of the initial 180 orders fromhome countries. Four orders from Malaysia in 2006;
Declaration of Intent from Chile for three aircraft— EADS-led Air Tanker – designated preferred bidder
for UK tanker programme

AS350 ﬂying
to Everest— Consolidation of global leadership in thecivil and parapublic sector— Spain conﬁrmed as third home market— Belgium, New Zealand and Spain as new customers
for the NH90
— Important co-operation agreements reachedin high-growth Asia and North America

Euroﬁghter— Strong year for deliveries and new orders— Substantial contracts for missiles, Euroﬁghter
self-protection and border surveillance— Capabilities added in growth sectors
through acquisition

Galileo satellite— Proﬁtability substantially increased due
to growth and lower cost base
— Successful qualiﬁcation of Ariane 5 ECA (ten tons)— Progress on the ballistic missiles qualiﬁcation— Major orders for EADS Astrium satellites
from South Korea and European Space Agency— Defence satellite communications systems advancewith progress on Paradigm in the UK and selection
as preferred bidder for Germany

EADS at a glance 2005

EADS GroupIII

Financial highlights 2005

EADS Group2005

Revenue
EBIT 1 (Earnings before interest and taxes)
Net income
Earnings per share
Dividend per share
Net cash position
Order intake5
Order book5
Workforce (number of employees)

€m
€m
€m
€
€
€m
€m
€m

2004

2003

34,206
31,76130,1332,852
2,4322
1,543
1,676
1,2032,3
206
2.11
1.503
0.26
0.654
0.50
0.40
5,489
3,961
3,008
92,551
44,117
61,150253,235 184,288 179,280
113,210 110,662 109,135

1

Unless otherwise indicated, EBIT ﬁgures presented in this report are pre-goodwill impairment and exceptionals
2004 restated by stock options expense (€ –12 million for EADS Group) according to ﬁrst time application of IFRS 2
3
EADS continues to use the term net income. It is identical with proﬁt for the period attributable to equity holders of the parent as deﬁned by IFRS rules;
revised application of IAS 32 standards required changes regarding the accounting for the put option granted to BAE Systems as a minority shareholder
of Airbus. These changes contributed €289 million to net income (FY 2004: €185 million) or €0.36 to earnings per share (FY 2004: €0.23)
4
To be proposed at AGM on 4th May 2006
5
Contributions from commercial aircraft activities to EADS order intake and order book based on list prices
2

EADS Segments
2005

2004

2003

€m
€m

22,179201,963

20,224136,022

19,048141,836

Military Transport Aircraft
Revenue
Order book

€m
€m

763
20,961

1,304
19,897934
20,007

Eurocopter
Revenue
Order book

€m
€m

3,211
9,960

2,786
9,117

2,611
8,702

Defence & Security Systems
Revenue
Order book

€m
€m

5,636
18,5095,385
17,276

5,165
14,283

Space
Revenue
Order book

€m
€m

2,698
10,931

2,592
11,311

2,424
7,888

Other Businesses 6
Revenue
Order book

€m
€m

1,155
2,128

1,123
1,079

1,192
1,115

Airbus
Revenue
Order book

6

ATR, EADS EFW, EADS Socata and EADS Sogerma Services are allocated to Other Businesses which is not a stand-alone EADS DivisionIV

EADS at a glance 2005

Financial highlights 2005

EADS has consistently delivered higher
EBIT and earnings per share.

Revenue (€m)

2005

34,206

2004

31,761

2003

30,133+17%

In 2005, EADS clearly
outperformed its previous
record year. The outstanding
result is mainly due to thecontinued strong revenue
and earnings of Airbus
as well as the Group’s Spaceand Defence businesses.

1,676
1,203

+39%

Net income, €1,676 million
was up 39% from €1,203 million
in 2004. The 2004 ﬁgure(reported at €1,030 million)
was restated for comparison
following implementationof IFRS 2 and revised IAS 32.

2.11
1.50

+41%

Earnings per share 2005 grewto €2.11 from €1.50 in 2004
reﬂecting the sharp increaseof net income linked to strong
operational performance andan increased ﬁnancial result.

5,489
3,961

+39%

EADS’ net cash position
remained strongly positiveat €5.5 billion, expandingby 39%, providing robustness
and ﬂexibility.

EBIT (€m)

2005

2,852

2004

2,432

2003

1,543

Net income (€m)

2005
2004
2003

206

Earnings per share (€)

2005
2004
2003

0.26

Net cash position (€m)

2005
2004
2003

+8%

Revenue grew by 8% to€34.2 billion. Increases wereachieved in most of our Divisions
and were particularly strong
in Airbus and Eurocopter.

3,008

Percentages used with the charts throughout this reportrefer to variation between 2004 and 2005

EADS at a glance 2005

Financial highlights 2005

V

Key indicators 2005

Revenue breakdown by geography in 2005 (%)
40
26
23
11

EuropeNorth America
Asia-PaciﬁcRest of the world

Revenue in defence activities in 2005 (%)
25
21
18
11
10
6
6
3

MissilesEurocopter
Military Air Systems
Defence andCommunication Systems
Space
Defence Electronics
Military Transport Aircraft
OthersEmployees by country at year end 2005 (%)
38.2
36.6
12.6
7.7
0.7
1.7
2.5

FranceGermany
UK
Spain
Italy
US
Rest of the world

Employees by business sector at year end 2005 (%)
48.3
20.5
11.3
9.7
3.5
6.7

VI

EADS at a glance 2005

AirbusDefence & Security Systems
Eurocopter
Space
Military Transport Aircraft
HQ, Research Centre andOther Businesses

Europe accounts for the greatest percentageof revenue, with North America generating
the second-highest percentage, closely
followed by Asia-Paciﬁc.

Revenue from the defence businesses
amounted to €7.7 billion. The largest
contributors were helicopters, missiles(MBDA), military aircraft, securecommunication (DCS) and space.

In total, 95% of EADS’ total workforce
is located in EADS’ European homemarkets on more than 80 industrial sites.

There was a small increase in employees
during 2005, mainly as a result of expansion
at Airbus and Eurocopter. The total numberof employees was 113,210 at year end 2005.

Key indicators 2005

A record order book underwrites
future growth.

In 2005, EADS enjoyed a record order intakeof €92.5 billion (+110% over 2004), including€10.3 billion from defence businesses.

Order intake (€m)

2005

92,551

2004

44,117

2003

61,150The EADS order book increased by
37% thanks to the growth of Airbus
backlog and continuous growth in defence
businesses. It would have increased by
32% at constant US Dollar/Euro exchange rate.

Order book (€m)

2005

253,235

2004

184,2882003

179,280

The defence order book increased 7%
in 2005 thanks to strong order intake
in Military Transport Aircraft, Eurocopter
and Defence & Security Systems.

Defence order book (€m)

2005

52,363

2004

49,075

2003

45,737

R&D expenditure in 2005 reﬂected
EADS’ continued high level of investment
in innovation. It was equivalent to 6.1%
of EADS’ revenue.

Self-ﬁnanced R&D (€m)

2005

2,075

2004

2,126

2003

2,189

EADS at a glance 2005

Key indicators 2005

VII

Owning EADS shares

The institutional investor ownership of EADS sharesprogressed during 2005, with European institutions
lifting their investments. Continental institutional
investors increased their stake signiﬁcantly from 34%
to 40%. Meanwhile, the UK and US investors’ stake
has receded somewhat from 55% to 48%.
Closing the year at €31.95, the EADS share price
was up a full 50% from a year earlier, while the CAC 40
and the aerospace and defence sectors of the market
gained 23% and 21% respectively over the period.
In a context of rising share prices, trading volume
remained high, averaging around two million shares daily.
The start of 2005 was slow, with the share priceconsolidating following news of delays hitting theA380 programme, management succession issues andconservative ﬁnancial guidance for 2005 announcedin December 2004. EADS shares gained a meagre
1.73% in the four and a half months to mid May.
This was despite reassuring delivery guidance,and good full-year 2004 results published in theﬁrst quarter, along with a ﬁnancial guidance upgrade
and a 25% dividend increase.

Dividend per share (€)(gross amount)

0.651

2005
2004

0.50

2003
1

But EADS shares gained considerable momentum
following the publication of ﬁrst quarter 2005 resultsin May, a very fruitful Paris Airshow, as well as
the announcement of new management in June.
These events opened a perception of renewed strategic
initiative, combined with market success. In late July,ﬁrst-half results and cash ﬂow, and a further guidance
increase, reinforced investor appetite for EADS shares,
despite continued US Dollar uncertainty, rising fuelprices and openly heated competition in civil aviation
between Airbus and its main competitor.
Between mid May and year end, the EADS share pricerose by almost 50%. It reached an all-time peak on
22nd December at €33.45, in the midst of heavy news
ﬂow, including a substantial Chinese order anda follow-on Paradigm order for Astrium. The stock
price then consolidated until year end in low trading
volumes, largely inﬂuenced by US Dollar weakness
and fuel price anxieties.

+30%

0.40

To be proposed at AGM on 4th May 2006

VIII

EADS at a glance 2005

Owning EADS shares

For the third consecutive year,
an increase of dividend
is proposed based on EADS’
robust earnings growth.
In 2005, EADS’ Board adapted
its dividend policy taking into
account dividend continuity
as a desirable shareholder policy
objective over the following years.

EADS’ share price reached all-timehighs in 2005.

Share price evolution as of 31st December 2005

EADS share price in €Base 100: 10th July 2000
200
180
160
140
120
100
80
60
40
20
2000

2001

2002

2003

J F M A M J J A S O N D
2005

2004

EADS
CAC 40MSCI World Aero/Defence (in €, adjusted daily US$/€ rate)

36.0
32.4
28.8
25.2
21.6
18.0
14.4
10.8
7.2
3.6

Highest share price 2005:€33.45 on 22nd December

ISIN code: NL0000235190
Number of issued shares as of 31st December 2005: 817,743,130
Offer price on 10th July 2000: €19 for institutional investors, €18 for retail investors
Highest share price 2005 on Paris Stock Market: €33.45 on 22nd December 2005
Lowest share price 2005 on Paris Stock Market: €20.76 on 5th January 2005

Shareholder structure as of 31st December 2005 (as %)

29.9
29.9
5.5
1.3
33.4

DaimlerChrysler
SOGEADE(Lagardère and French state holding
company SOGEPA)
SEPI(Spanish state holding company)
Treasury shares(shares without economic or voting rights)
Institutional, retail and employee ownership(plus shares held out of the contractual
partnership by the French state)

In April 2006, DaimlerChrysler and Lagardère SCA announced they entered into simultaneous transactions aimed at reducing their respective stakes in
EADS by 7.5% each. This adds to EADS’ stock liquidity. At the same time, DaimlerChrysler and Lagardère SCA conﬁrmed their continued commitment
to remain core shareholders of EADS. Under the shareholder agreements, the balance of control between the core shareholders in EADS’ corporate
governance remains unchanged.

EADS at a glance 2005

Owning EADS sharesIX

EADS around the world

Germany
EADS welcomes German
decision on MEADS
ThyssenKrupp Technologies
and EADS jointly
acquire Atlas Elektronik

United Kingdom
EADS-led Air Tanker selected
as preferred bidder for British
Tanker Aircraft Programme

Belgium
Belgium opts for
NH90 helicopter

North America
EADS North America
expands UH-145 team
EADS joins Northrop Grumman
KC-30 advanced tanker team••Paris, France•

London, United Kingdom

Europe/US

Raytheon and EADS create
joint partnership for US
Army Future Cargo Aircraft

MEADS International signs
US$3.4 billion design anddevelopment contract•Ottawa, Canada

Madrid, Spain•

Warsaw,
PolandBerlin, Germany
Brussels, Belgium
Munich, Germany

•
•

•

•

Rome, Italy
Ankara, Turkey
Athens, Greece••Washington DC, USA•

Cairo, Egypt

Spain
Spanish Air Force toreceive Taurus missiles•

Eurocopter creates a newplant in Albacete within
the framework of the
Tiger helicopter programme

Mexico City, Mexico

Kourou, French Guyana

FranceSuccessful first flightof the Airbus A380
on 27th April 2005

Chile
São Paulo, Brazil

Airbus Military signs
agreement with Chile•

Johannesburg, South Africa

French Guyana•

Successful launchof the new Ariane 5 ECA•Santiago de Chile, Chile

BrazilEADS CASA signs
contracts with Brazil••

Head office
Representative officeThis map contains a selection of EADS’ recent activities
and business successes around the world

X

EADS at a glance 2005•

EADS around the world

South Africa
A400M programmepartnership

EADS is expanding into the world’s
aerospace and defence growth markets.

China
China Southern Airlinesorders five A380s
Airbus engineering centre
Eurocopter EC175
development

RussiaEADS acquires
10% stake of Irkut

Nepal

•

Moscow, Russia

India
Indian Airlines orders
A320 Family aircraft

World premiere –a Eurocopter Ecureuil/
Astar AS350 lands on
the summit of Mount
Everest (8,848m)

South Korea
Korean government
selects Eurocopter for
KHP helicopter development

Eurocopter/HAL
co-operation•

Beijing, China
Riyadh, Saudi Arabia

Singapore• Muscat, Oman
Abu Dhabi, UAE •EADS opens
R&T Centre••New Delhi, India•Hanoi, Vietnam
Bangkok, Thailand•
Kuala Lumpur, Malaysia••Seoul, South Korea•Taipei, Taiwan•Singapore, Singapore

Vietnam
EADS signs contract with
Vietnamese government
for the supply of a satellite-based
monitoring system•Jakarta, Indonesia
Malaysia
Malaysia joins the
A400M programmeSouth-East Asia
EADS’ donation fortsunami victims increases
to €3 million throughemployees’ contributions•Canberra, Australia
Australia and New Zealand
New Zealand Air Forceselects NH90 helicopter
Eurocopter/
Australian Aerospace

EADS at a glance 2005

EADS around the world

XI

Front cover:A380 cockpit
Back cover:
Ecureuil AS350
with A380

Contents

2
4
6

Messages
Letter from the Chairmen of the Board
EADS investment proposition
Statement from the Chief Executive Ofﬁcers

10
14
18

Driving principles
Improvement
Internationalisation
Innovation

22
28
32
34
36
38

Business review
The world in which we operate
AirbusMilitary Transport Aircraft
Eurocopter
Defence & Security Systems
Space

40
42

Responsibilities
Human Resources
Corporate Social Responsibility

46
48
50

Management and Corporate Governance
Organisational structure
Executive Committee
Corporate Governance

52
54
56

Corporate details
Glossary
Addresses
Financial calendar 2006

The complete EADS Annual Report Suite 2005 consists of:
Annual Review
2005 (1)Financial Statements
and Corporate
Governance2005 (2)

EADS Annual Review 2005

Business, Legaland Corporate
Responsibility
2005 (3)(available on request)

Contents

The online versionof the Annual Report
Suite is available atwww.reports.eads.com

1Messages

Letter from the Chairmen of the Board

Dear EADS
shareholders,
We are happy to report that during 2005,
EADS fully proﬁted from its market leadershipin the strong aviation market upturn andagain substantially strengthened its positionin the global aerospace and defence industry.

Left:
Manfred Bischoff
ChairmanRight:
Arnaud Lagardère
Chairman

2

EADS Annual Review 2005

Letter from the Chairmen of the Board

For the sixth consecutive year, EADS surpassed its announced
targets and consolidated its position as a driving force in global
aerospace and defence. EADS conﬁrmed its position as market
leader for commercial aircraft with 100 seats or more in 2005 –a record year for the aviation industry – and has considerablyincreased its portfolio in the defence sector.
As planned from the foundation of EADS, the Board of Directors
was renewed in 2005. At the same time, new CEOs and two
COOs were appointed and a slight reshaping of EADS’ divisional
structure and headquarters organisation took place. EADS’ Board
closely supervised this process, guaranteeing continuity of strategy
and reliability towards its stakeholders.
In 2005, the Board of Directors dedicated much time and attention
to reviewing and ensuring successful strategy implementation
with a focus on expanding into new markets and on widening
the product range. Examples of this were the launch of the Global
Industrial Development initiative as well as the regular reviewof the civil aircraft product portfolio, including the industrial
launch of the A350.
EADS’ competitive position in the international aerospace industry
was an important topic for the Board. The Board looked into
different ways of developing and positioning your Group for
the future. It reviewed the opportunities to develop EADS fromwithin, building on its strong existing capabilities, and studied
possible scenarios for external growth.
Throughout 2005, the Board closely monitored and reviewed
the progress of major programmes such as the Airbus A380,
the A400M transport aircraft, Paradigm and UAVs. Regarding
personnel and human resources issues at EADS, the Board dealt
with management qualiﬁcation as well as with the need to attract,
retain and develop our high-potential employees in order to ensure
the future quality of EADS’ management and its multinational
leadership structure. Finally, ﬁnancial performance and structure,
hedging strategy, funding policy and accounting principles weredebated and decided among the Board members in a collaborative
and trusting way.

We are also determined to become a market reference in the ﬁeldsof corporate governance and corporate social responsibility throughensuring transparent management and reporting, complying
with market expectations with regard to social, legal and statutory
standards. Therefore, to give guidance to EADS employees,
the Group’s Code of Ethics has been updated to reﬂect practices
recommended by various codes and laws, and to align with bestpractice. It is based on EADS’ underlying values and is fullyin line with recognised international standards. As such, EADS’
strategy envisions a sustainable balance between economic
performance, consideration of all stakeholders’ interests andrespect for the environment.
The Board of Directors appreciates that the management of
EADS has succeeded in establishing your Company as a credible
and reliable enterprise, not only for its customers, suppliers andemployees, but in the eyes of the public as well. Our thanks
and congratulations are due to everyone in the Group who has
contributed to this result, which will be developed and further
enhanced for the beneﬁt of all EADS stakeholders, according
to the highest standards of corporate governance.
For the future, the Board has taken action to guarantee continuity
in its operations and its composition. We remain committed to thesuccess of EADS and the implementation of its strategy of seeking
proﬁtable growth in civil aviation, space and defence by setting
the standards in these markets. This will allow us to continue
creating substantial value for our shareholders and, furthermore,
contribute to the well-being of all our stakeholders.

Manfred Bischoff
ChairmanArnaud Lagardère
Chairman

EADS was well positioned to beneﬁt fully from the market upturnand so 2005 results once again surpassed its targets. With an
EBIT of €2.85 billion, an impressive increasing order book, anda signiﬁcant net cash position, the Group has shown that EADS’
strategy and its implementation are on track, resulting in solid
ﬁnancial strength and proﬁtability.
The year 2005 was also a very positive one for shareholders inmany respects. Our share price clearly outperformed major indices,reaching an all-time peak on 22nd December 2005 at €33.45.
This made us one of the strongest performers in the world aerospaceand defence sector. In view of the Group’s ﬁnancial strengthand excellent prospects, the Board will be recommending paymentof a dividend of €0.65 per share, an increase of 30% from theprevious year.

EADS Annual Review 2005

Letter from the Chairmen of the Board

3

Messages

EADS investment proposition

To invest in EADS is to buy
a share in a global company
with leading positions in growthmarkets in the aerospace anddefence industry.

4

EADS Annual Review 2005

EADS investment proposition

We are delivering

EADS has delivered on its goals. In the six
years since its creation, we have achieved
leadership in major markets, implemented
industrial reorganisation on a massive scale,and we have increased the proﬁtabilityof all our businesses through higher revenue
and greater efﬁciency. In every year, thishas led to ﬁnancial results in line with,or ahead of, publicly stated targets.

Ariane 5 ECA

We are building balance
Beluga loading
an NH90

We are becoming global
A380 over Sydney

We are positioned for growth
A400M

EADS Annual Review 2005

EADS investment proposition

Defence orders have grown in the past
few years, and our defence businesses
have become stronger, as major new
programmes enter production and delivery.
We progressively enhance our systems
integration and provide ‘networked’
solutions for both complex defence andglobal security requirements. Further
increasing the proportion of defence
revenue, as well as proﬁts, is our declaredgoal. That way, we also mitigate thecyclicality of the civil aviation business.

EADS has a strong presence in the largest,
fastest-growing aerospace and defence markets
globally. It is actively seeking to build
its presence in these countries throughout
the entire value chain. By becoming
increasingly global, we are securing accessto the countries with the greatest demand.
We are doing so with ambition and withexcellent resources in aerospace and defence.

EADS is reaping the rewards of both the
upturn in civil aviation and greater internal
efﬁciency. Airbus has a record order book,defence activities are growing steadily andSpace is gaining from increased productivity.
A competitive and evolving product portfolio,
improving operations and expanding
international presence will drive growth.

5Messages

Statement from the Chief Executive Ofﬁcers

Key to growing EADS, ina more competitive world, are:
Improvement,Internationalisation,
Innovation
6

EADS Annual Review 2005

Statement from the Chief Executive Ofﬁcers

EADS Chief Executive Ofﬁcers
Thomas Enders (left)
and Noël Forgeard (right)
inside an EC 135

EADS Annual Review 2005

Statement from the Chief Executive Ofﬁcers

7

EADS’ proﬁtability has reached new heights
and great, innovative products pave the way
for future growth.
Dear shareholders, customers, suppliersand employees,
An outstanding year for the aerospace industry, 2005 has beena record year for EADS. Not only has the Company delivered
its best overall performance yet, it also met or even exceeded its
ﬁnancial targets for the sixth consecutive year. We should liketo thank everyone who contributed to this success.
2005 results conﬁrm the Company’s growth trajectory. Everybody
working at EADS is committed to keeping up this momentum
and to realising the Company’s huge potential for the future.
In terms of proﬁtability, EADS has reached new heights. The 2005
EBIT margin reached 8.3%, equalling €2.85 billion. It is worth
pointing out that EBIT, net income and net cash have risen
considerably more than revenue – which also increased substantially.
Furthermore, great, innovative products pave the way forfurther growth.
A vision comes true – the A380
A whole new era in commercial aviation began when the A380
took to the skies for the ﬁrst time on 27th April. This wasan historic event – witnessed by tens of thousands at Toulouseand watched on TV by millions all around the globe.

What started as a bold engineer’s sketch more than ten years ago
will become part of passengers’ and airlines’ reality when thisrevolutionary aircraft enters into service. Offering comfortable
and affordable air travel for the world’s growth regions, the A380
shows what we mean by calling EADS a driver of change inglobal aerospace.
In fact, this Company is very much characterised by the technologicaland entrepreneurial quest for that ‘step beyond’. In line with thisthinking, we jointly took over the responsibility as CEOs in orderto make a great company even greater and to build on the solid
foundations laid by our predecessors.

Beginning the new chapter with a clear strategy
In 2005, the Company began a new chapter in its development.
Our strategy emphasises four objectives: ensuring that Airbus
remains a robust competitor, enhancing the operational and ﬁnancial
performance of our space, defence, and helicopter businesses,
expanding our global footprint, and ultimately delivering bestin-class proﬁtability across our businesses.

Last year’s results and initiatives conﬁrm the Company is making
good progress towards achieving these strategic objectives.
In 2005, for the third year in a row, Airbus led the industry interms of units delivered, and for the ﬁfth consecutive year in termsof new orders. Yet competition has stepped up its efforts torecapture lost ground. We will counter this challenge.
Eurocopter, with its strong performance in revenues and earnings,
reinforced its position as market leader of the rotary wing
sector. Additionally, the Group’s Military Transport Aircraft
and Space Divisions showed signiﬁcant improvement in theirﬁnancial performances.
We see EADS’ unwavering commitment to its Space businesscorroborated not only by the successful turnaround alreadyaccomplished, but also by the fact that in EADS’ institutional
Space business annual growth of 2.5% is already secured up
to 2010.
EADS’ highly attractive and exportable platform portfolio with
‘blockbuster’ products such as the A400M, the Euroﬁghter andthe NH90 and Tiger helicopters, as well as various advanced
missile systems, is proving to be successful in markets aroundthe globe. The Company is also developing its defence businesstowards large systems integration, and the provision of complex
solutions both in defence and global security. Based on our
expertise in PFI (Private Finance Initiative), gained particularly
through leading the two largest defence PFIs in the United
Kingdom, we plan to make services, supported by innovative
ﬁnancing, a core offering.

Thomas Enders
Chief Executive Ofﬁcer

8

EADS Annual Review 2005

Statement from the Chief Executive Ofﬁcers

The acquisition of Atlas Elektronik, a leading maritime defence
electronics company, carried out in partnership with ThyssenKrupp,
underlines EADS’ determination to strengthen the Company’ssystems capabilities in the naval ﬁeld. EADS carefully evaluates
all options for further acquisitions and consolidation.
EADS strengthens its presence in growth markets
During 2005, the Company made great progress in expanding its
global reach. Practically half of all new Airbus orders came from
China and India. And China’s air trafﬁc is expected to more thandouble in the coming ﬁve years. EADS is determined to seize
the growth opportunities of globalisation.

Accordingly, we have forged several important alliances with US,
Chinese, Russian and Korean industrial partners, embarking
together on highly promising co-operation and co-development
projects, both civil and military.
In the United States, EADS has expanded its industrial footprint
and is well positioned for major projects with the Air Force andthe Army. NorthropGrumman decided to partner with us for the
renewal of the Air Force tanker ﬂeet. In South Korea, Eurocopter
was selected as the nation’s primary partner for developmentof the ﬁrst local military transport helicopter. With China,
two strategic agreements were signed, covering the co-developmentof a new multi-purpose helicopter, the EC175. EADS will
make further inroads into the most promising growth markets
in months and years to come.
At the end of 2005, the Company’s order book stood at an
unmatched €253.2 billion, reﬂecting the strong business momentumof EADS’ operational units. Their order intake more than doubled
to almost €93 billion. All of this provides us with an excellent
foundation for continuing the Company’s unique success story.
The way forward: three major development thrusts
Since our appointment in June, we have concentrated on devising
the way forward for EADS, focusing on the Company’s growth
perspectives, top and bottom line, in an aerospace and defence
industry environment deﬁned by intensifying global competition.

Under the heading of ‘Triple I’, we have introduced a Groupwide programme providing a comprehensive roadmap towards
further growth:— Making sure through continuous Improvement we beneﬁt
fully from our huge order book, raising EADS’ operational
performance in terms of cost, quality and on-time delivery.
State-of-the-art tools and processes, successful implementationand execution of Improvement projects through all Divisions
and corporate functions, and a particular focus on managing
the ever-more complex supply chain, will therefore be given
highest priority in the years to come.
— Creating new mid-term growth opportunities throughInternationalisation, we are set to expand the Company’s
footprint in the commercial, security and defence markets
with the most dynamic development. EADS plans to be a strong
local industrial player in key countries, such as the UnitedStates, China, Russia, South Korea and India. Apart frommarket access, being a corporate citizen in these key countries
will allow us globally to recruit the best talent and technology
there is. We are convinced that with its European background,
this Company is exceptionally well prepared for becoming
a truly global industrial Group.
— Finally, through Innovation, we lay the foundations for
tomorrow’s growth, shaping the future of our Company andthat of the industry. With our initiative to speed up innovation,for example by increasing technology readiness levels, focusing
on game-changing technologies and introducing a Chief
Technology Ofﬁcer at Group level, we will ensure that EADS
maintains the innovative edge that differentiates our productsin the competitive landscape.
Stepping forward together
While striving to become stronger, EADS never forgets its
responsibility for those in need. Both during the tsunami
catastrophe in South East Asia and when hurricane Katrina hit
the southern United States, EADS sent mobile hospitals,
helicopters and transport aircraft to the affected areas. On bothoccasions, EADS employees showed great commitment andgenerosity, and we want to thank them for their support.

We have set the Group ambitious targets and deﬁned a clear roadmap
that we believe will ensure EADS’ success in years to come.
Looking back at an outstanding 2005, the Company is assertively
preparing its future. It will be a demanding journey, but one
that we embark on with conﬁdence.

Thomas Enders
Chief Executive OfﬁcerNoël Forgeard
Chief Executive OfﬁcerNoël Forgeard
Chief Executive Ofﬁcer

EADS Annual Review 2005

Statement from the Chief Executive Ofﬁcers

9Driving principles

Improvement

10

EADS Annual Review 2005

Improvement

Enhancing our businessAs a global aerospace and defence company, we always
need to put customers and shareholders ﬁrst: customers
expect performance as promised and shareholders expect
the best possible return on their investments. Continuous
improvements are key to ensure fulﬁlment of expectations.

Helicopter rotor blade

EADS is continually leveraging groundbreaking technologies
to develop products that provide its customers with competitive
advantage. Yet the ambitious nature of EADS’ new programmes
brings operational challenges, both within EADS and at its
sourcing partners. These may concern product development
or the associated manufacturing processes.
In 2005, the CEOs made improvement a key element of theirlong-term strategy. They have initiated a Group-level examinationof how operational processes can be improved to ensure thatmaximum control over programmes is delivered on quality,
on speciﬁcation, on cost and on time, and how best practice canbe better shared within the Group.
In view of the increasing role of innovation in accelerating new
product development and internationalisation in fostering future
growth, operational improvement is more essential than ever.
As a technology leader in aerospace and defence with industrial
partners across the globe, EADS’ need for world-class operational
processes will be vital.
EADS’ long-term improvement initiative will focus on executionof the key operational processes that ﬂow across engineering,
manufacturing and procurement. In particular, it will concentrateon new product introduction and the supply chain. It will build
on programmes already started, pooling resources across the Group,
giving people the skills they need to make real improvements,
and implementing best-of-breed processes and information
technology tools.
Mastering tried and tested solutions
When enhancing the processes behind introducing new
products, EADS is looking to master solutions adopted by othertechnologically advanced industries. Cultural change is a priority.
The challenge is becoming greater as EADS is ever-more dependent
on key suppliers for product development. As EADS increasingly
becomes the architect and integrator, so it must develop a spiritof true partnership with suppliers.

In the supply chain, EADS can adapt cutting-edge processes andsupporting information technology solutions. In order to achieve
world-class supply chain performance, it will be necessary to utilise
state-of-the-art IT tools that complement those already being usedin the Business Units.
Early-stage initiatives, like enhanced Customer Reviews or theBlack Belt programme for building internal experts in the ﬁeld,
were well received by the Business Units during 2005, and there
is strong demand for operational support.

Improvement – a strategic priority
Raising EADS’ operational performancein terms of cost, quality and on-time delivery
will ensure we beneﬁt fully from our hugeorder book.

12

EADS Annual Review 2005

Improvement

Route 06
Airbus has already carried out a similar improvement drive as partof its Route 06 initiative. Although primarily aimed at driving
down cost, Route 06 is creating a much leaner and more efﬁcientorganisation, as indicated by a striking reduction in lead times.
Between 2003 and 2005, the lead time between a buyer ofa single-aisle aircraft stating its required speciﬁcation, in termsof engines and cabins, and delivery, was reduced from nine toseven months. The experience of Route 06 can be used to makesimilar improvements in other parts of the Group.

Driving principles

Improvement

In 2004, the Defence & Security Systems Division started
a comprehensive ‘Programme and Risk Management’ (PRM)
initiative, aimed at enhancing these critical skills and associatedprocesses on a sustained basis throughout the Division. This
programme will also be considered for Group-wide application.

AS350 helicopter

EADS Annual Review 2005

Improvement

13

Driving principles

Internationalisation

14

EADS Annual Review 2005

Internationalisation

Globalising our business
Internationalisation will make us part of the most
attractive markets and allow us to tap the best
resources worldwide. It will fuel our growth.

Airbus A320

In selected countries, EADS is seeking to enhance its industrial
presence signiﬁcantly throughout the value chain – developing,
manufacturing and selling in these major marketplaces.
In 2005, the CEOs decided to make global industrial development
a key dimension of the Group’s long-term strategy, and to dedicate
a team to driving its implementation. The aim is to ensure future
growth by becoming an integral part of growth markets andaccessing the best resources worldwide. EADS is developing an
industrial strategy for each of the key markets it has identiﬁed.
The target is to capture growth in the most attractive markets
through a selective industrial approach, while further developing
the industrial base in the four home countries.
Aerospace and defence is a global industry. As such, globally
allocated capabilities of research, development, sourcing,
manufacturing and after-sales service are increasingly factors for
success. Being active in all-important aerospace and high-tech
countries gives EADS access to the best technology and know-how
available. This improves its products and gives them a competitive
advantage. It also has the beneﬁt of reducing exposure to theEuro by balancing production costs across several currencies.
Additionally, governments often exercise strong control over markets
and prefer to buy from local contractors – at the very least, they
expect contractors to source signiﬁcant contract percentages locally.
Therefore, to continue its growth, EADS believes it is essential to
become a local company, a good neighbour and a committed citizen
in its target markets.
Focusing on the most attractive markets
EADS is focusing especially on the United States, the largest
single market; on Asia-Paciﬁc, the region with the highest growthpotential; and on Russia, where a very capable aerospace industry
is beginning to regain its former strength. Within Asia-Paciﬁc,countries like China, India and South Korea are of high priority.

These countries have the greatest demand potential and are home
to companies that would make high-quality partners with industrial
capabilities, as well as local market know-how. On a global basis,
the North American defence market and the Asian commercial
and defence markets are the fastest-growing. In addition to thesecountries, EADS will further pursue its successful strategy
of co-operation, and will acquire local players in all key markets.
Examples of this are Patria in Finland and Australian Aerospace
Industries, both creating growth opportunities and market accessin their respective markets.

Global industrial development – a long-term theme
Internationalisation allies EADS’ fortunes
with those of countries that have large
or growing aerospace and defence markets,
assets and capabilities.

16

EADS Annual Review 2005

Internationalisation

Achievements for 2005
The greatest achievements for this strategy in 2005 were in China.
In December, Airbus and the National Development & Reform
Commission of China (NDRC) agreed to expand industrial
co-operation. At the same time, the China Aviation Supplies Importand Export Group (CASGC) signed an agreement for the purchaseof 150 A320 Family aircraft, China’s largest-ever aircraft order.

Driving principles

Internationalisation

Also in December, China’s AVIC II aerospace company andEurocopter agreed to co-develop a six-seven-ton civil and parapublic
helicopter, the EC175. A similar agreement was struck in Korea
with Korea Aerospace Industries, for the co-development of aneight-ton military transport helicopter.
Substantial progress has also been made in the US, throughteaming with major US primes on important programmes,(eg the renewal of the US tanker ﬂeet), smaller acquisitions
and the development of industrial ties in the southern US.
Protecting our core assets
EADS will, while globalising its operations in various ways,
still continue to strengthen its role in the four home countries,
beneﬁting from the strong European industrial and technologicalbase. Any project is subject to careful review of its consequencesin terms of technology transfer, intellectual property rights andcontinuity of operations in Europe. These are key elements ofany decision.

For EADS, globalisation is a strategic must for proﬁtable growth.
As a multinational entity since inception, EADS has the skills
for global success.

Outer ﬂap of an
A380 wing

EADS Annual Review 2005

Internationalisation

17

Driving principles

18

EADS Annual Review 2005

Innovation

Driving our business
Innovation creates competitive advantage for ourcustomers, it means cheaper, quicker and safer
processes for EADS, and it creates high-value jobs
where EADS operates or sources.

Innovation

Future reusable launch vehicle Phoenix

The development of new products, services and processes thatbring competitive advantage to customers are at the core of EADS’
strategy. This has led to the family concept for Airbus planes,
greater use of composites in planes and helicopters, the ﬁrst ﬂyby-wire helicopters and the ﬁrst PFI for military communications.
EADS invests substantially more than any of its competitors ininnovation. In addition to institutional and government-ﬁnanced
research and development (R&D), the Group spent €2.1 billion on
self-ﬁnanced R&D during 2005, equivalent to over 6% of revenue.
The Group also invested more than €600 million in research andtechnology to develop technologies for future products, services
and processes.
Accelerating technology research and product development
To enhance the pace and relevance of innovation, management
is reinvigorating technology research and product development.
Speed is a key factor, and the Group will focus on ensuring
the readiness level of new technologies at a much earlier stage.
EADS’ capabilities will be continuously benchmarked, ensuringthat the Company remains at the forefront of developments and,in particular, responsive to breakthrough technologies.

EADS will further strengthen its approach to systems architectureand engineering skills and tools by streamlining the use of designand engineering tools. Ambitious targets to reduce development
times by up to half for major platforms have been set. There will
be fewer tools, but these will be used Company-wide, as wellas implemented in suppliers’ and partners’ organisations, increasing
overall homogeneity.
New technologies are being introduced to save both cost and time.
One day, virtual mock-ups will take over from ﬂight tests andiron birds. The wind tunnel will be replaced by digital simulation
tools. Development programmes will be shared seamlessly acrossthe Company, with suppliers and partners around the globe strivingfor progress independent of time zones and Company structures.
To cover all aspects and achieve its ambitious goals, EADS will
open up more to the outside. Technological programmes developedwith either academic or industrial partners on an international
basis will therefore have at least doubled by 2010.

Innovation at core of success
New products, services and processes drive value
creation for customers and, in turn, shareholders.

20

EADS Annual Review 2005

Innovation

Deﬁned areas of focus for technology innovations are, for example,
advanced sensor systems, material and structures, alternative energy
concepts and human-friendly platforms.

Driving principles

Innovation

A typical example of recent developments is the ﬁrst ﬂight in
September 2005 of a helicopter using adaptive rotor blades, which
can signiﬁcantly reduce noise and vibrations. The technology
demonstrator’s rotor ﬂaps are powered by actuators made from‘smart materials’. Following successful ﬂight testing of theexperimental system, it will be developed for series production.
Another example is the completion of the Airbus Visual Line
(AVL) system on the shop ﬂoor at its ﬁnal assembly stations
in Toulouse. With its large electronic displays, it has replaced
all paper printouts, providing detailed information about thework in progress, any problems and their resolution.
EADS will strive to go to the very limit of the achievable,delivering relevant breakthroughs and mature technologies
as early as possible. This is challenging, but rewarding, andwill bring further competitive advantage and nurture further
growth; securing jobs, as well as bringing superior long-term
shareholder value.

Automated
Transfer Vehicle

EADS Annual Review 2005

Innovation

21

Business review

The world inwhich we operate
22

EADS Annual Review 2005

The world in which we operateAircraft orders are running at the highest
level ever. In defence and space, speciﬁc sectors
are seeing long-term growth.

EADS Annual Review 2005

The world in which we operate

23

Business review

Commercial aviation
Airlines are ordering an unprecedented number of commercial
aircraft, motivated by the launch of key new planes, strong demand
from low-cost carriers and the rapid growth of aviation in Asia.
The high price of oil is also boosting demand for fuel-efﬁcient aircraft.

The world inwhich we operate

The two leading aircraft manufacturers combined secured 2,140
new orders for aircraft of 100 seats or more last year, comparedwith an all-time high of 1,528 in 1989 and 1,138 at the peakof the last cycle in 2000. As recently as 2003, orders toucheda cyclical low of 524. Other commercial markets of interest
to EADS are also in an upswing. Civil helicopter deliveries
were up 15% globally measured by volume, and 30% by value.
Several new-generation planes were launched during the year.
The aircraft manufacturers are taking advantage of new materials
such as composite and other technologies to design planes thatare more fuel-efﬁcient, while at the same time improving comfort.
In addition, these aircraft cost less to maintain. New-generation
aircraft can be between 40% and 55% more fuel-efﬁcient thanolder-generation aircraft, depending on model and type of operation.
According to the Air Transport Association, US airline fuelefﬁciency has tripled since 1971. New-generation aircraft will
improve efﬁciency still further.
But the price of fuel and the rise of competition, mainly throughthe low-cost business model, is eating relentlessly into the higher
revenue earned from ongoing trafﬁc recovery. As oil prices haverallied, so jet fuel has risen still more, averaging approximately
US$60 in 2005, against roughly US$30 in 2002. Forecasters
do not see signiﬁcant falls from these levels. In order to counter
this, airlines are reducing workforces and the weight of on-board
equipment through, for example, removing on-board phones,
galley equipment and excess water. They are also using more precise
navigation. At the lower end of the commercial market, higher
fuel prices are encouraging a sales boom for turboprop planes,
which are both fuel-efﬁcient and have low CO2 emissions.

ATR 72

Airline proﬁtability varies widely across the world. While theInternational Air Trafﬁc Association (IATA) estimates losses
totalled US$6 billion in 2005, this is concentrated in the UnitedStates (US$10 billion losses). Three US airlines are currently
in Chapter 11 bankruptcy as they seek to reorganise their affairs.
US legacy airlines are beleaguered by high labour and welfare
costs. They have succeeded in reducing labour costs, but fuelprice rises have wiped out the savings.

Fuel cost in total airline expenses (%)

30
25
20
15
10
5
0

1967

1975

1985

1995

2005

At US$1.70 per gallon, airline fuel costs as a percentage of total expenses is close to 25%
Source: ICAO

24

EADS Annual Review 2005

The world in which we operateTrafﬁc growth
Trafﬁc is continuing its recovery. International Civil Aviation
Organisation (ICAO) preliminary ﬁgures show scheduled
trafﬁc measured by revenue passenger kilometres (RPK) increased
by approximately 7.5% in 2005 compared with 2004. Capacity
additions, measured by available seat kilometres (ASK), increased
more slowly, resulting in higher load factors and asset utilisation.
Growth was greatest for the airlines in the Middle East followedby those in Latin America while Asia-Paciﬁc and European growth
was similar to the world average. Growth in the United States
was more muted due to the severe hurricanes.

Asia’s airlines are currently the most proﬁtable and are expected
to gain most from the growth of air travel. Chinese trafﬁc expansion
will be the fastest worldwide, according to Airbus, with averageannual growth in RPKs of 8.2% over 20 years, comparedwith a 5.2% global average. By 2023, Asia-Paciﬁc is expected
to have a 31% share of world traffic, with Europe having 32%
and North America 26%. Today’s split is 33% North America,
32% Europe and 25% Asia-Paciﬁc.
Looking forward, according to the Airbus Market Outlook,global passenger trafﬁc will grow three times to nine trillion RPKs
between 2004 and 2023. To fulﬁl this growth, airlines will invest
in 16,600 new passenger planes with a seating capacity above
100 seats, and 700 new freighters. In the helicopter market,
industry experts anticipate between 2,600 and 3,000 new civil use
helicopters to be delivered during the next ﬁve years. Corporate,
emergency medical services, oil and gas, and national parapublic
helicopters (eg homeland security, law enforcement, and ﬁre ﬁghting)are expected to lead the market. North America will remain
the biggest market, while emerging Asia will contribute mostto future growth.

Defence and security
The sector’s main growth driver remains the necessary replacementof ageing platforms, with up to 90% of future global defence
procurement platform-related. This is increasingly spurring longterm growth for support aircraft (tankers and transport), mission
aircraft including Unmanned Aerial Vehicles (UAVs), helicopters,
combat ships and light armoured vehicles (incorporating complex
electronic mission equipment). At the same time, as forces
undergo transformation they are demanding new capability-based
interoperable solutions for joint missions. The changing natureof threats, in particular from rogue states and terrorists, is also
creating demand for speciﬁc types of military and security equipment.

An expanding proportion of procurement will be acquired throughnew methods. Globally, governments are increasingly interested inbuying services from the private sector. To fulﬁll these requirements,
defence contractors have to offer not only high-performanceservices, but also innovative contract schemes.
Buying integrated systems is another procurement trend. Certain
customers want the industry to deliver complete interoperable
systems with command and control decisions based on a common
operational picture. Only large defence and security contractors
have the range of capabilities to act as prime contractors for suchcomplex integrated systems.

EC130

Aircraft orders and deliveries over the last 20 years

Deliveries
Gross orders

2,500
2,000
1,500
1,000
500
0
1985

1990

1995

2000

2005

Source: Airbus, Boeing, MD

EADS Annual Review 2005

The world in which we operate25

Business review

The world inwhich we operate

Defence procurement in the US (US$147 billion in 2005) andEurope (€55 billion in 2005) will continue to grow at ~1% per year
over the long run. In emerging Asia, budgets are rapidly increasing.
EADS estimates that spending was close to US$100 billion
in 2005, and will grow more than 2% per year over the long run.
However, the larger part of Asian budgets is only accessible for
local players. Middle Eastern equipment imports remain stable
at a high level.
Global security offers a new opportunity for most defence contractors,
as governments increasingly prioritise building national security
infrastructures following 9/11. EADS estimates the size of thismarket was more than €35 billion in 2005, and will expand
at a rate of more than 10% per year outside the United States.
Helicopters is one of the fastest-growing defence sectors.
Demand from Europe and the United States for transport andattack helicopters is fuelling this in the short term, but Asia
will provide the most signiﬁcant growth in the medium term.
Out of total estimated sales of 7,200 military helicopters until
year 2020, a clear majority will be sold outside the US market.
Additionally, security forces, such as border patrols and the police,need increasing numbers of helicopters. Commercial helicopterswill tend to be adapted for these speciﬁc security needs.
In combat aircraft, there is a need to replace ageing ﬂeets(40% of the 7,000-strong world ﬂeet is more than 25 years old).
The future is dominated by major programmes under development
coming into production. Europe’s Gripen, Rafale and Euroﬁghter
aircraft have all entered production, while the new US F35 isstill in development. Russian alternatives are successful in markets
with lower requirements. While these replacement needs are likely
to materialise before Unmanned Combat Aerial Vehicles (UCAVs)
are fully introduced, the ﬁrst UAV programmes are already being
developed for surveillance and reconnaissance.
Airbus and Boeing are both addressing the worldwide need toreplace refuelling aircraft. Meanwhile, the candidates to replacelarge and medium transport aircraft are the very large C-17
from Boeing, the C-130 from Lockheed Martin and EADS’ newchallenger, the A400M. In the smaller transport aircraft segment,
Finmeccanica and EADS are the global competitors.

NH90

World military expenditures in 2004 (US$bn)
478
247
176
58
39
24
14

Source: S.I.P.R.I. Yearbook 2005

26

EADS Annual Review 2005

The world in which we operateNorth America
Western Europe
Asia-Paciﬁc
Middle East
Eastern Europe
Latin America
AfricaIn the missile sector, the greatest growth is expected from
Asia-Paciﬁc, although the Middle East will continue to be a major
destination for US and European export campaigns. A signiﬁcantfactor in winning such opportunities is co-operation with platform
providers for air and naval solutions. The United States accounts
for half of the world market, while Europe and the rest of theworld each share one quarter.
Industry consolidation is likely to continue, as defence companies
look for opportunities to build and inﬁll their portfolios as wellas to buy into new regional markets. In 2005, BAE Systems
acquired United Defence Industries, the US land systems company,
while EADS and ThyssenKrupp Technologies jointly acquired
Atlas Elektronik, the German naval electronics company.
Commentators in the investment community have noted these
healthy long-term growth trends for contractors with theappropriate mix of equipment and services. At the time of
publishing an extensive research study in September 2005,
Goldman Sachs Group, Inc. raised its view of Europe’s aerospaceand defence industry from neutral to attractive.
Space
Military:
Within Europe, defence spending on military satellites
is expected to grow signiﬁcantly due to spending on
secure communications systems, early warning systems,
reconnaissance, signal intelligence and navigation. At present,
national budgets total approximately €1 billion per year.
The US military space budget remains by far the largest
worldwide, at approximately US$17 billion, according
to ofﬁcial sources. Foreign companies wishing to accessthis market need to partner a US defence company.

Secure communications is in demand due to increasing deploymentof armed forces overseas. Rather than buying equipment, many
defence ministries are signing Public Private Partnership (PPP)
contracts. Under this model, the service provider builds the satellite
and continues to own it, but is paid for the service. This has
the advantage of offering better value to defence ministries,and surplus satellite capacity can often be sold by the operator
to another user.

Civil institutional and commercial:
Demand for telecommunication satellites is steady, following thedownturn in the early part of this decade. The industry expects
commercial satellite orders to average 18–20 a year in the near term.
Some 19 were ordered in 2005.

Meanwhile, the European Space Agency (ESA) Ministerial Council
meeting of 5th–6th December 2005 in Berlin was a success for theindustry, conﬁrming the ESA space budget of €8.26 billion from2006 to 2010 and unanimously adopting a series of favourable
resolutions. This provides certainty that current civil institutional
programmes will continue.
The Council also made a resolution designed to encourage
European countries to favour European launchers for satellite
launches, common practice in the United States, China andRussia. Additionally, ministers granted a 2.5% annual increaseover ﬁve years to the ESA’s science programmes budget.

US and Europe governmental space budgets 2005 (€bn)
15.9
13.0
2.4
1.5
0.6

US Department of Defense
NASA
ESA
Europe Civil
Europe Military

Based on 2005 average exchange rates €/US$ = 1.24
Source: ASD-Eurospace

Exo Mars

EADS Annual Review 2005

The world in which we operate27

Business review(€m)

Revenue
EBIT
Order intake
Order bookIn number of aircraft

Deliveries
Order book

2005

2004

Variation

22,1792,307
78,254201,963

20,224
1,919
25,816
136,022

+10%
+20%
+203%
+48%

2005

2004

Variation

378
2,177

320
1,500

+18%
+45%

In 2005, Airbus received more orders than ever before in its 35-year
history, maintaining its industry leadership in terms of both numberof orders and deliveries. Production rates were steadily ramped
up in line with the record order backlog. This success reﬂects both
unprecedented demand for new aircraft and Airbus’s use of innovation
to provide airlines with the fuel efﬁciency and operating ﬂexibility
that they need.

The year was signiﬁcant for Airbus’s two new aircraft programmes.
The A380 double-deck airliner ﬂew for the ﬁrst time on 27th April.
Not only is the 555-seat plane the largest to ﬂy, it is also themost technologically advanced, with advanced aerodynamics,
high-pressure hydraulics and increased use of carbon ﬁbre-reinforced
plastic. The A350 250–300-seat, wide-bodied long-range aircraft
was launched in October, offering airlines the technology available
on the A380.
In terms of costs, the Route 06 cost-saving programme, which waslaunched in 2003 with a €1.5 billion cost reduction target for 2006,
is on track. While the programme is being implemented, there
is now a focus on continuous efﬁciency improvement, both within
Airbus and among its suppliers.

Conﬁrming leadership2005 was a record year for Airbus in termsof deliveries, order intake, order bookand proﬁtability.

Airbus28

EADS Annual Review 2005

AirbusAirbus achieved its highest-ever revenue in 2005. At €22.2 billion
for the year to 31st December 2005, these were 10% higher than2004 (€20.2 billion). Deliveries of 378 aircraft of 100 seats or more,compared with 320 in 2004, was the chief driver of this increase.
EBIT grew by 20% to €2.31 billion (€1.92 billion in 2004), and the
EBIT margin expanded to more than its 10% target (9.5% in 2004).
Airbus was responsible for 56.6% of 2005 deliveries, and has
now delivered 4,130 aircraft to airlines since its inception.
Production rates are steadily increasing on both the A330/A340
line and the single-aisle line, and will reach a scale of 7.5 and 30,
respectively, per month in the spring of 2006. The outputof the A320 line is the highest ever achieved by any aircraft
manufacturer. It has been made possible due to ﬂexible production
techniques and strong production lead-time reduction.

Order book2005 was an unprecedented year for new orders, with Airbus
taking 1,111 ﬁrm orders valued at some US$95.9 billion at
catalogue prices. This was well ahead of Airbus’s previous record
year, namely 1998 with 556 orders, and gave Airbus a market
share of 52% in terms of aircraft units and 45% in terms of value.
This leaves Airbus with the largest order book it has ever had,
totalling 2,177 aircraft valued at some US$220.3 billion at list price.
In terms of order book size, it has a 55% market share.

The majority of 2005 orders came from Asia and the Middle East,with some substantial orders also coming from Latin America
and from Europe’s new low-cost carriers. The largest orders camefrom China, including the order for 150 single-aisle aircraft
placed by the China Aviation Supplies Import and Export Group(CASGC) in December, for which down payments have been
received. Leasing companies also continued to play an importantrole, placing orders for up to 195 aircraft.

A380

EADS Annual Review 2005

Airbus29

Business review

Becoming global
In order to adapt to secure growth for its shareholders and its
employees, Airbus is seeking partnerships with industrial organisationsin China, Russia, the United States and other countries.

AirbusNew orders for A380 included contracts signed with three customers
for 20 aircraft, exceeding the target of one additional customer
a year until entry into service. These new customers include theﬁrst in China, China Southern, the ﬁrst in India with Kingﬁsher,
and a second large freight carrier, UPS, based in the United States.
The orders clearly reﬂect the beneﬁts of the new double-deck plane’s
unprecedented capacity to Airbus customers. Total ﬁrm orders
for the A380 now stand at 159 from 16 customers. Certiﬁcationis planned in time for delivery to the ﬁrst customer, Singapore
Airlines, by the end of 2006.
The new A350 250–300-seat long-range airplane won 172 orders
and commitments from 13 customers between its October launch
and the year end. Some 87 of these were ﬁrm orders from ninecustomers and leasing companies. Commitments for this new model
are substantially higher than they were for its direct competitor
in the medium capacity long-range class at the same period of timeafter commercial launch. They reﬂect well on the commercial
appeal of the aircraft, including its advanced technology and its
operational commonality with the rest of the Airbus families.
The long-range A330, A340 and A350 Family took 166 orders
from 18 customers, its highest-ever level of annual gross orders.
The market for new aircraft in this 250–300-seat long-range market
is estimated to rise to more than 3,000 aircraft over the next 20 years.
Most of the orders were for the highly successful single-aisle
A320 Family. With 918 orders, its highest-ever order intake,it achieved a 62% market share and continued as market leader
in this segment. With an order backlog of 1,652 aircraft, theA320 Family is the preferred choice of low-cost operators, whichplaced more than a third of the year’s orders. This Family is also
the clear favourite of the Chinese aviation market.
A320 derivatives sold well in the corporate jet market, with theAirbus Corporate Jetliner Family logging 15 ﬁrm orders. This took
the total number of orders for the Family to more than 60.

30

EADS Annual Review 2005

AirbusTies with Chinese civil aviation were extended during the year,
following the signing of several agreements for increased co-operation.
Two contracts signed with China Aviation Industry Corporation
I and II (AVIC I and II), the state-owned aviation organisations,were followed in December by an agreement to study the feasibilityof an industrial partnership to set up an A320 ﬁnal assemblyline in China. Today, ﬁve Chinese companies from AVIC I and II
are involved in manufacturing parts for the single-aisle Family.
Airbus is committed to increasing procurement volumes to reach
US$60 million per annum by 2007, and US$120 million by 2010.
Collaboration with Russian companies was also expanded. In August,
Airbus and Irkut, the Russian scientiﬁc production company, signeda preliminary agreement outlining Russian participation in thedevelopment of the A350 and future aircraft programmes. By 2007,
Airbus intends to offer Russian companies contracts withan aggregate value of US$110 million annually. Airbus originally
opened its Moscow ofﬁce in 1995. Its Russian programme covers
numerous research and technology projects and design work,
as well as wide co-operation in the certiﬁcation ﬁeld.
Airbus’s presence in North America was enlarged with a newengineering centre in Mobile, Alabama. This new facility will
work on commercial and military derivative aircraft – including
the A330, A340 and A350 jetliners, and the KC-30 advanced
military tanker. The centre is due to begin operations in 2006
and is expected to employ approximately 150 people.
In Australia, Airbus extended its research partnership by
establishing a research and technology framework agreementwith the Melbourne-based Co-operative Research Centre forAdvanced Composite Structures.

Airbus painting centre

Customer services
As part of its continuous drive to improve customer service, Airbus
moved its customer services department to new ofﬁces on its
Toulouse site, where it installed all 1,000 staff under one roof.
The ofﬁces have a 24-hour call centre.

Airbus took several steps designed to help its customers makecost savings. Most importantly, it froze the price of spare parts forthe third year running. It also decided to place all technical data
online, or on CD-ROM, which will save airlines time and reduce
their costs. Additionally, Airbus designed a fuel management
software programme for airlines. The web-based AirS@avings
provides fuel cost index values for either individual ﬂight journeys
or city pairs. It helps to reduce and optimise fuel consumption.
Online services were upgraded with a new business-to-businessportal called Airbus World, where airlines and operators can share
information. This is complemented by a new spare parts e-catalogue.

Outlook
Airbus’s existing order backlog alone will lead to deliveries risingby more than 10% in 2006 and continuing at a high level forthe next few years. Furthermore, with the full implementationof the Route 06 cost-savings programme and additional continuous
efﬁciency improvements, Airbus is preparing to confront an
anticipated deterioration in the Euro/US Dollar hedging ratefrom 2007.

While 2005 orders were exceptionally high, Airbus is optimistic
it can maintain the record level of the order backlog throughout
2006, given the strength of Asian demand. This would keep
visibility on future deliveries consistently high through to theyear end. Looking further forward, US airlines did not participate
in 2005’s surge in orders, but are expected to invest in new,more fuel-efﬁcient aircraft at some point in the next few years.

Airbus also set up the ﬁrst Maintenance Repair and Overhaul(MRO) network, with 13 MROs, in order to help airlines
find the best quality maintenance services wherever they are.
This was complemented by the Airbus Modular Spares Service,a comprehensive support package designed to help airlines improve
management of their spares stock. Once again, this is intended
to save airlines time and money.

EADS Annual Review 2005

Airbus31

Business review(€m)

Revenue
EBIT
Order intake
Order book

2005

2004

Variation

763
48
1,840
20,961

1,304
26
1,176
19,897

–41%
+85%
+56%
+5%

Revenue by market (as % of external revenue)
12
88

Civil
Defence

The Military Transport Aircraft Division delivered higher EBIT in
2005, beneﬁting from the restructuring completed in the previous
year. It made progress in export campaigns for all classes of aircraft,including the high-value A400M transport and refuelling aircraft
based on Airbus platform, beneﬁting from re-equipment cycles inthese areas. EADS CASA maintained its global leadership in medium
and light transports, as shown by its selection for two of the largest
contracts ever awarded by the Brazilian government.

EBIT rose by 85% to €48.4 million compared with €26.2 million
in 2004. This reﬂected the successful restructuring and the absenceof associated costs. Revenue was €763.3 million (2004: €1.3 billion).
This decrease primarily reﬂects the negative (€0.5 billion) impactof the shift of revenue recognition for the A400M programme
until the ﬁrst quarter of 2006.
New orders totalled €1.8 billion, with both the A400M and
EADS CASA medium and light aircraft winning large orders.
The order book grew slightly, ending the year at €21.0 billion(2004: €19.9 billion). A number of contracts and Declarationsof Intent were signed that will lead to ﬁrm orders in the 2006
ﬁnancial year.
First export orders for A400M
The A400M won its ﬁrst export orders, as governments sought toupgrade their old-generation, heavy transport planes. South Africa
signed a ﬁrm order in April for at least eight and Malaysia signed
a contract in December, which will be booked in 2006, to buy
four. Added to the 180 ordered by the European launch countries,
this brings the total to 192. In a sign that more orders are on
the way, in July the Chilean government signed a Declarationof Intent to acquire up to three.

Winning export orders
Contracts in Asia, Africa and Latin America
conﬁrmed the Division’s leadership in medium
and light transports, and included the A400M’s
ﬁrst export orders.

Military Transport
Aircraft
32

EADS Annual Review 2005

Military Transport AircraftAdditionally, the Brazilian government awarded EADS CASA twolarge export orders. EADS CASA will supply 12 C-295 mediumtransport aircraft for supporting people in the remote Amazon.
It will also modernise eight P-3 maritime patrol aircraft, installingthem with mission systems (FITS). These are the biggest contracts
ever signed between EADS and Latin America.
In line with EADS’ Global Industrial Development strategy, allof the Division’s export agreements involved local subcontractors.
MTA’s strategy for participating in the US defence market advanced
signiﬁcantly. In September, EADS joined Northrop Grumman
as principal subcontractor in its bid for the US Air Force’s
new-generation KC-30 refuelling aircraft. Additionally, a partnershipagreement was signed in May with Raytheon to bid for the
US Army’s Future Cargo Aircraft programme.
Industrial progress
Production of the A400M has started and construction of the ﬁnal
assembly line in Seville, Spain is under way. Continuing thechange in the workforce required for the new A400M and tanker
programmes, approximately 150 engineers joined the Division,
taking the total workforce to around 4,000.

Outlook
The Division’s range of military transport aircraft is well suited
to the needs of governments seeking to re-equip their air forces
and other services. With its superior load capacity, speed andcapability for low-altitude tactical ﬂights, the A400M is beginningto win export orders and is an obvious choice for governments
looking to replace their ageing ﬂeets of heavy transport aircraft.

The Division is bidding for a number of large contracts. MTA
expects 2006 will see the Air Tanker consortium land an orderfrom the UK government for the €14 billion Future Strategic
Tanker Aircraft programme covering 14 A330 MRTTs. In theUS, it is in bidding partnerships with Northrop Grumman andRaytheon in particular for the tanker replacement programme
and for future cargo aircraft jointly procured by the Army and
Air Force. Finally, Portugal’s early 2006 order of 12 C-295 aircraft
will add to revenue.
Looking forward over the next few years, the Division will
deliver higher revenue and EBIT. Both the A400M andtankers will make a substantial contribution to the expansion.
Additionally, the Division is in a strong position to expand
its order book in medium and light military transport aircraft.

The ﬁrst of the ﬁve A330 Multi-Role Tanker Transport Aircraft(MRTT) ordered by the Australian Defence Forces is currently
being manufactured by Airbus. Three prototypes of the innovativerefuelling boom, with electronic ﬂy-by-wire controls, havebeen completed.

A400M

EADS Annual Review 2005

Military Transport Aircraft

33

Business review(€m)

Revenue
EBIT
Order intake
Order book

Eurocopter once again captured more than 50% of civil and parapublic
sales, conﬁrming its global leadership of this sector. The Divisioncontinued to win a large share of accessible military business, further
demonstrating the competitiveness of its new-generation militaryhelicopters. From a strategic perspective, important agreements werereached in Spain, Asia and the United States.
2005

2004

Variation

3,211
212
3,522
9,960

2,786
201
3,245
9,117

+15%
+5%
+9%
+9%

Revenue grew 15% to €3.2 billion (€2.8 billion in 2004), while
EBIT expanded slightly to €212 million (€201 million in 2004).
The revenue mix, an unfavourable US Dollar/Euro exchange rateand higher research and development expenditure, put pressure
on the proﬁt margin.
New orders totalled €3.5 billion, lifting the total order bookto €9.96 billion at year end. Some 401 helicopters were ordered.
By value, the orders break down into 42% for serial helicopters,
41% customer services and 17% research and development
and other.

Revenue by market (as % of external revenue)
47
53

Civil
Defence

In addition to Australia and ten other countries, Belgium,
New Zealand and Spain selected the NH90 multi-role helicopter
for their armed forces, underlining its performance, as well
as low operating and maintenance costs.
The great commercial successes obtained in various sectors suchas oil and gas, search and rescue, and medical, including an orderfrom one of the largest US air medical service companies, again
demonstrated the versatility of the product range.
International expansion
The building of a new industrial site in Albacete, southern Spain,
the signature of the Tiger HAD’s development and production
contract for Spanish and French needs, and the selection of the
NH90 conﬁrmed Spain as the third home base of Eurocopter.

Expanding order book
The Division maintained its global leadershipof the civil and parapublic sector, while winning
important military business and expanding
its international presence.

Eurocopter
34

EADS Annual Review 2005

Eurocopter

Signiﬁcant progress was made abroad, especially in high-growthAsia. In China, AVIC II, the state-owned aviation company, andEurocopter decided to expand their partnership by co-developing
a new six-seven-ton technologically advanced civil and parapublic
helicopter which will meet Chinese and worldwide demand in
this segment. In Korea, traditionally a US market, the government
entrusted Eurocopter, under the leadership of KAI, with thedevelopment of the country’s ﬁrst military utility helicopter.
In the United States, another key market, Eurocopter booked
122 orders and won more than 45% of the US civil market share.
In addition, the US Coast Guard selected it to upgrade their
Dolphin helicopter ﬂeet. On the military side, Eurocopter joined
forces with Sikorsky to tender for the LUH contract, allying
the best COTS helicopter and the best logistics support solution.
Better technology and service
Eurocopter’s R&T projects focus on three main axes:—Helicopter’s integration into the military digital battleﬁeld(harder detection, protection from missiles and crash);—Helicopter’s integration into the civil air transport systems(all-weather, ﬂight noise and vibration reduction);—Cost effectiveness by using simulation technologies to reduce
non-recurring costs, development cycles and to optimise
maintenance, repair and overhaul processes, as well as the
manufacturing of composite structures.

Outlook
Eurocopter faces the future with a competitive and comprehensive
product range, a large forward order book and a strong strategic
position. A number of major sales campaigns are under way.
Notably, the Division is offering highly competitive new-generation
military helicopters and services at a time when demand for
procurements such as the US Army Light Utility Helicopter
programme is growing. Eurocopter’s well-balanced portfolio ofactivities and the size of the ‘in service’ ﬂeet reduce the ﬁnancial
risks associated with new helicopter market cycles.

Strategically, Eurocopter’s proven ability to implement international
co-operation agreements in rapidly growing markets is bolstering
its order book, access to scarce resources and results. Meanwhile,
Eurocopter intends to protect and enhance its technological edge,
the main prerequisite for sustainable development. Additionally,
its ability to offer and certify customised solutions to missionoriented customers will remain strategically valuable.
In 2006, Eurocopter anticipates further growth in turnoverand proﬁtability, and plans to consolidate its worldwide market
leadership. Longer term, this growth should be sustained,with a greater contribution from higher military sales where
demand is expected to expand steadily.

Regarding services, Eurocopter continued to invest in customer
satisfaction. Mechanical repair workshops were overhauled andlogistics platforms opened worldwide. Additionally, the training
offer expanded with a new D-level simulator.

EC 135

EADS Annual Review 2005

Eurocopter

35

Business review(€m)

Revenue
EBIT
Order intake
Order book

Defence & Security Systems ramped up Euroﬁghter production andincreased missile deliveries. The Division won a high number of neworders, increasing the size of the order book, with especially buoyant
orders for its advanced technological solutions in missiles and missile
defence, and security solutions. Management acted to improve
the Division’s range of capabilities and operating effectiveness.
2005

2004

Variation

5,636
201
6,673
18,509

5,385
226
8,457
17,276

+5%
–11%
–21%
+7%

Revenue by market (as % of external revenue)
6
94

Civil
Defence

Driven largely by Euroﬁghter and missile programmes, revenue
increased by 5% to €5.6 billion (€5.4 billion in 2004). Thirty-fourEuroﬁghters for Germany and Spain, some 600 Storm Shadow/Scalp
long-range cruise missiles and 66 Taurus air-to-ground missiles
have been delivered as at the end of 2005. EBIT is at €201 million(€226 million in 2004, due to the one-off release of a litigation
provision), despite around €100 million charges for UAV activities
in 2005. Hence operational proﬁtability has clearly increased
over 2004.
Order book growth
The order book rose by 7% to €18.5 billion at the year end(€17.3 billion in 2004). Substantial contracts included Spain’sorder for the Taurus air-to-ground missile, a Defence Electronics
order for Euroﬁghter self-protection systems, India’s orderfor Exocet missiles, the UK’s contract award for the defence
information infrastructure project, and conﬁrmation of theborder surveillance contract in Romania. As part of the Medium
Extended Air Defence System (MEADS) International consortium,
LFK and MBDA were awarded a part in designing and developing
the tri-national MEADS system.

Moving beyond defence to security
A strong year for deliveries and new orders,
while building capabilities in growth areas.

Defence &Security Systems
36

EADS Annual Review 2005

Defence & Security Systems

This large order book provides considerable certainty as to therevenue outlook for the next few years. Its backbone remains
Eurofighter (Tranche 1 and 2), as well as missile orders. While
the majority of orders are from European countries, the percentageof export orders is growing.
Increasing efﬁciency and enhancing integration
Due to a more integrated structure within Defence & Security
Systems, which includes a consolidation of the sales and marketingorganisation and the creation of the ‘System Design Centre’ as acentralised entity, Defence & Security Systems will present a more
integrated approach and will focus more intensely on its nationalcustomers and markets. The organisational structures in theBusiness Units, ‘Defence and Communications Systems’, ‘DefenceElectronics’ and ‘Military Air Systems’ are being streamlined.

Two acquisitions added to capabilities in growth sectors.
In September, the Division acquired Nokia’s Professional Mobile
Radio (PMR) business, making EADS the only competitive global
secure telecommunications player offering both the TETRA andTETRAPOL technologies. In December, EADS and ThyssenKrupp
Technologies jointly acquired Atlas Elektronik, the naval electronics
company, which will strengthen capabilities in the ﬁeld of naval
electronics and systems, creating a ‘maritime systems and electronics
house’ for both surface ships and submarines.

Outlook
Building on its strong platform business in defence that currently
accounts for most of the Division’s revenue, Defence & Security
Systems is implementing a strategy of further enhancing its systems
and security activities. While Euroﬁghter and missile contracts form
the backbone of the order book, there is a strong focus on adding
to capabilities in command and control systems, maritime systems,
global security and secure communications, where EADS sees
opportunities for growth in the medium term.

Reorganisation of the Division will improve access to markets
and optimise interfaces with home markets. Integration of central
functions at divisional level is reducing cost, and will continue
to enhance proﬁtability. Additionally, Defence and Communication
Systems (DCS), Defence Electronics (DE) and Military Air Systems(MAS) were reorganised. Together with the integration of LFK
into the MBDA missile business, this will further pave the way
for greater efﬁciency.
In 2006, Defence & Security Systems will further shift fromdevelopment to production of missiles and other products.
Additionally, Euroﬁghter export campaigns may strengthen
the order book, and Unmanned Aerial Vehicle (UAV) productdevelopment may stimulate customer demand. Looking further
ahead, security activities are expected to contribute progressively
more to revenue.

The PMR acquisition allowed EADS to submit a joint tender with
Siemens to provide the German security authorities with a national
digital voice and data transmission network.

Storm Shadow in
the anechoic chamber

EADS Annual Review 2005

Defence & Security Systems

37

Business review(€m)

Revenue
EBIT
Order intake
Order bookSpace conﬁrmed its return to proﬁtability in 2005. EBIT was
substantially higher at €58 million (€9 million in 2004).
The improvement reﬂects growth in what remains a difﬁcult businessenvironment, combined with the positive impact of the lower costbase following the restructuring programme.
2005

2004

Variation

2,698
58
2,322
10,931

2,592
9
5,658
11,311

+4%
+544%
–59%
–3%

Revenue expanded to €2.7 billion in 2005 (€2.6 billion in 2004),
with EADS Space Transportation, EADS Astrium and EADSSpace Services all contributing substantially to this growth.
At the year end, the Division’s order book stood at €10.9 billion(€11.3 billion in 2004), instilling conﬁdence that growth would
continue over the next few years.
Keen appetite for defence communications
Germany joined the UK as a customer for Space Services, selecting
EADS as preferred bidder for the contract to build and operate
Satcom BW, its ﬁrst dedicated military satellite system. As defence
ministries deploy more troops overseas, they need secure satellite
communications procured through medium-term build and operatecontracts that minimise capital expenditure. In December, the UK
upgraded its ground-breaking Skynet 5 military communications
contract to include a third satellite.

Revenue by market (as % of external revenue)
71
29

Civil
Defence

Also within defence, the French government contracted EADS SpaceTransportation to develop the demonstrator for the Upper Stageof a ballistic missile, and EADS Astrium for a military satellite,
conﬁrming its willingness to prepare for the future of militarysystems with EADS.
Commercial businesses progress
Signiﬁcantly, the powerful Ariane 5 ECA ten-ton satellite launcher
achieved qualiﬁcation in November, allowing it to launch nextgeneration large satellites, and to operate more proﬁtably. Arianespace,in which EADS Space Transportation holds a 29% interest, carried
eight satellites into space and won seven new contracts. Its Starsem
subsidiary launched three satellites and won two contracts.

Building upon our achievements
Revenue grew following the restructuring.
The Division’s services, launchers and satellites
are well positioned to meet evolving needs.

Space
38

EADS Annual Review 2005Space

In a highly competitive market, EADS Astrium signed its ﬁrst
contract with SES ASTRA, the Luxembourg-based satellite operator,and has been awarded a contract by the Korean Aerospace andResearch Institute to design and build their ﬁrst multi-functional
satellite COMS (Communication, Ocean and Meteorological
Satellite), while three satellites were launched into commercial
service. Anticipating the needs of satellite operators, in June
EADS Astrium announced two new joint initiatives. Astrium
is joining with Alcatel-Alenia Space to develop the Alphabus
satellite, which will have the high performance required fornext-generation multimedia and mobile telephony services.
It also agreed with Antrix Corporation, the commercial armof the Indian Space Research Organisation, to jointly develop
and market lower performance communications satellites.
Enlarging its European footprint, in December the Divisionacquired Dutch Space, the largest space company in the Netherlands,
and will integrate it into Space Transportation.
Institutional stability
Development of Europe’s Galileo satellite navigation systemremained on track, with the launch of the ﬁrst of four test satellites
in December. Galileo Industries, in which EADS has a 38%
stake, is building three test satellites. In June, the two consortia
competing to operate Galileo once it becomes operational around2008, merged. The newly merged consortium, of which EADS
is a member, is expected to receive the concession contract in 2006.

OutlookAs a pioneer in secure satellite communications, the EADS Space
Services Business Unit is well positioned to capture new contracts
in this expanding market. Additionally, the Division’s commercial
businesses have product offerings suited to their customers’
evolving needs following qualiﬁcation of the powerful Ariane 5
ECA ten-ton launcher, the proven reliability of its modular
Eurostar 3000 satellites and agreement to develop the highperformance Alphabus satellite. Finally, the institutional outlook
is stable after the European Space Agency (ESA) Ministerial
Council meeting of December 2005 agreed budgets for the next
four years, and the Galileo project continues to indicate Europe’s
determination to maintain independent access to space.

In the year ahead, the Division will continue to grow in revenue
and EBIT. EADS Space Transportation and EADS Space Services
will lead a robust expansion in revenue. Cost improvements
in Astrium and Space Transportation, planned from streamlining
operations and greater efﬁciencies in supply chains, will create
better margins. These improvements in revenue and margins
will feed through to higher EBIT.

Agreement was reached on the locations for Galileo’s infrastructure,with the headquarters in Toulouse and operating functions inGermany, Italy, the UK and Spain.
Galileo’s satellite navigation system is expected to spawn a wide
range of new applications for satellite navigation.

Satellite engine

EADS Annual Review 2005

Space

39

Responsibilities

EADS is a rapidly expanding international company with global
ambitions, driven by innovation and high performance standards.
EADS is developing its people to drive the Group towards its goals
in a demanding global business environment.
Global ambitions
In line with EADS’ ambitions to have a more global presence,
Human Resources (HR) management has been anticipating how
to manage its expanding global workforce and beneﬁt from its
increasing diversity.

With several Divisions expanding their activities in China, a joint
HR project was launched to establish a common EADS HR policy
for China. Through the joint HR task force, the ECHO project,
a common HR policy and practical handbook was created for theuse of the HR professionals of the Divisions and Business Units
expanding into the country. Additionally, a number of training
programmes were organised, including an Expand Management
Development programme visiting Shanghai. Action Learning
Expeditions were organised to China and India for EADS
top managers.
Employer image
In 2005, EADS’ appeal as a place to work was recognised
by a number of independent surveys. According to a survey carriedout by Universum, engineering students ranked EADS as theﬁfth most attractive place to work in Europe (ﬁrst in France andsixth in Germany). Reﬂecting the commitment of EADS to promoting
gender diversity in engineering careers, a survey has shown thatamong German female engineers EADS has been improving its
appeal to become the ninth best place to work – up from 21stin 2004.

Developing our people
As a leading company in a high-technology
industry, EADS employs some of the mosttalented individuals in its sector and is ranked
one of Europe’s most attractive employers.

Human
Resources
40

EADS Annual Review 2005

Human ResourcesHuman resource evolution
In 2005, the number of employees increased to 113,210
compared with 110,662 in 2004. Airbus’s workforce grew from51,959 to 54,721. EADS has been increasing its engineering andmanufacturing resources to cope with the increasing development
workload of new programmes such as the A350, and due toimportant programmes coming in to the delivery phase, suchas the A380, NH90 and Tiger helicopters.
People development
Several new innovative training schemes were launched during
the year, intended to develop EADS employees’ full potential.

In addition to its ongoing programmes, the Corporate BusinessAcademy has launched the Summer Academy, a customised training
and learning programme, in which staff use innovative methods
for learning. A new programme of strategic and personal
development for senior executives, named ACHIEVE, hasalso been launched.
Importantly, EADS is preparing itself for changing demographics
in society and its impact on working life. EADS is taking speciﬁc
action to improve career opportunities for senior employees inFrance. This involves a formal career assessment when employees
reach 45, combined with further training. The aim is to ensurethat the skills and motivation of older employees last longer intheir working lives.

EADS Annual Review 2005

Human Resources

Employee Share Ownership Plan
Employees participated in the achievements of the Group inlarge numbers. More than 10,000 employees purchased almost
two million shares through the Employee Share Ownership Plan
(ESOP), representing approximately 0.25% of the share capital.
EADS employees have bought 21.52 million shares during thelast six years. With EADS’ share price evolution during the year,
employees have proﬁted from their collective efforts to develop
EADS. To make ESOP more attractive to EADS UK employees
also, a new tax savings plan called the Stock Incentive Plan (SIP)
has been launched.
HR efﬁciency
EADS has launched a global e-HR programme covering all Divisions.
This programme is aiming to review and simplify current processes,
implement common e-HR platforms, based on common SAP
software systems, and to establish in the medium term, common
global shared services for pay and time. This will be a major
driver in HR efﬁciency in EADS in the coming years. Additionally,
common tools have been established for internal reporting andexecutive management.

In summary, EADS HR is responding to the challenges ofan increasingly global organisation and a modern workforce.
EADS employs some of the world’s most talented engineers
and managers. In order to achieve its ambitions, it must continue
to attract the best and to offer opportunities for learning andcareer development.

41

Responsibilities

Developing a model for sustainable growthoyeeEnvironm
ent
Environme
nta
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rp
Co izecit

orns atehip

EADS
sustainable
development

le growth
inab
sta
Su

re

Eco
no
mi

c

Business ethicsplr-em
Employe nshiprelatioS o c ial

In 2005, EADS put a policy framework in place that will allow it
to progress towards its goal of setting the standard for Corporate
Social Responsibility (CSR) in the aerospace and defence sector.
The Company formalised CSR policies to be applied consistently
across EADS to achieve sustainable development by balancing
economic performance with environmental and social considerations
across the Group. Through Key Performance Indicators, performanceand improvement can be monitored internally and reported toexternal audiences.

Additionally, EADS’ Code of Ethics was updated to reﬂect boththe Group’s status as a market leader and current best practicewith regard to business ethics.
Highlights 2005
In 2005 EADS made progress in further implementing its
CSR policy in each of the policy areas.
Economic:
Business Ethics is a major focus for EADS to ensure ethicalbusiness practices and compliance with all relevant legislation in
the countries where it operates. During 2005, the Group revised
its foreign trade rules to increase awareness of best practice andto reinforce protection against corruption. The revisions took into
account valuable input from reputable international bodies withwhich EADS has developed regular contacts. Through this active
networking, and continued exchange with peer companies, EADS
supports the industry’s initiative to set and promote integrity
standards in aerospace and defence.

Progressing towards setting the standard
EADS is putting a framework in place thatwill allow it to realise and measure progressin Corporate Social Responsibility.

Corporate Social
Responsibility
42

EADS Annual Review 2005

Corporate Social Responsibility

EADS’ long-term Sustainable Growth relies on the Group’s ability
to deliver products and services that perform. This requires
a continuous focus on customer satisfaction and product quality,
permanent innovation and expert management of suppliers. To thisend, the Quality and Operational Excellence Programme (QOEP)
was increasingly deployed throughout Business Units. To increase
the potential for innovation, the Corporate Research Centre
signed new partnerships with academic partners and launcheda think tank for a new type of visionary aviation research.
Environment:
Environmental Care is of particular interest to EADS because
it sells products with long lifecycles. The Group prioritises
minimising the environmental impact of its activities, ensuringthat each Business Unit complies with the laws and regulationsof each country in which it operates. In 2005, EADS formed
a dedicated network to meet the challenges of the EU Restrictionof Hazardous Substances (RoHS) directive, which limits the useof speciﬁc hazardous materials. Other initiatives have been deployed
across the Group. For example, Airbus will soon achieve the full
ISO 14001 certiﬁcation for all its European sites. Across EADS,
nine more sites were covered by an ISO certiﬁcation or an EMAS
registration at the end of 2005 compared with end 2004 (+45%).

Social:In the area of Employer-Employee Relationship, the Groupemphasises its determination to respect social rights wherever it
operates. In June, EADS and the European Works Council, in
association with the European and the International Metalworkers’
Federation, signed an international agreement providing a framework
for respect of social rights wherever the Group operates. This
reafﬁrms their collective belief in CSR and the will to respectcommon principles and standards laid down by international
conventions and guidelines while growing EADS’ economic successworldwide. EADS also furthered its long-term plan for bringing
women into aerospace, exceeding its annual 20% target for female
recruits by 0.5%.

Regarding Corporate Citizenship, EADS believes it is important
to contribute to the cultural, educational and social well-beingof the countries where it operates. This involves a wide range ofactivities, but in 2005 the disaster relief efforts following the
Asian tsunami, Pakistani earthquake and US hurricane were mostnotable. In Asia, an Airbus Beluga jetliner ﬂew in relief supplies,
several Eurocopter helicopters ﬂew rescue missions and a mobile
rescue station was established on the coast of Indonesia. In Pakistan,the Group ﬂew in 95 tons of relief supplies following theearthquake and offered its help in evacuating the injured by air.
Finally, in the United States, EADS ﬂew in 23 tons of relief
supplies, as well as helicopter rescue missions.

‘Defence industry operates
in a strictly controlledenvironment’
An interview with John Harrison, General Counsel,
Defence & Security Systems

Can EADS be socially responsible while owning a defence business?
I think the very concept of participating in the defence industry
is in itself socially responsible. Why? Because we are not only
a player in the global economy but also support governments andinternational organisations such as NATO which ultimately defend
and underpin our freedoms and all of the advantages of a freesociety that we currently enjoy. On a less philosophical level,
the defence industry operates in a strictly controlled legal andregulatory environment.
How do you ensure that export controls are respected?
To make sure that we comply with the vast array of export control
legislation is a complex business and one of my jobs is to break
down that complexity. We have to identify where a product isaffected by a legal provision, which is a minimum requirement
for us, completed by application of company rules which often
go beyond legislation. The export control people are technicallyastute and work at our sites, not in ivory towers.

EADS Annual Review 2005

We take the advice of experts to tell us whether parts can be used
for both civil and military purposes, so that we can ensure wecomply with export restrictions.
Not only do we follow the law but also we have discussions with
relevant authorities. It is difﬁcult to do more.
How do you guard against corruption?
As a company we do not tolerate bribery. We have detailed internal
policies and procedures which deal precisely with this point,
offering guidance on hospitality for example. But just having rules
is not enough. We enforce them rigorously. Each EADS employee
and partner is responsible for respecting the rules. Additionally,
we have a department that oversees compliance and advises
employees as to what is permissible.

Corporate Social Responsibility

43Responsibilities
Values
EADS’ updated set of values was drawn up in 2005.

Corporate
Social Responsibility

Reliability We deliver on our promises to customers, employees
and shareholders. We recognise our responsibilities towards
all our stakeholders. We manage our risks and are accountablefor what we do.
Innovation We share a common creative spirit and an enthusiasm
for innovation. We develop the most advanced projects witha pioneering spirit. We value entrepreneurship and courage
as a source of breakthrough ideas and future success.

For more detailed
information please refer to:
Business, Legal andCorporate Responsibility
2005 (3)(available on request)

Excellence We set ambitious targets and seek continuous
improvement. We are committed to achieving best-in-classperformance and proﬁtability. We create value for our shareholders
and all other stakeholders.
Customer satisfaction We are market driven. We listen to
our customers in order to provide them with the best solutions
which anticipate and meet their needs. Customer satisfactionis the key for our long-term success.
Honesty We act in accordance with our values and commitments.
We are committed to complying with all applicable laws andregulations as well as respecting high standards of honesty andintegrity. We provide transparent information to our stakeholders.
Diversity We believe our people are key drivers for our future
success. We are an international company with a shared cultureof diversity and openness. We value both individual contribution
and teamwork.

‘Diversity adds breadth
to our skills’
An interview with Thierry Baril,
Head of Human Resources, Eurocopter

What is your policy towards diversity?
We believe absolutely in diversity for both ethical and pragmatic
reasons. Eurocopter is an increasingly global company at a time when
all the high-technology companies are competing for the best people.
Embracing diversity in terms of gender, nationality, backgroundand so on gives us the greatest choice of people and allows us
to recruit the best.
Diversity also adds breadth to our skills. If we are in India we needIndian people in order to understand the country and the wayof doing business. Recruiting people from the automotive industry
teaches us about series production. We want 10% of our 2006
engineering recruits to have lived or studied outside France,
Germany or Spain.

44

EADS Annual Review 2005

What CSR challenges arise from being the EADS Division withthe most international presence?
To put this into context, we have 11,000 employees in France,
Germany and Spain and another 2,000 spread across our 15
international subsidiaries. In 2004, we started to lay foundations
for a more global implementation of HR policies. With ourglobal internal HR database we are now able to monitor our people
worldwide and to ensure more equal opportunities. We also brought
people from our subsidiaries to Europe for training for the ﬁrst
time, for example at the EADS Corporate Business Academy,
and offered customised local career development opportunities.
What difference has the International Framework Agreementagreed with the European Works Council made?
We have had subsidiaries outside Europe for 25 to 30 years andhave always maintained European social standards across these
operations. The International Framework Agreement reinforces
our standards, but we have always been a respected and attractive
employer. Between 2002 and 2005 we doubled the headcountoutside Europe but had no difﬁculty recruiting highly valued people.

Corporate Social Responsibility

EADS Code of Ethics
In light of its establishment as a market leader in many of its
businesses and the evolving legal environment relating to businessethics, EADS updated its Code of Ethics (Code) in order to reﬂect
practices recommended by various codes and laws, and to alignwith best practice.

The enhanced Code sets out in one single, comprehensive
document the EADS business guidelines relating to the Group’s
ethical standards. The Code serves as a core EADS businessguideline in an architecture of documents, and also refers todetailed policies as laid out in the EADS Corporate Handbook,and can be complemented with policies and processes speciﬁc
to Divisions or Business Units. It is based on EADS’ underlying
values and is fully in line with international recognised standards
as laid out in charters, declarations or guidelines, such as the
Universal Declaration of Human Rights.
The Code covers the full scope of EADS’ CSR policies, addressing
in ﬁve chapters the principal lines of ethical behaviour. In thisway the Code gives guidance to all employees about appropriate
conduct in their professional environment.
EADS is committed to implementing the principles describedin the Code, in particular through entrusting an Ethics Committee,
appointed by the EADS Board, with compliance responsibility
in ethics matters.

OutlookIn 2006, EADS will further deploy and monitor its CSR policies
through a network co-ordinated at corporate level and including
representatives from the Divisions/Business Units. The Group will
also work towards further enhancement of reporting CSR parameters.

Another priority will be to further address the topic ‘businessethics’, both internally and externally. Internally, the Ethics Codewill be launched through a comprehensive information campaign
to raise employee awareness about the importance of ethicalbusiness conduct, linking it to underlying EADS values.
Furthermore, foreign trade training and networking activities
will be used to disseminate an ‘awareness’ culture.
Externally, EADS is pursuing a business dialogue within theEuropean aerospace and defence industry which aims to launcha platform of principles setting high standards, exchanging bestpractices, promoting training and compliance programmes, and,more generally, generating common European industry positions
on ethics and anti-corruption.
As EADS builds its industrial presence across the world, a particularfocus will be placed on promoting CSR policies outside homemarkets. The procurement teams are starting to be sensitised to
the CSR challenges associated with increasingly global sourcing.
EADS will continue enhancing its CSR policy and practices,
creating long-term value by continuously applying the Group visionof achieving economic performance, while taking into consideration
all stakeholders’ interests and caring for the environment.

‘We want to integrate
environmental matters
into our culture’
An interview with Philippe de Saint Aulaire,
Head of Environmental Affairs, Airbus

As the largest commercial aircraft, is the A380 also thelargest polluter?
When the A380 enters into service, it will be the most efﬁcient
aircraft regarding CO2 emissions. Additionally, it consumes
a little less than three litres of fuel per person per 100 kilometres.
By comparison, the average car in Europe consumes more thanﬁve litres per person given average load factors.
In the last 40 years, aviation fuel consumption has fallen 50%.
Furthermore, the Advisory Council for Aeronautics Research inEurope has set a very challenging target of reducing consumption
another 50% by 2020. We are researching how to do this,questioning the design of the aircraft and how it is operated.

What is the signiﬁcance of Airbus’s aim of achieving ISO 14001
certiﬁcation for sites and products by the end of 2006?
We want to integrate environmental matters into our culture.
The ISO 14001 environmental management system will help
ensure that environmental aspects are considered in every partof Airbus and will enable us to measure our progress.
Can the environment be a source of competitive advantage?
As stakeholder pressure grows, the environment is becominga real issue for airlines. It is also conceivable that passengers may
in future select their ﬂights depending on the environmental
performance of the aircraft. So, yes, environment is on the way
to becoming a signiﬁcant competitive issue.

What do you do with aircraft when they become obsolete?
The ﬁrst Airbus aircraft are reaching the end of their lives andwe believe that our customers will soon be required to dismantle
them. With the so-called PAMELA (Process for Advanced
Management of End of Life of Aircraft) project we are preparing
to store and dismantle civil aircraft in environmentally friendly,
safe and economic conditions.

EADS Annual Review 2005

Corporate Social Responsibility

45

Management and Corporate Governance

Organisational structure
as of 31st December 2005

Boardof Directors

Chief
Executive
Ofﬁcers

Chief
OperatingOfﬁcersGroup
Functions

Chairmen
Manfred Bischoff
Arnaud Lagardère

CEOsThomas EndersNoël Forgeard

Finance
Hans Peter Ring

EADS North America
Ralph D. Crosby Jr.

Thomas EndersNoël Forgeard
Hans Peter Ring
Jean-Paul Gut
Juan Manuel Eguiagaray
Louis Gallois
Rüdiger Grube
François David
Michael Rogowski

Human Resources
Jussi Itävuori

Corporate Secretary
Laurence Dors

Corporate Communications
Christian Poppe
CEOs

Marketing, Strategy
Philippe
Camus
and Global
Developement
Rainer
Hertrich
Jean-Paul
Gut
Legal Affairs
Diane de Saint Victor

Corporate Quality
Bill Black

Political Affairs
France: Denis Verret
Germany: Christoph Hoppe
Spain: Enrique Barrientos

Executive Committee Member

46

EADS Annual Review 2005

Organisational structure

In April 2006 EADS appointed
Mr Jean J. Botti as Chief Technical Ofﬁcer
and Member of the Executive Committeewith effect from 1st May 2006

The Board actively shapes the Group’s mission and strategic
priorities, which are implemented under the leadership of
the Chief Executive Ofﬁcers (CEOs), who provide the impetus
for major operational initiatives. Group Functions and theDivisions operate under the leadership of the CEOs.
The ﬁve Divisions – Airbus, Military Transport Aircraft, Eurocopter,
Defence & Security Systems, and Space – serve the speciﬁc needsof their respective customers while the Group Functions enhance
the Company offering through information exchange, technology
sharing and working practice synergies. This allows for maximum
generation of value.

DivisionsOperatingCompanies

AirbusGustav Humbert

EADS Sogerma Services
Anne-Marie Perus

Elbe Flugzeugwerke
Horst Emker

Eurocopter
Fabrice Brégier

GIE ATR
Filippo Bagnato

EADS Socata
Stéphane MayerSpace
François Auque

Space Transportation
Evert Dudok
Alain Charmeau

Astrium
Antoine Bouvier

Space Services
Eric Béranger

Defence & Security Systems
Stefan Zoller

Defence Electronics
Bernhard Gerwert

MBDA
Marwan Lahoud

Euroﬁghter
Aloysius Rauen

Military Air Systems
Johann Heitzmann

Defence andCommunications Systems
Hervé Guillou

Military Transport Aircraft
Francisco Fernández Sáinz

EADS Annual Review 2005

Organisational structure

47

Management and Corporate Governance

Executive Committee

Thomas Enders
Chief Executive Ofﬁcer
Mr Enders joined MBB/Dasa AG in 1991. After several years in thecompany’s marketing sector, he became Corporate Secretary of Dasa AG
in 1995. From 1996 he was in charge of Corporate Strategy & Technology
and from 2000, he was the Head of Defence & Security Systems Division.
In June 2005, he was appointed Chief Executive Officer of EADS.
Mr Enders holds degrees from the University of Bonn and UCLA, California.

Noël Forgeard
Chief Executive Ofﬁcer
Mr Forgeard joined Matra in 1987 as Senior Vice President of the Defence
and Space activities. In 1992, he became Managing Director of Lagardère
and Chief Executive Ofﬁcer of Matra HT. He joined Airbus Industrie in1998 and became President and Chief Executive Ofﬁcer of Airbus in 2001.
In 2005, he was appointed Chief Executive Ofﬁcer of EADS. Mr Forgeard
graduated from the Ecole Polytechnique and the Ecole des Mines.

Fabrice Brégier
Head of Eurocopter Division
Mr Brégier joined Matra Défense in 1993 as Chairman of the Apache MAW
and Eurodrone GIEs. In 1996, he was appointed Director for the Stand-Off
activities of Matra BAe Dynamics before becoming CEO of MBD in 1998
and CEO of MBDA in 2001. He became President and CEO of Eurocopter
in April 2003. In June 2005 he was appointed Head of the Eurocopter
Division and member of the Executive Committee.

Gustav Humbert
Head of Airbus Division
Mr Humbert joined MBB in 1980. Before becoming President andChief Executive Ofﬁcer of Daimler Benz Aerospace Airbus GmbH in 1994,
he was a member of the Dasa AG Management Board responsible for theCommercial Aircraft Division. He was nominated Chief Operating Ofﬁcerof Airbus in 2000 and President and Chief Executive Ofﬁcer of Airbus
in 2005. Mr. Humbert holds an engineering degree and a PhD from
Hanover Technical University.

Francisco Fernández Sáinz
Head of Military Transport Aircraft Division
Mr Fernández Sáinz joined CASA in 1971 as a Stress Engineer. Between
1975 and 2002 he occupied various positions such as Product Engineering
Manager, Project Manager, Engineering Development Director of theTechnical Directorate, Vice President of Engineering and Executive Vice
President Programmes, and ﬁnally as Airbus España General Manager.
Since 2002, he has been Head of Military Transport Aircraft. Mr Fernández
Sáinz holds an MBA from ICADE and is a Senior Aeronautical Engineer.

Ralph D. Crosby Jr.
Head of EADS North America
Mr Crosby has been Chairman and CEO of EADS North America since 2002.
Previously, he established and was President of the Integrated Systems
Sector at Northrop Grumman Corporation after having been Corporate
Vice President and General Manager of the company’s Commercial Aircraft
Division and of the B-2 Division. Mr Crosby holds degrees from the
US Military Academy, from the Graduate Institute of International Studies
in Geneva, and from Harvard University.

48

EADS Annual Review 2005

Executive Committee

The Chief Executive Ofﬁcers (CEOs) are supported
in their operational tasks by two Chief Operating
Ofﬁcers (COOs) and an Executive Committee.

Hans Peter Ring
Chief Operating Ofﬁcer for Finance
Mr Ring began his career at MBB in 1977 and was appointed Head ofControlling of the company’s Missiles business in 1987. From 1992, he was
Chief Financial Ofﬁcer and member of the Board of Dornier Luftfahrt.
In 1996, he was appointed Senior Vice President of Controlling of Dasa
and subsequently of EADS. Mr Ring was appointed Chief Financial Ofﬁcer
of EADS in 2002. Mr Ring holds a degree in business administration.

Jean-Paul Gut
Chief Operating Ofﬁcer for Marketing, Strategy and Global Development
Since 1983, Mr Gut has held various executive positions in the ﬁeld ofexport and international operations for Matra Défense and the LagardèreGroup. In 1998, Mr Gut integrated the Lagardère Group Management Board
and was responsible for International Operations and the High Technology
sector. In 2000, he was appointed Head of EADS International and in 2005,
EADS Chief Operating Ofﬁcer (COO). He graduated from the Institutd’Etudes Politiques of Paris.

Stefan Zoller
Head of Defence & Security Systems Division
Mr Zoller joined Dasa in 1996 as Chief of Staff of the President and CEOof the Company. Previously, he held various management positions within
DaimlerChrysler, Dornier and Senstar/Canada. Since 2000, he has held top
management positions within EADS’ defence business and was appointed
Head of the Defence & Security Systems Division in 2005. Mr Zoller
graduated from the University of Tübingen and holds a PhD in company law.

François Auque
Head of Space Division
Mr Auque joined Aerospatiale as Chief Financial Ofﬁcer in 1991, after
a career with the Suez Group and the French Cour des Comptes. He held
various top management posts within Aerospatiale Matra. Since 2000,
he has been Chief Executive Ofﬁcer of EADS Space Division. Mr Auque
graduated from the Ecole des Hautes Etudes Commerciales, from theEcole Nationale d’Administration, and from the Institut d’Etudes
Politiques of Paris.

Jussi Itävuori
Head of Human Resources
Mr Itävuori joined EADS in September 2001. Previously, he worked
for KONE Corporation since 1982 and was appointed in 1989 as Headof Human Resources and member of the Executive Committee of KONE
Elevators. In 1995, he was appointed member of the Executive Committeeand Head of Human Resources of KONE Corporation. Mr Itävuori
graduated from the Vaasa School of Economics, Finland and servedin the Airforce as a pilot.

EADS Annual Review 2005

Executive Committee

In April 2006 EADS appointed
Mr Jean J. Botti as Chief Technical Ofﬁcer
and Member of the Executive Committeewith effect from 1st May 2006

49

Management and Corporate GovernanceCorporate Governance

For more detailed
information please refer to:
Corporate Governance sectionof www.eads.com
orFinancial Statements andCorporate Governance2005 (2)In 2005, the EADS Board continued to uphold the driving principleof maximising shareholder value and complying with applicable laws
and corporate governance principles in the countries relevant to theCompany, while also sharpening its focus on corporate governancebest practice.

In the course of taking care of the Company’s affairs, the Board
met seven times and was regularly informed of developments
through business reports from the Chief Executive Officers,
including rolling forecasts as well as strategic and operational plans.
The average attendance rate at such meetings was 91%. The Board
discussed topics and authorised operations including EADS strategy;
reorganisation topics (such as the reshaping of EADS’ divisional
structure and headquarter organisation); and major business issues(such as the A350 industrial launch decision, Airbus future
product policy, EADS’ strategy in defence including European
industry consolidation and the acquisition of Atlas Elektronik
together with ThyssenKrupp Technologies, the review of the
EADS UAV programmes, the co-development of the EC175
helicopter with China and the review of Sogerma future strategy).
The Board also approved operational plans, budgets, remuneration(including a share option plan and an employee share option plan)and the Group’s ﬁnancial results and forecasts, as well as ﬁnancial
optimisations and the process of risk management and internal
controls. Additionally, it dealt with topics regarding personnel
and human resources, such as management qualification as well
as attracting, retaining and developing high potential executives
in order to ensure the future quality of EADS’ management andthe multinational leadership structure. At the 11th May 2005
meeting, Manfred Bischoff and Arnaud Lagardère were re-elected
as Chairmen and the two Board Committees were reconstituted
with the same composition as previously. At the 25th June 2005
meeting, the Board appointed the following to the Executive
Committee: the EADS Chief Executive Ofﬁcers, the two Chief
Operating Officers, the Chief Executive Officer of Airbus,
the head of Defence & Security Systems and the head ofEurocopter. It also conﬁrmed appointment of the other Executive
Committee members.

Shaping the Group’s mission and strategy
Effectiveness of governance andmanagement are a key success factor.

50

EADS Annual Review 2005

Corporate Governance

The changes to EADS’ corporate governance implemented in 2004
to reﬂect best practice in jurisdictions relevant to EADS affected
a number of matters in 2005, including the new Board members’
introduction packages following their appointment at the Annual
General Meeting.
The activities of the Audit Committee and Remuneration and
Nomination Committee during 2005 reﬂected various changes
to incorporate best practice in recent years, especially the adopted
new internal Directors’ guidelines (the ‘Directors’ Guidelines’)at the Board meeting of 10th December 2004. The Audit Committee
met three times during 2005 and had one written consultation.
It reviewed the 2004 results as well as the ﬁrst half-year 2005
results. The Remuneration and Nomination Committee met ﬁvetimes during 2005 to review the compensation policy (including
pension schemes), the bonus payments for 2004, the stock
option plan and the employee share ownership plan for 2005,
and to recommend the appointment of the President and theChief Executive Ofﬁcer of EADS Space Transportation, the headof Defence and Communications Systems and the Chief Executive
Ofﬁcer of EADS Sogerma Services.
For all Board members, remuneration contains a ﬁxed and a variable
part. Part of the compensation paid to members of the Board isbased on generation of cash and EBIT, either at Group or divisional
level, as well as on their individual performance. The variable
proportion generally represents at least half of total compensation.
Continuous improvement and effectiveness of governance andmanagement of the Group will remain a prime focus and key successfactor for EADS.

Members of the Board of Directors

Manfred Bischoff
Chairman of EADS
DaimlerChrysler Delegate for Aerospace
Arnaud Lagardère
Chairman of EADSGeneral Partner and Chief Executive Ofﬁcer of Lagardère
Thomas Enders
Chief Executive Ofﬁcer of EADS
President of the German Association of the
Aerospace Industries-BDLI
Noël Forgeard
Chief Executive Ofﬁcer of EADSMember of the Board of Directors of Arcelor
Hans Peter Ring
Chief Operating Ofﬁcer for Finance of EADSMember of the Supervisory Board and Shareholder Committeeof M+W Zander – D.I.B Facility Management GmbH
Jean-Paul Gut
Chief Operating Ofﬁcer for Marketing, Strategy andGlobal Development of EADSMember of the Board of Directors of Arjil Commanditée-Arco
Juan Manuel Eguiagaray Ucelay
Director of the Service of Studies of the Fundacion Alternativas
Louis Gallois
President of SNCF
Rüdiger Grube
Member of the Management Board of DaimlerChrysler
François David
Chairman and Chief Executive Ofﬁcer of Coface
Michael Rogowski
Chairman of the Supervisory Board of J. M. Voith AG

EADS Annual Review 2005

Corporate Governance51

Corporate details

Glossary

Air-Ground surveillance
A NATO ground surveillancesystem for combat monitoring
ARBS
Aerial Refuelling Boom Systemwith ﬂy-by-wire controls,
including an automatic load
alleviation system, giving a larger
refuelling envelope and improved
controllability. The ARBS willplace EADS in the forefrontof air refuelling technology
ASK
Available Seat Kilometres
ATI
Advanced Technology Initiative– a Group-wide drive toincrease efﬁciency in innovation,
research and technology
ATV
The Automated Transfer Vehicle(ATV) is a multipurpose support
spacecraft to carry supplies
and fuel to the International
Space Station (ISS)
AVL
Airbus Visual Line System
CBA
The EADS Corporate
Business Academy

Chapter 11 bankruptcy
Chapter 11 of the US
Bankruptcy Code protects
a bankrupt company from its
creditors while it reorganises
its businesses with a view
to becoming proﬁtable again
Corporate GovernanceThe control and monitoringof a company to ensure thatmanagement acts in the interestsof stakeholders, no undue
risks are taken and relevant
legislation is complied with
COTS
Commercial off the shelfCRC
EADS Corporate Research Centre
CSR
Corporate Social Responsibility –the responsibility of a company
towards its employees, theenvironment, its customers andthe wider community
Deepwater
A comprehensive US Coast
Guard modernisation programme
for acquiring new aircraft
and surveillance systems
DoI
Declaration of Intent

C4ISR
Command, Control,
Communication, Computers,
Surveillance and Intelligence
Systems for defence forces

52

EADS Annual Review 2005

EBIT
Earnings Before Interest andTaxes – EADS uses EBIT
pre-goodwill impairment andexceptionals as a key indicatorof its economic performance
EGAS
European Guaranteed Accessto Space
ESA
European Space Agency
ESOP
Employee Share Ownership
Programme
EuroMALE
A versatile, long-range
Unmanned Aerial Vehicle
produced by EADSFAAThe US Federal
Aviation Authority
FITS
Fully Integrated Technical System
Fleet commonality
A feature of the Airbus family,
allowing airlines to operate
type variants of different
sizes, while minimising theneed for pilot re-training
and re-certiﬁcation
Fly-by-wire
An aircraft control systemrelying on electronics rather
than mechanical linkages

Glossary

FSTA
The UK Future Strategic Tanker
Aircraft programme
Galileo
The European satellite
navigation system currently
being developed
GBAD
The new UK Ground Based
Air Defence System designed
to improve the country’s air
defence systems
GDP
Gross Domestic Product –a measure of an economy’s
outputGlobal security
State security designed
for border security, crisis
management and large
event protection
HAD
Hélicoptère d’Appui Destruction(Support Suppression Helicopter)Hedge
A way of insuring against
adverse foreign exchange rate
ﬂuctuations
Hub
A major, strategically-locatedairport from which ‘spokes’
radiate carrying regional trafﬁc

IATAInternational Air
Trafﬁc Association
ICAO
International Civil Aviation
Organisation – the ‘United
Nations’ agency for international
civil aviationISS
The International Space Station
JCA
US Army and US Air Force
Joint Cargo Aircraft
KHP
Programme to replace the ageing
ﬂeet of US transport and liaison
helicopters operated by the
Korean army
KPI
Key Performance Indicator –a measure of corporate
performance in a particular area
LSI
Large System Integration
LUH
US Army programme for Light
Utility Helicopters
MALE
Medium Altitude Long
Endurance UAV
MEADSMedium Extended Air Defense
System – a ground-based air
defence system

MOU
Memorandum of Understanding

PPP
Public Private Partnership

MRO
Maintenance, Repair andOverhaul – referring to theaviation industry

PRM
Programme Risk Management

MRTT
Multi-Role Tanker Transport
aircraftNASA
National Aeronautics andSpace Administration – the US
space agency
NATO
North Atlantic
Treaty Organisation
Network centric
Information superiority is
becoming ever more importantin defence. ‘Network centric’systems allow armed forces
to tackle new tasks inreconnaissance and surveillance,
sensor technology, andcommand and communications
OCCAR
Organisation Conjointe deCoopération en Matièred’Armement (Organisation
for Joint Armament Cooperation)PFI
The Private Finance Initiative
is a project where the public
sector procures services fromthe private sector. The public
sector deﬁnes the output it
desires and the private sector
then derives the solution toprovide the required services

EADS Annual Review 2005

Glossary

R&D
Research and development –all activities related to theevolution of new products
and services
R&T
Research and technology –all activities in the ﬁeld of
research and generic technologies
not directly attributableto products, and designed tomaintain or expand knowledgeor the technological base
RPK
Revenue Passenger Kilometres
Single-aisle aircraft
An aircraft with one aisle.
At Airbus, single-aisle isused for the A320 Family
SIP
Stock Incentive Plan
SOP
Stock Option PlanTETRA
Terrestrial Trunked Radio,
one of the most important
modern digital radio standards
and in use throughout theworld in the areas of public
transport and safety. It also
has widespread industrial
applications. The TETRA systemprovides secure, truly seamlessradio communication services
for the users
Triple III
Improvement,Internationalisation, Innovation,
are the driving principles
of EADS’ growth strategy:
Continuous improvements
are key to ensure fulﬁlmentof expectations.
Internationalisation will
make EADS part of the most
attractive markets.
Innovation creates competitive
advantage for EADS’ customers
UAV
Unmanned Aerial Vehicle
UCAV
Unmanned Combat
Aerial Vehicle

SRTC
Singapore Research & Technology
Centre, extension of the EADS
research organisation to manage
and broker projects in close
co-operation with Singaporeanscientiﬁc institutions

53

Corporate details

Addresses

EADS Headquarters

AirbusDefence & Security Systems

Space

European Aeronautic Defence
and Space Company EADS N.V.
Le Carré
Beechavenue 130–132
1119 PR Schiphol-Rijk
The Netherlands
Tel +31 20 655 4800

Airbus1, Rond-point Maurice Bellonte
31707 Blagnac
FranceTel +33 5 61 93 33 33

Defence&Security Systems
81663 Munich
GermanyTel +49 89 607 0

EADS SPACE
6, rue Laurent Pichat
75216 Paris Cedex 16
FranceTel +33 1 42 24 28 28

Head Ofﬁces

EADS Military Transport Aircraft
Avenida de Aragón 404
28022 Madrid
Spain
Tel +34 91 585 70 00

In France:
EADS
37, Boulevard de Montmorency
75781 Paris cedex 16
FranceTel +33 1 42 24 24 24

Military Transport Aircraft

Eurocopter
Eurocopter
Aéroport International deMarseille-Provence
13725 Marignane cedex
FranceTel +33 4 42 85 85 85

In Germany:
EADS
81663 Munich
GermanyTel +49 89 607 0

EADS Military Air Systems
81663 Munich
GermanyTel +49 89 607 0Euroﬁghter
Am Söldnermoos 1785399 Hallbergmoos
GermanyTel +49 811 80 0
Defence and Communication
Systems
81663 Munich
GermanyTel +49 89 607 0
Defence Electronics
Wörthstrasse 85
89077 Ulm
GermanyTel +49 731 392 0

In Spain:
EADS
Avenida de Aragón 404
28022 Madrid
Spain
Tel +34 915 85 7000

MBDA
11, The Strand
London WC2N 5HR
UK
Tel +44 20 7451 6000

EADS North America
EADS North America, Inc.
1616 North Ft. Myer Drive,
Suite 1600
Arlington, VA 22209
USA
Tel +1 703 236 3300

EADS/LFK – Lenkﬂugkörpersysteme GmbH
Landshuter Strasse 26
85716 Unterschleissheim
GermanyTel +49 89 3179 0
EADS Services
63, ter. Avenue Edouard
Vaillant
92517 Boulogne Billancourt
FranceTel +33 1 58 17 77 11

81663 Munich
GermanyTel +49 89 607 0

54

EADS Annual Review 2005

Addresses

EADS Astrium
31, Avenue des Cosmonautes
31402 Toulouse Cedex 04
FranceTel +33 5 62 19 62 19
EADS SPACE Transportation
Hünefeldstrasse 1 – 528199 Bremen
GermanyTel +49 421 539 0

66, Route de Verneuil,BP 300278133 Les Mureaux cedex
FranceTel +33 1 39 06 12 34
EADS SPACE Services
6, rue Laurent Pichat
75216 Paris cedex 16
FranceTel +33 1 42 24 28 28

EADS EFW
Grenzstrasse 101109 Dresden
GermanyTel +49 351 8839 0

EADS International

EADS Sogerma Services
Aéroport International
Bordeaux-Merignac
Rue Marcel Issartier
33701 Merignac
FranceTel +33 5 56 55 40 00

Representative Ofﬁces

EADS Socata
Zone d’Aviation et d’Affaires
Le Terminal,
Bât 41393350 Le Bourget
FranceTel +33 1 49 34 69 69
ATR Avions de Transport
Régional
1, Allée Pierre Nadot
31712 Blagnac cedex
FranceTel +33 5 62 21 62 21

EADS
Tel +33 1 42 24 24 24
Fax +33 1 42 24 26 19

North America
Ottawa, Canada
Tel +1 613 230 39 02
Fax +1 613 230 14 42
Western Europe
Athens, Greece
Tel +30 210 69 83 871
Fax +30 210 69 83 870

Middle East and Maghreb
Abu Dhabi, UAE
Tel +971 2 681 28 78
Fax +971 2 681 10 27

North Asia
Beijing, China
Tel +86 10 646 11 266
Fax +86 10 645 10 409

Cairo, Egypt
Tel +20 2 794 86 71
Fax +20 2 795 73 17

Seoul, South Korea
Tel +82 2 798 49 25
Fax +82 2 798 49 27

Muscat, Oman
Tel +968 24 601 922
Fax +968 24 602 845

Taipei, Taiwan
Tel +886 2 2712 15 94
Fax +886 2 2712 10 89

Riyadh, Saudi Arabia
Tel +966 1 46 53 456
Fax +966 1 46 30 844

South Asia and PaciﬁcCanberra, Australia
Tel +61 2 62 62 9133
Fax +61 2 62 62 9136

Rome, Italy
Tel +39 06 45 23 291
Fax +39 06 45 23 4006

AfricaJohannesburg, South Africa
Tel +27 11 256 79 00
Fax +27 11 256 79 11

New Delhi, India
Tel +91 11 4166 32 80
Fax +91 11 4166 32 07

Ankara, Turkey
Tel +90 312 439 89 64
Fax +90 312 439 70 07

Tripoli, Libya
Tel +218 21 335 1026
Fax +218 21 335 1257

Jakarta, Indonesia
Tel +62 21 573 57 33
Fax +62 21 573 59 23

London, United Kingdom
Tel +44 207 845 84 00
Fax +44 207 845 84 01

Latin America
São Paulo, Brazil
Tel +55 11 3093 2800
Fax +55 11 3093 2801

Kuala Lumpur, Malaysia
Tel +60 3 21 63 02 33
Fax +60 3 21 63 02 11

Central and Eastern Europe
Warsaw, Poland
Tel +48 22 627 05 28
Fax +48 22 627 05 35

Santiago de Chile, Chile
Tel +56 22 78 78 78
Fax +56 22 78 79 79

Moscow, Russia
Tel +7 495 797 53 67
Fax +7 495 797 53 66

Mexico City, Mexico
Tel +52 55 5281 02 90
Fax +52 55 5281 32 36

Singapore, Singapore
Tel +65 67 37 50 77
Fax +65 67 33 58 15
Bangkok, Thailand
Tel +66 2 610 43 00
Fax +66 2 610 43 01
Hanoi, Vietnam
Tel +84 4 943 68 85
Fax +84 4 943 68 72

EADS Annual Review 2005

Addresses

55

Corporate details

Financial calendar 2006

Full year 2005 results release:
8th March 2006
North America Investor Forum:
13th March 2006
New York, USA
Annual General Meeting:
4th May 2006,
Amsterdam, The Netherlands

Investor Relations contact:
Toll-free telephone numbers:
France: 0 800 01 2001
Germany: 00 800 00 02 2002
Spain:
00 800 00 02 2002
Shareholders from other countries
can contact us at:+33 1 41 33 90 94

First Quarter 2006 results release:
16th May 2006

An e-mailbox is dedicated toanswering shareholders’ enquiries:
ir@eads.com

Shareholders’ Information meeting:
3rd July 2006,
Paris, France

or visit our website at:www.eads.com

First Half 2006 results release:27th July 2006
Global Investor Forum:
21st and 22nd September 2006,
Hamburg, Germany
Third Quarter 2006 results release:
8th November 2006

56

EADS Annual Review 2005

Financial calendar 2006

Welcome

The complete EADS Annual Report Suite2005 consists of:Annual Review
2005 (1)

EADS is a global leader in aerospace,defence and related services.
Financial Statements andCorporate Governance2005 (2)Business, Legal andCorporate Responsibility
2005 (3)(available on request)The online version of the Annual
Report Suite 2005 is available atwww.reports.eads.com

May this ‘EADS at a glance 2005’
supplement serve you as a log bookof a journey around the world of EADS.

Designed and produced by williams and phoa.
Printed by Kriechbaumer.
Copywriting by The Clerkenwell Consultancy.

Cover image
Airbus A380

European Aeronautic Defence
and Space Company EADS N.V.
Le Carré, Beechavenue 130–132
1119 PR Schiphol-Rijk
The Netherlands

This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.

1

www.eads.com

In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France

European Aeronautic Defence and Space Company EADS N.V.

In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain

EADS
Annual Review
2005

Leading
Edge

EADS Annual Review 2005