BUSINESS,
LEGAL
AND
CORPORATERESPONSIBILITY
2006

3
Book

The complete EADS Annual Report Suite 2006 consists of:

ANNUAL REVIEW 2006

Book

1
Book

2
Book

3

TAKE
A
LOOK

Management & Responsibility

FINANCIALSTATEMENTSANDCORPORATEGOVERNANCE
2006

FINANCIAL STATEMENTS ANDCORPORATE GOVERNANCE 2006

BUSINESS,LEGALANDCORPORATERESPONSIBILITY
2006

BUSINESS, LEGAL AND
CORPORATE RESPONSIBILITY 2006

EADS
Annual Review
2006

2

The Full Picture: Transformation
The Business Year 2006
Inside EADS
Useful Information

Registration Document Part 1:
Risk Factors

Book

3

Net Assets Financial Position Results
Corporate GovernanceRegistration Document Part 2:(available on request)

Book

Information on EADS Activities
Corporate Social Responsibility
General Description of the Company
and its Share Capital
Entity Responsible for the Registration Document

The online version of theAnnual Report Suite 2006 is available atwww.reports.eads.com

Back to Contentsbusiness, legal
and corporate
responsibility

EADS
Registration Document – Part 2

EADS Registration Document
Part 2

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Business, legal and corporate responsibility
European Aeronautic Defence and Space Company EADS N.V. (the “Company” or “EADS”) is a Dutch
company, which is listed in France, Germany and Spain. Given this fact, the applicable regulations with respect
to public information and protection of investors, as well as the commitments made by the Company tosecurities and market authorities, are described in this registration document (the “Registration Document”).
This Registration Document was prepared in accordance with Annexe 1 of the EC Regulation 809/2004,
filed in English with, and approved by, the Autoriteit Financiële Markten (the “AFM”) on 25th April 2007
in its capacity as competent authority under the Wet op het financieel toezicht (as amended) pursuant
to the Directive 2003/71/EC. The Registration Document is composed of two parts which must be read
together: (i) this document entitled Business, Legal and Corporate Responsibility – (Registration
Document Part 2) and (ii) the document entitled Financial Statements and Corporate Governance –(Registration Document Part 1). This Registration Document may be used in support of a financialtransaction as a document forming part of a prospectus in accordance with Directive 2003/71/EC only
if it is supplemented by a securities note and a summary approved by the AFM.

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y

Back to Contentsbusiness, legal
and corporate
responsibility
1234

information on eads activities
Corporate social responsibility
general descriptionof the company and its share capital
entity responsible
for the registration document

EADS
EADS BUSINESS, LEG AL AND CORPORATE RESPONSIBILIT YG E N E RAL TABLE OF CONTENTs /REGI S TRATION DOCUMENT - PARTs 1 and 2

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FINANCIAL STATEMENTS
AND CORPORATE GOVERNANCE
Registration Document - PART 1
Nonactive summary. Please, go to Book 2
Risk Factors

71.

Financial Market Risks82.

Business-Related Risks10

3.

Legal Risks

14

4.

Industrial and Environmental Risks

15

Net Assets - Financial
position - Results

17

1
1.1

Management’s Discussion and Analysisof Financial Condition and Results
18of Operations

1.1.1

Certain Information
18
Exchange Rate Information
18
Ratings
18
1.1.2 Overview19
1.1.2.1 Significant Programme and Restructuring Developments in 2006
19
1.1.2.2 Outlook20
1.1.3 Critical Accounting Considerations, Policies
21and Estimates
1.1.3.1 Scope of and Changes in Consolidation Perimeter 21
1.1.3.2 Employee Benefits — IAS 19
22
1.1.3.3 U.K. Pension Commitments22
1.1.3.4 Fair Value Adjustments
23
1.1.3.5 Impairment of Assets23
1.1.3.6 Research and Development Expenses
24
1.1.3.7 Accounting for Hedged Foreign Exchange Transactions in the Financial Statements
24
1.1.3.8 Foreign Currency Translation
25
1.1.3.9 Accounting for Sales Financing Transactionsin the Financial Statements
25
1.1.4 Measurement of Management’s Performance
26
1.1.4.1 Order Backlog
26
1.1.4.2 Use of EBIT*
28
1.1.4.3 EBIT* Performance by Division
28
1.1.5 EADS Results of Operations31
Consolidated Revenues
31
Consolidated Cost of Sales
34
Consolidated Selling and Administrative Expenses 34
Consolidated Research and Development Expenses35
Consolidated Other Income and Other Expenses 35

EADS BUSINESS, L EGA L AND COR P O RATE R ESP ONSIB I LIT Y

Consolidated Share of Profit from Associates
Accounted for under the Equity Method andOther Income (Expense) from Investments
35
Consolidated Interest Result
35
Consolidated Other Financial Result
36
Consolidated Income Taxes
36
Consolidated Minority Interests
36
Consolidated Net Income (Profit for the Period
Attributable to Equity Holders of the Parent)
36
Earnings per Share (EPS)
37
1.1.6 Changes in Consolidated Total Equity(including Minority Interests)
37
IAS 39 Related Impact on AOCI
38
Currency Translation Adjustment Impact on AOCI 39
1.1.7 Liquidity and Capital Resources
39
1.1.7.1 Cash Flows
39
1.1.7.2 Consolidated Cash and Cash Equivalents
41
1.1.7.3 Consolidated Financial Liabilities
42
1.1.7.4 Sales Financing42
1.1.8 Hedging Activities
46
1.1.8.1 Foreign Exchange Rates
46
1.1.8.2 Interest Rates
48

1.2

Financial Statements

1.2.1

EADS N.V. Consolidated Financial Statements (IFRS) 50
Basis of Presentation
56
Notes to the Consolidated Statementsof Income (IFRS)
67
Notes to the Consolidated Balance Sheets (IFRS) 76
Notes to the Consolidated Statementsof Cash-Flows (IFRS)
95
Other Notes to the Consolidated Financial
Statements (IFRS)
97

Appendix: Information on principal
investments - Consolidation Scope

49

113

	Auditors‘ Report on the Consolidated Financial
119Statements (IFRS)
Report on the Consolidated Financial Statements 119
Report on other legal and regulatory requirements120
1.2.2 Company Financial Statements
121

1.3

Statutory Auditors’ Fees

132

1.4

Information Regarding
the Statutory Auditors

133

GENERAL TABLE OF CONTENTs/REGI STRATION DOCUMENT - PARTs 1 and 2

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Nonactive summary. Please, go to Book 2

2

Corporate
Governance

135

2.1

Management and Control

137

2.1.1

Board of Directors, Chairmen
and Chief Executive Officers

137

2.1.2

Audit Committee

145

2.1.3

Remuneration and Nomination Committee

146

2.1.4

Executive Committee

146

2.1.5 Internal Control and Risk Management Systems
2.1.5.1 Overview
2.1.5.2 RM System
2.1.5.3 IC System
2.1.5.4 Business Processes Covered by the IC System

2.2

Interests of Directors
and Principal Executive Officers

2.2.1

Compensation Granted to Directors
and Principal Executive Officers
2.2.1.1 General Principles
2.2.1.2 Compensation of the Membersof the Board of Directors
2.2.1.3 Compensation of the Members of the Executive
Committee
2.2.2 Long Term Incentives Granted
to the Two Chief Executive Officers

3

Financial
Calendar

167

2007 Calendar of Financial Communication 168

148
148
150
150
151

154
154
154
154
157

158

2.2.3

Related Party Transactions

158

2.2.4

Loans and Guarantees Granted to Directors

158

2.3

Employee Profit Sharing
and Incentive Plans

159

2.3.1

Employee Profit Sharing
and Incentive Agreements

159

2.3.2 Employee Share Ownership Plans
2.3.2.1 ESOP 2000
2.3.2.2 ESOP 2001
2.3.2.3 ESOP 2002
2.3.2.4 ESOP 2003
2.3.2.5 ESOP 2004
2.3.2.6 ESOP 2005
2.3.2.7 ESOP 2007
2.3.3 Long Term Incentive Plans

159
159
159
160
160
160
161
161
162

For the Contents of this bookplease turn to the next page➔

EA DS B USINESS, L EGA L AN D CORP O RATE R ESPONSIB I L IT Y

GENE R AL TABLE OF CONTENTs /REGIST RATION DOCUMENT - P ARTS 1 an d 2

Back to Contents

EADS BUSINESS, LEGALAND CORPORATE RESPONSIBILITY
Registration Document - PART 2

1
1.1

Information on EADS
Activities

7

Presentation of the EADS Group8

1.1.1	Overview8

1.1.2	Airbus

14

1.1.3	Military Transport Aircraft23

1.1.4	Eurocopter

26

1.1.5

Defence & Security

2.2.2	Sustaining and Protecting Innovation
2.2.2.1 Innovation Strategy
2.2.2.2 Protecting Innovation: Intellectual Property
2.2.3	Supplier Management: Fostering a Mutually
Beneficial Relationship with EADS’ Suppliers
2.2.3.1 Policy
2.2.3.2 Organisation
2.2.3.3 Performances and Best Practices

64
64
67

2.3

Environmental Care

71

30

2.3.1

Policy72

1.1.6	Astrium38

2.3.2	Organisation

72

1.1.7	Other Businesses

44

2.3.3

Performance and Best Practices73

1.1.8	Investments

46

1.1.9	Insurance

47

2.4

1.1.10	Legal and Arbitration Proceedings

48

Human Resources: Employer –Employee Relationship

75

1.1.11	Incorporation by Reference

49

2.4.1

Workforce Information and Organisation of Work 75

2.4.2	Human Resources Organisation

1.2

2
2.1

Recent Developments

Corporate Social
Responsibility

49

53

Business Ethics

56

2.1.1
Proper Business Practices56
2.1.1.1 Policy
56
2.1.1.2 Organisation
56
2.1.1.3 Performance and Best Practices57
2.1.2	Export Control Compliance
58
2.1.2.1 Policy
58
2.1.2.2 Organisation
58
2.1.2.3 Performance and Best Practices59
2.1.3	Compliance with Law Regarding all EADS’ Activities59
2.1.3.1 Policy
59
2.1.3.2 Organisation
60
2.1.3.3 Performance and Best Practices60
2.1.4	Corporate Governance Standards
61
2.1.4.1 Policy
61
2.1.4.2 Organisation
61

2.2

Sustainable Growth

2.2.1 Product Quality and Customer Satisfaction
2.2.1.1 Policy
2.2.1.2 Organisation
2.2.1.3 Performance and Best Practices



68
68
68
69

E A D S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B ILIT Y

62
62
62
62
62

77

2.4.3	Human Resources Policies and Performance
77
2.4.3.1 Health and Safety: Providing a Safe Workplacefor EADS Employees and Subcontractors
77
2.4.3.2	Caring for EADS Employees and EADS Know-How 78
2.4.3.3	Diversity: Commitment to Ensure Equal
Opportunity for all EADS Employees
78
2.4.3.4	Career Development: Efficient Managementof Skills and Know-How
80
2.4.3.5 Employee Relations: A Proactive Dialogue
82

2.5

Corporate Citizenship

2.5.1	Maintaining an Open Dialogue with EADS’
Stakeholders
2.5.1.1 Policy
2.5.1.2 Organisation
2.5.1.3 Performance and Best Practices
2.5.2	Encompassing Community Interests
in EADS’ Global Strategy
2.5.2.1 Policy
2.5.2.2 Organisation
2.5.2.3 Performance and Best Practices

84
84
84
84
84
85
85
85
85

GENE RAL TABLE OF CONTENTs/R EGIST R ATION D OCUMENT - P ARTS 1 an d 2

Back to Contents

3
3.1

General Descriptionof the Company
and its Share Capital

3.3.4	Changes in the Shareholding of the Company
Since its Incorporation

87

General Description of the Company 88

3.1.1	Commercial and Corporate Names,
Seat and Registered Office88

3.1.2	Legal Form

88

3.1.3	Governing Laws
88
3.1.3.1 Periodic Disclosure Obligations89
3.1.3.2 Ongoing Disclosure Obligations90
3.1.4 Date of Incorporation and Duration of the Company92

3.3.5

Persons Exercising Control over the Company

3.3.6	Simplified Group Structure Chart

108
110
110

3.3.7 Purchase by the Company of its Own Shares
112
3.3.7.1	Dutch Law and Information on Share Buy-Back
Programmes
112
3.3.7.2 French Regulations112
3.3.7.3 German Regulations112
3.3.7.4 Spanish Regulations113
3.3.7.5 Description of the Share Buy-Back Programme to
be Authorised by the Annual General Shareholders’Meeting to be held on 4th May 2007
113

92

3.4

Dividends

3.1.6	Commercial and Companies Registry

92

3.4.1

3.1.7	Inspection of Corporate Documents

92

Dividends and Cash Distributions Paid
Since the Incorporation of the Company

116

3.1.8	Financial Year

93

3.4.2

Dividend Policy of EADS

116

3.1.9	Allocation and Distribution of Income
3.1.9.1 Dividends
3.1.9.2 Liquidation
3.1.10	General Meetings
3.1.10.1 Calling of Meetings
3.1.10.2 Right to attend Meetings
3.1.10.3 Majority and Quorum
3.1.10.4 Conditions of Exercise of Right to Vote
3.1.11 Disclosure of Holdings

93
93
93
93
93
94
94
95
95

3.1.12	Mandatory Tender Offers
3.1.12.1 Takeover Directive
3.1.12.2 Articles of Association
3.1.12.3 Spanish Law

96
96
97
98

3.1.5	Objects of the Company

3.2

98

3.2.1	Modification of Share Capital or Rights
Attaching to the Shares

98

3.2.2	Issued Share Capital

99

3.2.3	Authorised Share Capital

99

3.2.4	Securities Granting Access to the Company’s
Capital

99

3.2.5	Changes in the Issued Share Capital Since
Incorporation of the Company

100

3.3

101

Shareholdings and Voting Rights

3.3.1	Shareholding Structure

101

3.3.2

103

Relationships with Principal Shareholders3.3.3	Form of Shares

3.4.3	Unclaimed Dividends

117

3.4.4	Taxation

117

3.5

4

Annual Securities Disclosure Report 118

Entity Responsible
for the Registration
Document

119

4.1

Entity Responsible
for the Registration Document

4.2

Statement of the Entity Responsible
for the Registration Document
120

4.3

Information Policy

120

4.4

Undertakings of the Company
regarding Information

121

120

Contents for this book

General Descriptionof the Share Capital

116

108

EADS BUSINESS, LEG AL AND CORPORATE RESPONSIBILIT YBack to Contents



EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y

Back to Contents

1

Information
on EADS Activities

1.1

Presentation of the EADS Group

8

1.1.1
1.1.2
1.1.3
1.1.4
1.1.5
1.1.6
1.1.7
1.1.8
1.1.9
1.1.101.1.11

Overview
Airbus
Military Transport AircraftEurocopter
Defence & Security
Astrium
Other Businesses
Investments
Insurance
Legal and Arbitration Proceedings
Incorporation by Reference

8
14
23
26
30
38
44
46
47
48
49

1.2

Recent Developments

EADS
EADSBUSINESS,
BUSINESS,LEG
LEG
ALALAND
ANDCORPORATECORPORATERESPONSIBILITRESPONSIBILIT
YY

49



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INFO R MATION ON EA DS ACTIVITIES
1.1

Presentation of the EADS Group

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1.1	 Presentation of the EADS Group
1.1.1	Overview
Due to the nature of the markets in which EADS operates and theconfidential nature of its businesses, any statements with respect to
EADS’ competitive position set out in paragraphs 1.1 through 1.1.8
below have been based on EADS’ internal information sources,
unless another source has been specified below.
With consolidated revenues of €39.4 billion in 2006, EADS isEurope’s premier aerospace and defence company and thesecond largest aerospace and defence company in the world. In
terms of market share, EADS is among the top two
manufacturers of commercial aircraft, civil helicopters,commercial space launch vehicles and missiles systems, and aleading supplier of military aircraft, satellites and defence
electronics. In 2006, it generated approximately 75% of its total
revenues in the civil sector and 25% in the military sector.

2006 Highlights
In spite of some impressive successes, 2006 was a very
challenging year for the Group. In particular, productiondifficulties for the A380 led to delays in its projected delivery
schedule, with the first A380 currently scheduled for delivery
in October 2007. The resulting costs and charges associatedwith these delays will impose a significant burden on EADS’
future financial performance. This has increased the need forcost savings in light of continued U.S. dollar weakness andadditional development costs for future programmes. In
response, the management of EADS (the “Management”) has
announced the implementation of the Power8 programme at
Airbus, which is designed to reduce costs, save cash anddevelop new products faster. The programme aims to achieve
annual cost savings of at least €2 billion from 2010 onwards
and deliver approximately €5.0 billion in cumulative cash
savings by 2010.
Despite these setbacks, the A380 successfully completed its
flight test campaign during 2006 and received type certificationby the European Aviation Safety Agency (EASA) and Federal
Aviation Administration (FAA), demonstrating the technicalsoundness of the all-new double-decker. EADS’ Board of
Directors also gave Airbus the go-ahead for the industrial
launch of the A350XWB (Xtra Wide Body), a new medium
capacity long-range extra wide-body family. The A350XWB
will be available in three basic passenger versions that
accommodate between 270 to 350 passengers, with the first

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y

entry into service planned for 2013. The A350XWB replaces
the former A350 programme at Airbus, launched in 2005.
In addition, EADS’ financial position remains sound despite theA380-related charges, due to the strong commercial
performance of Airbus delivery programmes and the helicopter,defence and space businesses. The record order book of€262.8 billion at the end of 2006 (consisting of €209.9 billion
in commercial business and €52.9 billion in defence) constitutes
a considerable asset for EADS’ future.
EADS’ business environment in 2006 was characterised byanother very strong year for the aviation industry. In 2006, thetwo leading aircraft manufacturers combined secured more than
1,874 new orders for aircraft of 100 seats or more, second only
to the record set in 2005, when 2,140 new aircraft wereordered. As recently as 2003, orders touched a cyclical low of524. According to the International Civil Aviation
Organisation, air traffic grew at an annual rate of approximately
5% in 2006, with a growth rate of 4.8% expected in futureyears. Despite these favourable market conditions, the overallbusiness environment remains volatile. The recent appreciationof the euro against the U.S. dollar places European companies at
a competitive disadvantage, while high oil prices put pressure
on EADS’ customers. Instability in the Middle East as well as
global terror threats add elements of uncertainty, while indefence, procurement budgets remain under pressure. At thesame time, new governmental initiatives to strengthen defenceand homeland security capabilities in order to counter increasing
threats may create new opportunities for the long-term.
2006 was Airbus’ second best year ever in terms of orders, with
824 gross orders (compared to the industry record of 1,111 grossorders set by Airbus in 2005). As a result of this strong sales
performance, Airbus has increased its backlog by 17%, to2,533 aircraft at the end of 2006. A large part of the year’s sales
tally was for Airbus’s highly popular single aisle family, with a
total of 673 orders taken from 47 customers, including a record
order for 150 aircraft from China Aviation Supplies Import andExport Group Corporation (CASGC). Airbus also delivered
434 aircraft in 2006 (378 in 2005), its highest level ever. Total
deliveries now stand at 4,564 aircraft. Finally, EADS became
the sole owner of Airbus in October 2006, when it acquired
BAE Systems’ 20% stake in Airbus for €2.75 billion.

INFORMATION ON EADS ACTIVITIES
1.1

1 2

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Presentation of the EADS Group

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In 2006, Eurocopter secured its position as the world’s leading
helicopter manufacturer with a total of 381 new helicopter
deliveries for military and civil helicopters. With a record orderintake of 615 new helicopters, Eurocopter’s backlog reached ahistorical high of €11 billion at the end of 2006. Eurocopter
made a decisive breakthrough in the U.S. military market inparticular, with the U.S. Army selecting the UH-145 (a versionof the commercial EC 145) as its next-generation lightutility helicopter.
Military Transport Aircraft focused primarily on managing theindustrial processes of its two new aircraft programmes during
2006, each of which are at important stages of development. The
first A330 Multi-Role Tanker Transport (MRTT) air-to-air
refuelling aircraft is scheduled to be delivered in 2008, while thefirst delivery of the A400M is scheduled for 2009. The A400M
programme completed four industrial milestones during the year,
including the completion of the first whole wing. The medium
and light aircraft business won orders for 19 aircraft during 2006,
including 12 C-295 medium-weight transport and maritime
patrol aircraft for the Portuguese air force.
Defence & Security continued to improve its profitability in2006 and moved major programmes and projects—including
Eurofighter and MBDA’s Storm Shadow, Brinstone, Taurus,
MICA and Aster—into the production phase. It also succeeded
in enhancing its position in the area of coastal and maritime
surveillance, and strengthened more generally its position in
the maritime sector. Further, the acquisition of professional
mobile radio capabilities made a positive contribution torevenues in 2006 and offset the integration of EADS’ German
missile house into MBDA.
Finally, Astrium (“Astrium”) had a strong year in 2006 as it
built on the full effect of five years of industrial restructuring.
The main drivers of this success were the ramp-up of Ariane 5
production and further development progress on military
satellite communication systems, such as Skynet 5 and Satcom
BW. Astrium also won orders for seven new telecom satellites.
Milestones included delivery of the Columbus space laboratory
to the European Space Agency (ESA) and the first fully
successful test flight of the M51 ballistic missile.

Strategy
In order to maximise value for its shareholders and to balanceits portfolio, Management intends to reinforce EADS’ position
as a leader in major global aerospace and defence markets.
Beyond implementing solutions for current operational
challenges, EADS will continue to focus on providing superiorvalue to its customers through innovative product and service
solutions. The Group has defined four long-term strategic goals

aimed at achieving sustainable value creation for its
shareholders:●Target a long-term leading position in commercial aircraft:
Despite the difficulties encountered in 2006, EADS willcontinue to strive for leadership in the commercial aircraft
market in terms of product innovation and customer
satisfaction. In particular, it will seek to offer a complete
product portfolio to its customers, while at the same timefurther developing its international partnerships. The fullcontrol of Airbus enables further integration within EADS
and additional long-term efficiency potential.

●

Develop strong growth drivers to improve the portfolio balance:
Faced with governmental procurement budget constraints
and the scarcity of new development programmes in Europe,
EADS intends to pursue its growth strategy by taking a
global approach, and will accelerate efforts to offer new
solutions by leveraging its broad base of existing capabilities
and products. The Group will consider all options forfurther growth, including targeted acquisitions thatstrengthen long-term organic potential, enhance its overall
competitive position and add capabilities to its portfolio.
Management is particularly focused on increasing EADS’
presence in services markets. EADS currently has a young
and rapidly developing commercial and defence fleet that hasentered into service, which it will seek to support
throughout its life cycle.

●

Become a truly global industrial group: To ensure continued
access to the growth potential of markets where thetraditional commercial approach has reached its limits, EADS
is designing a long-term industrial strategy that incorporates
an industrial footprint in key markets around the world. Thisapproach is also intended to reduce the Group’s exposure to
U.S. dollar weakness through enhanced global sourcing andoffshoring of production.

●

Restore adequate profitability and preserve long-term financial
soundness: By acting to reduce costs and streamline its
industrial organisation through programmes such as Power8,
EADS will strive to rise above its immediate industrial
challenges and ultimately re-establish a level of profitability
attractive to its shareholders. EADS will also seek to tailor
its funding policy to meet the long-term resource demands
associated with development of new products in a way that
ensures an optimal balance sheet structure and takes into
account a potential downturn in commercial aircraft demand.
The non-Airbus businesses have continued their overall
positive trends, with a record EBIT* of €810 million in 2006.
The target is to further improve this, both in relative andabsolute terms.

To achieve the strategic objectives above, further integration ofGroup operations will be paramount. Accordingly, the Groupwill seek to develop a common approach to marketing and

EADS BUSINESS, LEG AL AND CORPORATE RESPONSIBILIT Y

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1.1

Presentation of the EADS Group

Back to Contentsemphasise technology and process sharing in order to stimulate
growth and generate cost savings. EADS management has also
identified three main growth and profitability drivers for the
future. These are defined as the Triple I’s of EADS: Innovation,
Internationalisation and Improvement.
Innovation – Focus on all aspects of technology
and offer new solutions
Innovation in product, technology, manufacturing and customer
offerings will define EADS’ future. With development cycles
shortening and new competitors emerging in all fields, EADS
must maintain its technological edge and cover a broad
spectrum of capabilities in order to remain a market leader.
Compared to its peers, EADS has consistently devoted moreresources to research and development, both in absolute
numbers and as a percentage of sales. In 2006, EADS spentapproximately €2.5 billion in self-financed research anddevelopment, equivalent to over 6% of its revenues. It also
strengthened its technology department through theappointment of a new Chief Technical Officer, who will report
directly to the CEOs and members of the Executive Committee.
To maintain its innovative edge, EADS has set challenging
targets for future technology innovation. It will seek tosystematically employ the latest digital design and engineering
tools in order to complete major platform developments more
quickly, and will seek to accelerate the pace at which it reviews
its core technologies so as to close gaps against the competition.
The Group will also increase the number of technologicalprogrammes developed in cooperation with academic andindustrial partners worldwide.
In the commercial arena, the growth of businesses such as
Eurocopter and Airbus will depend on their ability to face suchchallenges as environmental issues, shortage of oil supply or
increasing expectations in security and safety. Future key
technologies such as composite materials, advanced aeronautic
research and advanced PLM (Product Lifecycle Management)
tools build the backbone of tomorrow’s market leadership.
Indeed, in order to leverage on these technologies, thosedivisions need to build on the combination of know-how andresources available Group-wide.
In the defence and space sectors, customer demand has been
influenced by the ongoing transformation of U.S. and European
defence forces and public safety agencies, as well as the need formore efficient defence spending. As a result, EADS must offer
the latest solutions in lead system capability for defence andhomeland security programmes (such as C4ISR), bordersecurity, extended air defence, unmanned aerial vehicles andspace applications, while simultaneously building on existing

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successful platforms and military derivatives of civilian
products.
In addition to offering the latest systems solutions, EADS will
also focus on offering the most innovative services solutions inorder to broaden its programme leadership. In particular, EADS
intends to expand its outsourced service offering based on the
recent experience it has gained through long-term contract
management.
Internationalisation – Becoming a Global Industrial GroupIn order to gain a foothold in certain countries, having a trueindustrial presence is often decisive. Such development must beorchestrated at the Group level in order to anticipate needs
more quickly, generate synergies and ensure that business units
are employing a cohesive strategy.
Consistent with this approach, EADS is seeking to establish
itself as a strong local player in key markets such as the U.S.,
China, Russia, South Korea and India. EADS’ implementationof a long-term vision and industrial footprint in these markets
is aimed at establishing long-term market access, while
benefiting from high market growth potential, technology
potential and natural hedging, risk-sharing opportunities andstructural cost advantages whenever possible. In 2006, EADS
pursued efforts to strengthen its industrial presence in key
markets by making targeted investments and entering into
strategic partnerships.
In the U.S., the goal is to establish a firm presence as a valued
corporate citizen in the world’s largest defence and homeland
security market. EADS is in the midst of pursuing a four-pillar
strategic approach: creating a U.S. industrial presence,developing transatlantic co-operations, acquiring small/midsized defence companies and cooperating with U.S. prime
contractors. EADS has partnered with key players in themarket: the Military Transport Aircraft division with Raytheon
for the Future Cargo Aircraft campaign, Northrop Grumman
for the KC-30 Tanker and Eurocopter with Sikorsky for theLight Utility Helicopter (LUH) programme. The year 2006
marked a key milestone, as the U.S. Army selected Eurocopter
to act as prime contractor for its LUH programme, with apotential total life-cycle value of over $2 billion.
China has been the pioneer country for the implementation of
EADS’ long-term industrial approach, with industrial
cooperation progressively increasing over the past several years.
Besides signing an agreement with a Chinese consortium toestablish an A320 final assembly line in China during 2006,
EADS worked on implementing the key strategic agreements it
had signed with Chinese partners in prior years. For example,
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committed to its long-term strategic partnerships in China inorder to sustain its leadership in the commercial aircraft market.

prerequisite for helping to ensure success and profitability inthe future.

In South Korea, Eurocopter and KAI are in the development
phase of a brand-new, 8 ton, helicopter for military transport.
This project is expected to serve as a strong foundation forfurther expansion of EADS’ position in the country.

Successful implementation and execution of improvement plansand projects throughout all divisions and corporate departments
will therefore be given the highest priority in the years to come.

India has already proven to be a strong growth market forcommercial opportunities (accounting for approximately 7% of
total EADS backlog), and in September 2006 the Group decided
to develop a technology centre in the country. This will allow
EADS to expand its local presence and at the same provide
support to its customers. The current challenge is to build onthese efforts in order to gain a foothold in defence, which
represents the largest share of India’s market potential.

Organisation of EADS Businesses

The development of Russia’s economy is promising, and theRussian aerospace and defence industry has grown stronger as it
restructures and consolidates. EADS has a 10% stake in Irkut,
which is a key player in the future industrial landscape of
Russia. EADS has also formed a joint venture for a freighter
conversion in Russia. Finally, EADS and leading Russian
aerospace industry executives have formed a strategic committee
in order to coordinate their mutual interests going forward.
Improvement – Delivering EADS’ backlog on-time and at
optimal cost levels, with a focus on quality and customer
satisfaction
Transforming the Group’s record backlog of €262.8 billion into
benchmark profitability will depend on the Group’s ability to
improve operational performance, measured in terms of time,
cost and quality, both within EADS and at its key suppliers.
Management has prioritised the successful implementation andexecution of improvement plans and projects throughout theGroup. Improvements in operational performance will requirereal-time visibility of the status of all operational parts and dataflows with EADS and its key suppliers. These efforts will besupported by the integrated planning and execution of closedloop collaborative processes and tools designed to support
effective decision-making and to enable the launch of earlyrecovery actions.
Development of the A380 has indicated the need for change
and improvement. Accordingly, Airbus will seek to integrate its
own internal processes and, at the same time, make itself amore integrated part of the EADS Group. Airbus is currently
implementing a new competitiveness programme: Power8. This
programme looks at all aspects of the company to make itleaner, more integrated, more efficient and more productive.
The need to improve is all the more imperative due to a marked
weakening of the U.S. dollar against the euro. Power8 is the

EADS’ principal businesses fall under five Divisions:(1) Airbus, (2) Military Transport Aircraft, (3) Eurocopter,(4) Defence & Security and (5) Astrium (formerly EADS Space).
The chart set out in “— 3.3.6 Simplified Group Structure
Chart” illustrates the allocation of activities among these five
Divisions.
AirbusAirbus is one of the world’s two leading suppliers ofcommercial aircraft of more than 100 seats. Since it was
founded in 1970 up to the end of 2006, Airbus has received
orders for 7,097 aircraft from approximately 250 customers
around the world. Its market share of annual deliveries
worldwide has grown from 15% in 1990 to 52% in 2006,
surpassing its rival Boeing for the fourth time. At
31st December 2006, its backlog of orders (2,533 aircraft) stoodat 79.9% of total EADS worldwide backlog. Gross order intake
was 824 aircraft and after accounting for cancellations, net orderintake for 2006 was 790 aircraft. In 2006, the Airbus Division
earned revenues of €25.2 billion, representing 63.9% of EADS’
total consolidated revenues. See “— 1.1.2 Airbus”.
Military Transport Aircraft
The Military Transport Aircraft (MTA) Division manufacturesand sells light and medium military transport aircraft and is
responsible for the development of the European heavy militarytransport A400M project. In addition, the MTA Division
produces and sells mission aircraft, which are derived fromexisting platforms and dedicated to specialised military tasks
such as maritime surveillance, antisubmarine warfare and inflight refuelling capabilities. The MTA Division also designs
and manufactures aerostructure elements. In 2006, the MTA
Division earned revenues of €2.2 billion, representing 5.6% of
EADS’ total consolidated revenues. See “— 1.1.3 MilitaryTransport Aircraft”.
Eurocopter
Eurocopter is one of the world’s leading producers ofhelicopters and the leader in the European civil and militaryhelicopter market. Management expects Eurocopter sales in the
military market to increase substantially due to the

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Back to Contentscommencement of delivery of the NH90 military transport
helicopter and the Tiger attack helicopter, the strong backlog inmilitary orders with a number of European governments andthe increasing demand in military and para-military export
markets. In 2006, Eurocopter captured 50% of the worldwide
market for civil helicopters. In 2006, the Eurocopter Division
earned revenues of €3.8 billion, representing 9.6% of EADS’
total consolidated revenues. See “— 1.1.4 Eurocopter”.
Defence & Security
The Defence & Security Division (the “DS Division”) is activein the field of integrated defence and security solutions
including missile systems, combat aircraft, defence electronics,
military communications and “homeland security”. Its
customers are military forces and law enforcement agencies
worldwide. The Military Air Systems unit is a leading partnerin the Eurofighter consortium and is also active in the UAV
field. The DS Division is also a leading supplier of defence
electronics in Europe and plays a significant role in the secureand encrypted military communications market. In 2006, theDS Division earned revenues of €5.9 billion, representing
14.9% of EADS’ total consolidated revenues.
See “— 1.1.5 Defence & Security”.

Astrium
Astrium is the third-largest space systems manufacturing
company in the world after Boeing and Lockheed Martin, andthe leading European supplier of satellites, orbital
infrastructures, launchers and associated services. Astrium iscomposed of three main business units: Astrium Satellites,
Astrium Space Transportation and Astrium Services, throughwhich it designs, develops and manufactures satellites, orbital
infrastructures and launcher systems and provides space
services. Astrium also provides launch services through its
shareholdings in Arianespace, Starsem and Eurockot, as well as
services related to telecommunications and earth observation.
In 2006, Astrium earned revenues of €3.2 billion, representing
8.1% of EADS’ total consolidated revenues.
See “— 1.1.6 Space”.
Investment
Among its significant investments, EADS holds a 46.3% stakein Dassault Aviation, a major participant in the world market
for military jet aircraft and business jets.
See “— 1.1.8 Investments”.

Summary Financial and Operating Data
The following tables provide summary financial and operating data for EADS for the years ended 31st December 2006,
31st December 2005 and 31st December 2004.
Consolidated Revenues for the years ended 31 st December 2006, 2005 and 2004 by Division
Year ended 31st December 2006

Year ended 31st December 2005

Year ended 31st December 2004

Amount in €bn

In percentage*

Amount in €bn

In percentage*

Amount in €bn

In percentage*

Airbus

25.2

62.6%

22.2

64.3%

20.2

62.7%

Military Transport Aircraft

2.2

5.5%

0.8

2.2%

1.3

4.0%

Eurocopter

3.8

9.4%

3.2

9.3%

2.8

8.6%

Defence & Security

5.9

14.6%

5.6

16.4%

5.4

16.7%

Astrium

3.2

8.0%

2.7

7.8%

2.6

8.0%

100%

34.5

100%

32.3

100%

Total Divisional Revenues

40.3

Other Businesses

1.3

1.1

1.1

Headquarters/Eliminations**

(2.1)

(1.4)

(1.6)

Total Consolidated
Revenues

39.4

34.2

31.8

(*) Percentage of total divisional revenues before headquarters/eliminations.
(**) Includes inter-company eliminations and headquarters sales.

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Consolidated Revenues by Geographical Area for the years ended 31 st December 2006, 2005 and 2004
Year ended 31st December 2006
Amount in €bnYear ended 31st December 2005

Year ended 31st December 2004

In percentage*

Amount in €bn

In percentage*

Amount in €bn

In percentage*

Europe

17.1

43.6%

13.6

39.7%

14.6

45.7%

North America

9.4

23.9%

9.0

26.4%

8.7

27.4%

Asia/Pacific

7.9

19.9%

7.7

22.6%

4.9

15.6%

5

12.6%

3.9

11.3%

3.6

11.3%

39.4

100.0%

34.2

100.0%

31.8

100.0%

Rest of the World**
Total(*) Percentage of total revenues after eliminations.
(**) Including the Middle East.

Consolidated Orders Booked for the years ended 31 st December 2006, 2005 and 2004
Year ended 31st December 2006

Year ended 31st December 2005

Year ended 31st December 2004

Amount in €bn

In percentage***Amount in €bn

In percentage***Amount in €bn

In percentage***

Airbus**

53.4

76.8%

78.3

84.5%

25.8

58.2%

Military Transport Aircraft

1.6

2.3%

1.8

2.0%

1.2

2.6%

Orders booked*

Eurocopter

4.9

7.1%

3.5

3.8%

3.2

7.3%

Defence & Security

5.2

7.5%

6.7

7.2%

8.5

19.1%

Astrium
Total Divisional
Orders

4.4

6.3%

2.3

2.5%

5.7

12.8%

69.5

100.0%

92.6

100.0%

44.4

100.0%

Other Businesses

1.5

1.9

1.1

Headquarters/Eliminations**

(1.9)

(2)

(1.4)

Total

69.1

92.6

44.1

(*) Without options.
(**) Based on catalogue prices.
(***) Before headquarters/eliminations.

Consolidated Backlog for the years ended 31 st December 2006, 2005 and 2004****
Year ended 31st December 2006

Year ended 31st December 2005

Year ended 31st December 2004

Amount in €bn

In percentage***Amount in €bn

In percentage***Amount in €bn

In percentage***

Airbus**

210.1

77%

202.0

77%

136.0

70%

Military Transport Aircraft

20.3

7%

21.0

8%

19.9

10%

Backlog*

Eurocopter

11.0

4%

10.0

4%

9.1

5%

Defence & Security***

17.6

6%

18.5

7%

17.3

9%

Astrium
Total Divisional
Backlog***

12.3

5%

10.9

4%

11.3

6%

271.3

100%

262.4

100%

193.6

100%

2.2

2.1

1.1

Headquarters/Consolidation(10.8)(11.3)(10.4)

Total

262.8

253.2

184.3

Other Businesses(*)
Without options.
(**) Based on catalogue prices or commercial aircraft activities.
(***) Before “Other Businesses” and “Headquarters/Consolidation”.
(****) For a discussion on the calculation of backlog, see “Part 1/1.1.4.1 Order Backlog”.

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Relationship Between EADS N.V. and the GroupEADS N.V. itself does not engage in the core aerospace, defenceor space business of its Group but coordinates related
businesses, sets and controls objectives and approves majordecisions for its Group. As the parent company, EADS N.V.
conducts activities which are essential to the Group activities
and which are an integral part of the overall management of theGroup. In particular, finance activities pursued by EADS N.V.
are in support of the business activities and strategy of theGroup. In connection therewith, EADS N.V. provides or
procures the provision of services to the subsidiaries of theGroup. General management service agreements have been put

in place with the subsidiaries and services are invoiced on a costplus basis.
For management purposes, EADS N.V. acts through its Boardof Directors, Executive Committee, and Chief Executive
Officers in accordance with its corporate rules and procedures
detailed in “Part 1/Chapter 2 — Corporate Governance”.
Within the framework defined by EADS, each Division,business unit (“BU”), and subsidiary is vested with full
entrepreneurial responsibility.

1.1.2	Airbus
Introduction and Overview
Airbus is one of the world’s two leading suppliers ofcommercial aircraft of more than 100 seats. Since it was
founded in 1970 up to the end of 2006, Airbus has received
orders for 7,097 aircraft from approximately 250 customers
around the world. Its market share of annual deliveries
worldwide has grown from 15% in 1990 to 52% in 2006. In
2006, the Airbus Division of EADS generated revenues of€25.2 billion, representing 63.9% of EADS’ total revenues.
With 434 aircraft deliveries in 2006 (378 in 2005), Airbus wasonce again the largest supplier of commercial aircraft in theworld, surpassing its main rival for the fourth consecutive year.
Airbus received 824 gross orders in 2006 (compared to theindustry record of 1,111 gross orders set by Airbus in 2005).
After accounting for cancellations, net order intake for 2006
was 790 aircraft (compared to 1,055 aircraft in 2005). At
31st December 2006, Airbus’ backlog of orders (2,533 aircraft)stood at 79.9% of total EADS worldwide backlog.
Nonetheless, 2006 proved a challenging year for Airbus, due
primarily to the difficulties it encountered in the installation ofelectrical harnesses for the A380. These difficulties led it totwice revise its delivery schedule for the A380 during 2006, tothe disappointment of its customers. In particular, FedEx
cancelled its order for the freighter version of the A380, theA380F, as a result of the delivery delays. More recently, UPS
announced that it too would cancel its order for the A380F
following Airbus’ announcement that development of the
A380F had been rescheduled. See “Recent Developments”.
From a financial perspective, the delay in A380 production had
a negative effect on Airbus’ earnings before interest and taxes,
pre-goodwill impairment and exceptionals (“EBIT*”) of€2.5 billion in 2006. See “Part 1/1.1 Management’s Discussion

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and Analysis of Financial Condition and Results ofOperations”.
In response to customer recommendations, Airbus also
redesigned its originally proposed A350 aircraft during 2006.
In July 2006, it presented technical specifications for a revised
aircraft family, the A350XWB (Xtra Wide Body).
In December 2006, Airbus formally launched the A350XWB
series and discontinued the original A350 programme. The
A350XWB series will accommodate between 270 to
350 passengers and is expected to enter service in 2013.
In order to meet its future investment needs related todevelopment of the A350XWB and to address other challenges,
Airbus announced the implementation of the Power8
programme on 28 February 2007, as discussed below.
Airbus S.A.S. has been a wholly-owned subsidiary of EADS
since the purchase of BAE Systems’ 20% stake in October 2006.
See “—Organisation of Airbus”.

Strategy
Airbus’ primary goal is to deliver strong results in a sustainedmanner, while commanding at least half of the worldcommercial aircraft market over the long-term. To achieve thisgoal, Airbus is actively:
Developing the most comprehensive line of products in
response to customer needs
Specifically, this currently consists of (i) introducing the A380
into service, the world’s largest passenger aircraft and Airbus’
response to increasing demand for mobility in the world’s

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densely populated growth regions, (ii) the development of the
new A350XWB Family of highly advanced medium capacity
long-range aircraft, (iii) the gradual expansion of relevant
freighter applications across the range of Airbus aircraft,through the launch of the A330-200F and the A320 Passengerto-Freighter in particular, (iv) the continuous improvement ofexisting models’ competitive edge in their respective markets,and (v) the entry into the military business through new
aircraft such as the A400M or the development of militaryderivatives products such as the Multi Role Tanker Aircraft
based on the A330 airframe.
Focusing on key geographic markets
Airbus is seeking to expand its global presence and to increase
its market share in key emerging markets such as China, Russia
and India, and to consolidate its position in the difficult U.S.
airline market, where most carriers are just emerging from asevere financial crisis. As part of this strategy, Airbus hasdeveloped a number of international industrial partnerships.
For example, Airbus signed a framework agreement with aChinese consortium in October 2006 for the establishment ofan A320 Family final assembly line in Tianjin. In May 2006,
Elbe Flugzeugwerke GmbH (EFW), the EADS freighter
conversion centre based in Dresden (Germany), signed apreliminary agreement with MiG and Irkut, two leading
Russian aircraft manufacturers, to develop a conversion businessof Airbus single aisle passenger aircraft into freighter aircraft.
Expanding its customer services offering
Airbus seeks to remain at the forefront of its industry by
expanding its customer services offering to meet customers’
evolving needs. As a result, Airbus has designed acomprehensive portfolio of services named Air+ by Airbus. See“—Products and Services—Customer Service”. It is throughthis interface that Airbus aims to satisfy all of its customers’
pre-delivery and in-service support requirements throughindividually tailored packages.
Attempting to restore its competitive edge by focusing
on flexibility and efficiency
In order to address the challenges posed by U.S. dollar
weakness, increased competitive pressure and the financial
burden related to the A380 delays, and to meet its other future
investment needs, Airbus announced the implementation of thePower8 programme on 28 February 2007.
Power8 consists of nine measures for enhancing profitability:
Reduction of Airbus Overhead Costs, Faster Development,
Lean Manufacturing, Smart Buying, Maximising Cash, Putting
the Customer First, Focusing on the Core Business/

Restructuring the Industrial Set-Up and Streamlining the Final
Assembly Lines. Collectively, these measures are aimed attransforming Airbus’ business model and developing a global
network of partners. The programme aims at the full industrial
integration of Airbus by establishing a new industrialorganisation with transnational centres of excellence replacing
the existing national structures. This transformation will
happen progressively over several years and includes the further
expansion of Airbus’ global footprint.
As part of Power8, Airbus management will implement strong
cost reduction and cash generating efforts with the goal ofachieving contributions to EBIT* of €2.1 billion from 2010
onwards and an additional €5 billion of cumulative cash flowfrom 2007 to 2010. A large part of the cost savings will beachieved through the reduction of Airbus’ current workforce by
10,000 employees (including temporary and on-site supplieremployees). The planned measures to reduce overhead costs, andspecifically headcount, require a provision of €680 million to berecorded in the first quarter of 2007. For further information
related to the Power8 programme, see “Recent Developments”.

MarketCyclicality and Market Drivers
The main factors affecting the aircraft market include passenger
demand for air travel, national and international regulation (andderegulation), and the rate of replacement and obsolescence ofexisting fleets. The performance, competitive posture andstrategy of aircraft manufacturers, airlines, cargo operators andleasing companies as well as wars, political unrest andextraordinary events may also precipitate changes in demandand lead to short-term market imbalances.
In recent years, China and India have emerged as significant
new aircraft markets, and in the next twenty years are expected
to constitute the second and fifth most important markets,
respectively, for aircraft deliveries. As a result, Airbus has
sought to strengthen its commercial and industrial ties in thesecountries. In October 2006, for example, Airbus signed anagreement with the China Aviation Supplies Import and Export
Group Corporation (CASGC) for 150 A320 Family aircraft, as
well as a letter of intent for 20 A350XWBs.
The no-frills/low-cost carriers also continue to emerge as asignificant sector, and are expected to continue growing aroundthe world, particularly in Asia. Airbus single aisle aircraftcontinue to be a popular choice for these carriers, which
ordered a total of 221 single aisle aircraft during 2006. As someof these carriers begin testing the market with new long-hauloperations, demand for Airbus’ range of twin aisle aircraft may
also increase.

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Overall Growth. The long-term market for passenger aircraft
depends primarily on passenger demand for air travel, which isitself primarily driven by economic or gross domestic product(“GDP”) growth, fare levels and demographic growth.
Measured in revenue passenger kilometres, air travel increased
every year from 1967 to 2000, except for 1991 due to the Gulf
War, resulting in an average annual growth rate of 7.9% for theperiod. Demand for air transportation also proved resilient in
the years following 2001, when successive shocks, including
9/11 and SARS in Asia, dampened demand. Nevertheless, themarket quickly recovered, with more than 28% traffic growthrecorded over the past five years.

provide passengers with access to a far greater number of air
travel destinations through one or more flight connections.

In 2006, Airbus projected that air travel would grow at 4.8%
per annum during the period 2006-2025. Airbus therefore
expects passenger traffic, as measured in revenue passenger
kilometres, to more than double in the next twenty years.

Airbus, like others in the industry, believes that route networks
will continue to grow through expansion of capacity on existing
routes and through the introduction of new routes, which will
largely be typified by having a major hub city at least at one endof the route. These new route markets are expected to be wellserved by Airbus’ latest product offering, the A350XWB,
which has been designed with them in mind. Airbus believes
that it is currently well-positioned to meet current and future
market requirements given its complete family of products,from the 107-seat A318 to the 555-seat A380.

Cyclicality. Although those in the industry believe that longterm growth in air travel is secure, the market for aircraft has
proven to be cyclical, due to the volatility of airline profitability
and cycles of the world economy. When cyclical downturns
have occurred in the past, aircraft manufacturers have typicallyexperienced decreases in aircraft orders and have made fewer
deliveries; this has generally been followed by a period ofsustained order and delivery activity. Accordingly, while total
worldwide orders for aircraft of 100 seats or more reached acyclical low of 524 in 2003, the number of new orders
rebounded to a record 2,140 in 2005, followed by more than
1,800 in 2006.
Regulation/Deregulation. National and international regulation(and deregulation) of international air services and majordomestic air travel markets affect demand for passenger aircraft
as well. In 1978, the United States deregulated its domestic airtransportation system, followed by Europe in 1985. Today,
other regions and countries are progressively deregulating,particularly in Asia. This is expected to continue, facilitating
and in some cases driving demand. In addition to providing
greater market access (which may have formerly been limited),
deregulation may allow for the creation and growth of new
airlines or new airline models, as has been the case with the nofrills/low-cost airline model, which has increased in importancethroughout major domestic and intra regional markets sincederegulation (e.g., in the U.S. and Europe).
Airline Network Development: “Hub” and “Point-to-Point”
Networks. Following deregulation, major airlines have sought totailor their route networks and fleets to continuing changes incustomer demand. Accordingly, where origin and destination
demand prove sufficiently strong, airlines often employ direct,
or “point-to-point” route services. However, where demand
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The chosen system of route networks in turn affects aircraft
demand, as hubs permit fleet standardisation around both
smaller aircraft types for the short, high frequency and lower
density routes that feed the hubs (between hubs and spokes)
and larger aircraft types for the longer and higher density
routes between hubs (hub-to-hub). As deregulation has led
airlines to diversify their route network strategies, it has at thesame time therefore encouraged the development of a wider
range of aircraft in order to implement such strategies.

Alliances. The development of world airline alliances has
reinforced the pattern of airline network development describedabove. According to data from Airclaims, a U.K.-based aviationindustry consultancy, half of the world’s jetliner fleet of over
100 seats was operated by just 31 airlines as of February 2006.
In the 1990s, the major airlines began to enter into alliancesthat gave each alliance member access to the other alliancemembers’ hubs and routings, allowing airlines to concentrate
their hub investments while extending their product offeringand market access. Airlines have also begun to explore different
merger possibilities in recent years. Examples include themerger of Air France and KLM and US Airways and America
West, with talks between other airlines currently ongoing.
Governmental Funding. A 1992 bilateral agreement between the
E.U. and the U.S. provided for ceilings on reimbursable launch
investments (typically used by European governments) of 33%
of the total development costs of new large civil aircraft
programmes. It also set a ceiling at 3% of industry revenues forindirect support in relation to the development or productionof large civil aircraft (typically the Department of Defence andNational Aeronautics and Space Administration (“NASA”)
mechanisms used in the U.S.). This bilateral agreement
provided a level playing field for government support, reflecting
the needs of both Europe and the U.S.
However, the unilateral withdrawal from the 1992 agreementby the U.S. government in late 2004 eventually led to formal
claims and counterclaims being made by the U.S. and the E.U.,
respectively, with the World Trade Organisation (WTO). The

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E.U. and the U.S. have entered into negotiations to seek aformal settlement of the issues pending before the WTO, withthe goal of agreeing upon a new system for funding future
aircraft development.
Market Structure and Competition
Market Segments. According to a study conducted by Airbus, a
total of 12,676 aircraft with more than 100 seats were in service
worldwide at the end of December 2006 (as compared to 11,850
aircraft at the end of 2005). Currently, Airbus competes in eachof the three principal market segments for aircraft with morethan 100 seats. “Single aisle” aircraft, such as the A320 Family,
have 100-210 seats, typically configured with two triple seats
per row divided by one aisle, and are used principally for shortrange and medium-range routes. “Twin aisle” or “wide body”
aircraft, such as the A300/A310 and A330/A340/A350XWBFamilies, have a wider fuselage with more than 210 seats,
typically configured with eight seats per row and with twoaisles. While the A300/A310 are used on short-range andmedium-range routes, the A330/A340/A350XWB Families arecapable of serving all short to long-range markets. The A340500/600 is designed for ultra-long-range operations inparticular. “Very large aircraft”, such as the A380 Family, aredesigned to carry more than 400 passengers, non-stop, oververy long-range routes with superior comfort standards andwith significant cost-per-seat benefits to airlines. Freight aircraft,which form a fourth, related segment, are often converted expassenger aircraft. See “— 1.1.7 Other Businesses — Aircraft
Conversion and Floor Panels”.
Despite the popularity of the A300-600F freight aircraft,
Airbus announced in March 2006 that the last A300-600
would be delivered in July 2007, after 35 years of production.
In its place, Airbus launched a freighter derivative of thesuccessful A330-200 in July 2006, with industrial development
expected to begin in early 2007. It has also announced thelaunch of freighter versions of its new A350XWB family.
Finally, Airbus intends to be present in the large freighter
market (>80 tonnes payload) with the A380 freighter and at thebottom end of the freighter market with a passenger tofreighter conversion of the A320, in conjunction with partners
including Russian manufacturers MiG and Irkut.

following deregulation. In comparison with North America andEurope, the Asia-Pacific region uses a greater proportion of twin
aisle aircraft, as populations tend to be more concentrated in
fewer large urban centres. The tendency towards use of twin aisle
aircraft is also reinforced by the fact that many of the region’s
major airports limit the number of flights, due either toenvironmental concerns or to infrastructure constraints that limit
the ability to increase flight frequency. These constraints
necessitate higher average aircraft seating capacity per flight.
However, Airbus believes that demand for single aisle aircraft in
Asia will grow over the next 20 years, particularly as domestic
markets in China and India continue to develop. This is expected
to occur at the same time that Asian demand for larger/longrange aircraft continues to increase.
Competition. Airbus has been operating in a duopoly since
Lockheed’s withdrawal from the market in 1986 and Boeing’s
acquisition of McDonnell Douglas in 1997. As a result, themarket for passenger aircraft of more than 100 seats is now
effectively divided between Airbus and Boeing. According to
manufacturers’ published figures, in 2006 Airbus and Boeing,respectively, accounted for 52% and 48% of total deliveries, 44%
and 56% of total gross orders, and 51% and 49% of the total
year-end backlog.
The significant barriers to entry into the market for passenger
aircraft of more than 100 seats make it unlikely that a
newcomer will be able to compete effectively with either of theestablished suppliers in the foreseeable future.

Customers
As of 31st December 2006, Airbus had 250 customers,
4,564 Airbus aircraft had been delivered to operators worldwide
since the creation of Airbus, and 2,533 aircraft were on order.
The table below shows Airbus’ most significant gross firm
orders, by number of aircraft, for the year 2006.
Customer

Firm Orders*

CASC (China)

150

Skybus65

EasyJet52

Airbus also competes in the corporate, VIP business jet market
with the ACJ, an A319-based Corporate Jetliner, and the A318
Elite. It has also recently sold the A320, the A340-500 and theA340-300 to serve the business jet market as a corporate
shuttle and in government/VIP roles.

Indian Airlines

43

Lufthansa

42

Air Asia

40

TAM

37

CIT

34

Geographic differences. The high proportion of single aisle aircraft
in use in both North America and Europe reflects the
predominance of domestic short-range and medium-range flights,
particularly in North America due to the development of hubs

Singapore Airlines

28

AerCap20(*)

Options are not included in orders booked or year-end backlog.

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Organisation of Airbus
Management and Integration of Airbus Activities
On 13th October 2006, EADS acquired BAE Systems’ 20% stakein Airbus for €2.75 billion, following the put option processlaunched by BAE Systems in June 2006. EADS thereby became
the sole owner of Airbus S.A.S, with full management control
over its operations.
Louis Gallois was appointed President and Chief Executive
Officer of Airbus by the EADS Board of Directors
in October 2006, while continuing as Co-CEO of EADS.
Fabrice Brégier was appointed Chief Operating Officer (COO)of Airbus at the same time, and remains a member of the
EADS Executive Committee. Together with Airbus CEO Louis
Gallois, the two form the “Airbus President’s Office” and are
responsible for the operational management of the Airbus
business, together with the Executive Committee. The latter
consists of eleven members (in addition to the CEO and COO)
all of whom are agreed upon by the President and Chief
Executive Officer of Airbus S.A.S. and appointed by the EADS
Board of Directors. EADS has consolidated 100% of the Airbus
group in its financial statements since 2001.

Products and Services
Airbus Aircraft Family Overview
Technological innovation has been at the core of Airbus’ strategy
since its creation. Each product in the Airbus family is intended
to set new standards in areas crucial to airlines’ success, such as
cabin comfort, cargo capacity performance, economic
performance, environmental impact and operational commonality.
Airbus innovations often provide distinct competitive advantages,
with many becoming standard in the aircraft industry. Key
examples include fly-by-wire controls, aircraft commonality andthe introduction of widebody twin-engine aircraft.
A300/A310 Family
The A300 was the original aircraft launched by Airbus in 1969,
and was the world’s first twin-engine twin aisle commercial
aircraft at the time. From the 250-300 seat A300 the family
expanded to include the 200-250 seat A310, new build andconverted freighters, combi/mixed configuration aircraft, airtankers and military transport versions.
Currently, the A300-600 Freighter (A300-600F) is the only
member of the A300/A310 Family still in production. Despite
its popularity with major express courier providers and airlines,
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in March 2006 that the last A300-600F would be deliveredin July 2007.
In 2006, 9 A300-600Fs were delivered.
A320 FamilyWith more than 5,000 aircraft sold and 3,000 currently inservice, the A320 Family has proven extremely popular withcustomers, offering high standards of cabin comfort, technology
and economic performance. Its success with low-cost airlines inparticular demonstrates the economic appeal of the A320 Family.
Within this family, four identical aircraft of different lengths,
the A318, A319, A320 and A321, share the same systems,
cockpit, operating procedures and cross-section. The A320
Family covers the market from 100 to 220 seats, flying routes
up to 3000 nm/5700 km.
In 2006, Airbus received 673 firm orders for the A320 Familyof aircraft, and delivered 339 to customers.
A330/A340 FamilyWith more than 1,000 aircraft sold and 793 currently in service,
the A330/A340 Family is Airbus’ solution for regional, longrange and ultra long-range travel, designed to carry between 250
to 350 passengers. The A330/A340 Family concept is unique: one
airframe is powered by either two or four engines. The twinengine A330 offers attractive economic performance for regional
and long-range routes, while the four-engine A340 can perform
on the most demanding long-range and ultra long-range routes.
The A330/A340 Family is composed of six passenger versions.
Each shares the same 222-inch fuselage cross-section, cockpit
and other advanced features, delivering the commonality thatencourages airlines to adopt the most efficient mix of aircraft
for their networks. The A330/A340 Family offers high levels of
passenger comfort as well as large underfloor cargo areas.
Launched in January 2007, the A330-200F will be a new midsize, long-haul freighter and the latest addition to the A330/
A340 Family. Capable of carrying 64 tonnes over
4,000nm/7,400 km, or 69 tonnes up to 3200 nm/5930 km, theA330-200F is aimed at replacing the ageing 50 to 70 tonne
aircraft in the market (such as ageing DC8Fs and DC10Fs). The
range of the A330-200F will offer airlines the opportunity toincrease services in low frequency long-haul markets currently
served with much larger aircraft, develop new routes andrespond to market growth. Entry into service is planned for thesecond half of 2009.
In 2006, Airbus received 119 firm orders for the A330/A340
Family of aircraft, and delivered 86 to customers.

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commitments received for the A380 at the end of 2006 stood at
166 from 15 customers, with the first A380 due to be delivered
to the first operator, Singapore Airlines, in October 2007.

A350XWBAt the end of 2006, Airbus launched its new offering in themedium capacity long-range aircraft market, the A350XWB
series, which will accommodate between 270 to 350 passengers
and is expected to enter service in 2013.
The A350XWB builds on the A380 cockpit and systems. It is
designed for a high cruise speed, with the latest generationengines and a robust structure. The A350XWB is designed todeliver superior levels of fuel and economic efficiency, withlow environmental impact.
The A350XWB received 2 firm orders and 40 commitments in2006, with 100 firm orders and 82 commitments remaining forthe former A350 aircraft at the end of the year.
A380
The A380 is the most spacious aircraft ever conceived, andrepresents Airbus’ entry into the very large aircraft market. Its
new cross-section provides a flexible and innovative cabin space,allowing passengers to benefit from wider seats, wider aisles
and more floor space, tailored to the needs of each airline.
Seating 555 passengers in three classes and with a range of8000 nm/19,400 km, the A380 offers superior economic
performance, lower fuel consumption, less noise andreduced emissions.
In addition to the passenger version, Airbus has started
development on a freighter version of the A380, the A380F.
With three cargo decks, the A380F will be able to offer more
payload (up to 158 tonnes), greater range (5,600 nautical miles)
and the lowest unit cost of any large freighter currently in themarket. Recently, Airbus announced that development of the
A380F had been rescheduled. See “Recent Developments”.
During 2006, Airbus twice revised its delivery schedule for the
A380 after having encountered difficulties in the installation of
the aircraft’s electrical harnesses. Nevertheless, repeat firm
orders for the A380 were placed by Singapore Airlines andQantas for nine and eight aircraft, respectively. However, FedEx
cancelled its order for ten A380F freighters as a result of thedelivery delays. Accordingly, the total number of orders and

The Family Concept – Commonality across the Fleet
Airbus’ aircraft families promote fleet commonality. Thisphilosophy takes a central aircraft and tailors it to create
derivatives to meet the needs of specific market segments. Thisapproach means that all new-generation Airbus aircraft (i.e.,
excluding the A300/310) share the same cockpit design, fly-bywire controls and handling characteristics. Pilots can transfer
among any aircraft within the Airbus family with minimal
additional training. Cross-crew qualification (CCQ) acrossfamilies of aircraft provides airlines with significant operational
flexibility. In addition, the emphasis on fleet commonality
permits aircraft operators to realise significant cost savings increw training, spare parts, maintenance and aircraft scheduling.
The extent of cockpit commonality within and across familiesof aircraft is a unique feature of Airbus that, in Management’s
opinion, constitutes a sustainable competitive advantage.
Technical Product Overviews
Short- and medium-range single aisle aircraft: the A320 Family.
Airbus’ family of single aisle aircraft, based on the A320
(which entered service in 1988 following a development
programme launched in 1984), includes the A318, A319 andA321 derivatives, as well as the A319­ based Airbus Corporate
Jetliner and A318 Elite business jet, which Airbus launched in
1997 and 2005, respectively.
At 3.96 metres diameter, the A320 Family has the widest
fuselage cross-section of any competing single aisle aircraft.
This provides a roomy passenger cabin, a high comfort level anda more spacious underfloor cargo volume than its competitors.
The A320 Family incorporates digital fly-by-wire controls, anergonomic cockpit and a lightweight carbon fibre composite
horizontal stabiliser. The use of composite material has also
been extended to the vertical stabiliser. The A320 Family’scompetitor is the Boeing 737 series.

Single Aisle Technical Features
Model

Entry into service

Passenger capacity*

Maximum range (km)Length (meters)

Wingspan (meters)

A318

2003

107

6,000

31.4

34.1

A319

1996

124

6,800

33.8

34.1

A320

1988

150

5,700

37.6

34.1

A321

1994

185

5,600

44.5

34.1

(*)

Two-class layout.

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The A300/A310 programme has undergone continuous
development. The current A300-600 Freighter was launched in1991 based on the A300-600R passenger variant, which
incorporated the lightweight carbon fibre composite horizontal
stabilizer initially developed for the A310.

Medium-range, midsize freighter: the A300/A310 Family. The
A300/A310 Family has spanned over 30 years of production,with over 800 aircraft delivered. The A300-600 Freighter is the
only member of the A300/A310 Family currently in production.
The final delivery from this line is due in July 2007.

The A300-600F’s main competitor is the Boeing 767 Freighter.
A300-600F Technical Features
Model

A300-600F

Entry into service

Typical Capacity

Maximum range (km)Length (meters)

Wingspan (meters)

1994

54.6 tonnes

4,850

54.1

44.8

In 2006, Airbus announced the commercial launch of theA350XWB Family, a new extra-wide body medium capacity
long-range family. Dimensioned for the 21st century, theA350XWB features A380 technology, a wider fuselage and agreater use of composite material.

Medium- to ultra-long-range twin aisle aircraft: the A330/A340/
A350XWB Families. Airbus developed the twin-engine A330
and the four-engine A340 with the same all-new wing designfor both aircraft and retained the fuselage cross section of the
A300/A310. In 1997, Airbus began development of the ultralong-range A340-500 and the high capacity A340-600
derivative version. The A340-500 flies over extremely longranges, including nonstop flights such as Los Angeles— Singapore or Chicago — Auckland. The A340-600 made its
first flight in 2001 and deliveries began in 2002.

The competitors of the A330, A340 and A350XWB are the
Boeing 767, 777 and 787 aircraft series.

A330/A340/A350XWB Technical Features
Model*

Entry into service

Passenger capacity*

Maximum range (km)Length (meters)

Wingspan (meters)

A330-200

1998

253

12,50059.0

60.3

A330-300

1994

295

10,50063.7

60.3

A340-300

1992

295

13,70063.7

60.3

A340-500

2002

313

16,70067.8

63.6

A340-600

2002

380

14,60075.3

63.6

A350-800

2014

270

15,75060.5

64.0

A350-900

2013

314

15,60066.8

64.0

A350-1000

2015

350

15,400

73.8

64.0

(*)

Three-class layout.

Very large aircraft: the A380 Family. A significant milestone in
the history of Airbus and the aviation industry was met whenthe A380 received joint European Aviation Safety Agency(EASA) and Federal Aviation Administration (FAA) Type
Certification on 12th December 2006.

New standards for systems, structure, powerplant and cabin
facilities will enable Airbus to deliver the most economic
aircraft ever and one that exceeds the challenging performanceand environmental targets initially set for it.
The A380’s main competitor is the 400 seat Boeing 747-8.

A380 Technical Features
Model*

Entry into service

Typical capacity*

Maximum range (km)Length (meters)

Wingspan (meters)

A380-800

2007

15,00073.0

79.8

A380-800F

2010

555
157.4 tonnes (typicalvolumetric)

10,500

73.0

79.8

(*)

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New Product Development: A400M
Airbus’ Military Programme Directorate performs research anddevelopment related to the A400M project as an outsource
provider to Airbus Military S.L. The Military Transport Aircraft
A400M is described in “— 1.1.3 Military Transport Aircraft —Products — Military Transport Aircraft/Special Mission Aircrafton Transport Aircraft Platforms — Airbus A400M”.
Asset Management
The Airbus Asset Management Division was established in
1994 to manage and re-market used aircraft acquired by Airbus,
originally as a result of customer bankruptcies, andsubsequently in the context of certain buy-back commitments.
The Division operates with a dedicated staff and manages a fleet
comprised of Airbus aircraft across the range of models.
Through its activities, the Asset Management Division helps
Airbus respond more efficiently to the medium and long-term
fleet requirements of its customers.
Its key roles comprise the commercial and risk management of
the Airbus portfolio of used aircraft. Most of the aircraft areavailable to customers for cash sale, while some can only beoffered on operating lease, depending on the financing attachedto such aircraft. At the end of 2006, the Airbus AssetManagement portfolio contained 22 aircraft, a net reduction of
8 aircraft compared to the end of 2005. The Asset Management
Division also provides a full range of support services,
including assistance with entry into service, interior
reconfiguration and maintenance checks.
Sales Finance
Airbus favours cash sales, and does not envisage sales financing
as an area of business development. However, Airbus recognizes
the commercial need for manufacturers to assist customers inarranging financing of new aircraft purchases, and in certain
cases to participate in such financing itself. An extension of
credit or assumption of exposure is subject to corporate
oversight and monitoring, and follows stringent standards of
discipline and caution. Airbus’ dedicated Sales Finance team has
accumulated decades of expertise in aircraft finance. When
Airbus finances a customer, the financed aircraft generally serveas collateral, with the engine manufacturer participating in thefinancing. These elements assist in reducing the risk borne by
Airbus. Airbus’ sales financing transactions are designed tofacilitate subsequent sell-down of the exposure to the financial
markets, third party lenders or lessors. Airbus’ financing
exposure is counter-cyclical and currently Airbus is able toconclude significant sell-down of its exposure. Management
believes, in light of its experience, that the level ofprovisioning protecting Airbus from default costs is adequate
and consistent with standards and practice in the aircraft
financing industry. See “Part 1/1.1.7.4 Sales Financing”.

Customer Service
Airbus works to assist customers in operating their Airbus
fleets as efficiently as possible. Whatever an operator’s size,
Airbus offers technical help and advice in keeping its aircraft
operational. With respect to aircraft operation, the Airbus
Customer Services directorate heads an engineering andtechnical support group, a technical documentation
organisation, a network of training centres, spare parts support
centres, customer support teams and field services teams thatare based at customer airlines. Through this single interface,
Airbus aims to satisfy all of its customers’ pre-delivery and inservice support requirements, including (1) engineering andtechnical support, (2) training and flight operations support and(3) material and logistics support.
Engineering and technical support provides Airbus operatorswith technical assistance on a 24-hour basis to ensure safe andreliable operations of their Airbus fleet. Customised cost
reduction programmes are designed to reduce customers’maintenance costs to optimised levels.
The training and flight operations support service includes apermanent staff of over 200 instructors around the world toprovide accessible and up-to-date training for Airbus flight andground crews. Airbus has four training centres, one inToulouse, France, one in Hamburg, Germany, one in Miami,
U.S. and one in Beijing, China. A co-operation agreement with
Canadian Aviation Electronics Ltd (“CAE”) has enlarged thisnetwork by 13 additional training locations worldwide. As partof its training services, Airbus offers Cross Crew Qualification
programmes enabling pilots to take advantage of the highdegree of commonality between Airbus aircraft families,
representing considerable savings to airlines.
Airbus’ spare parts support centres stock over 3,300,000 items
out of a range of 250,000 different part numbers, as part of aworldwide distribution network that includes Hamburg,Frankfurt, Washington, D.C., Singapore, Beijing and Shanghai.
The 24-hour/365-day order desk is able to dispatch in-stock
items within a customized lead-time, down to two hours forgrounded aircraft. Airbus’ Modular Spares Services provides
customers with a comprehensive range of services to support
operation of Airbus aircraft worldwide, which can be tailored to
specific requirements of the operators. It contains Spares
Planning and Access, Inventory Management, supply chain
solutions and material management related consulting.
In 2006, Airbus brought together its full range of services into
one comprehensive portfolio named Air+ by Airbus, fromwhich operators can pick and choose as per their individual
needs. Airbus recognizes the diversity of airline models andorganisations and in response, Air+ by Airbus is designed sothat each customer can tailor its Air+ by Airbus solution inaccordance with its own outsourcing policy. Air+ by Airbus

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covers all aspects of an airline’s technical operations whencombined with Airbus’ powerful Network of Maintenance andRepair Organisations (“MRO”) partners and suppliers and aims
to bring value to customers’ technical operations throughincreased aircraft availability, reduced operating costs and theenhanced quality of operations.

Production
Industrial Organisation
Each task in the building of Airbus aircraft (from design,
definition and production to product or operational support) is
allocated to industrial sites according to their specialised expertise.
The nurturing and development of centres of excellence
constitutes an essential feature of Airbus manufacturing.
Engineering
Airbus engineers work on specific and non-specific aircraft designs
to create solutions that meet customer needs, using a working
practice known as Airbus Concurrent Engineering (“ACE”).
Engineering innovation at Airbus is driven by five Centres ofCompetence (“CoCs”), which develop general aircraft
technologies and provide functional design leadership for
specific aircraft components. The CoCs operate trans­nationallywith engineers from each CoC present at all Airbus sites.
Airbus engineers have also developed “Colleges of Experts” —teams of the most experienced specialists in each discipline thatprovide guidance and advice at senior levels. This approach not only
delivers design solutions to meet the highest standards of technicalquality and performance, but also ensures that both individual andcollective knowledge is nurtured throughout the CoCs.
The engineering teams are supported by system tests andintegration laboratories, structural test centres and the Airbus
flight test centre.
This approach has enabled Airbus to open engineering centres
in Wichita (Kansas), U.S., in Moscow, Russia, and in Beijing,
China, through which it has gained access to a large pool of

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experienced aerospace engineers. The Wichita engineering
centre began operations in early 2001 and has already made asignificant contribution to Airbus wing design. The engineering
centre in Russia, organised as a joint venture with Kaskol, wasinaugurated at the end of 2002 and the engineering centre in
China was inaugurated in late 2005. A fourth engineering
centre opened in Mobile (Alabama), U.S. in 2006. The fifthengineering centre is in the process of being opened in firstquarter 2007 in Bangalore, India. This centre’s focus will be on
non-specific design work.
Manufacturing Facilities and Production Flow
Airbus has established highly specialised centres of excellence(“CoEs”) based on the core competencies of each site within its fieldof expertise, each with its own responsibilities and chain of decisionmaking. The CoEs are responsible for the design, procurement andmanufacturing of fully equipped and tested deliverables, ranging
from specific parts to major aircraft components.
Aircraft components are transferred between the network of CoE
sites and the final assembly lines using Airbus’ five custom built
A300-600 “Beluga” Super Transporters. To support the A380
production flow, Airbus has integrated road, river and sea transport,
including the specially commissioned “Ville de Bordeaux” ship.
Typical production lead times for single aisle aircraft are 8-9months, and 12-15 months for long-range twin aisle aircraft.
Adaptability to Changes in Demand
Airbus delivered 434 aircraft in 2006 (compared to 378 in 2005)
and expects to deliver more than 440 aircraft in 2007. Any
major market disruption or economic downturn could lead torevision of these figures.
To meet its 2007 delivery target, Airbus has set various
elements of its adaptable manufacturing process in motion;these include enhanced integrated intelligence of customer andmarket situations to provide early anticipation, repatriation ofan array of outsourced tasks and adaptation of make or buy
criteria. Additionally, Airbus is exploiting flexibility features of
its labour structure by applying flexible time and overtime
contractual provisions, and by optimising temporary and timedefined workforce.

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1.1.3	Military Transport Aircraft
Introduction and Overview
The Military Transport Aircraft Division (the “MTA
Division”) develops, manufactures and sells light and medium
military transport aircraft and is responsible for the A400M,
the European heavy military transport aircraft project. In
addition, the MTA Division produces and sells special mission
aircraft, which are derived from existing aircraft platforms andare dedicated to specialised military and security tasks such as
maritime surveillance, antisubmarine warfare and in-flightrefuelling capabilities. The MTA Division also designs andmanufactures aerostructure elements.
In 2006, the MTA Division generated revenues of €2.2 billion,
representing 5.6% of EADS’ total revenues.

Strategy
The MTA Division’s strategic goals are to develop its corebusinesses, leverage the EADS pool of technologies to gain
market share and enhance profitability. To achieve these goals,
the MTA Division has implemented a focused, two-pronged
strategy to:Consolidate its leadership position and address thegrowing demand for modern tactical military transport
aircraft
EADS is the global leader in the market segments for light andmedium-sized military transport aircraft. Through the additionof the A400M heavy transport aircraft, EADS is seeking tobroaden its range of tactical military transport aircraft and to
capture a market with high replacement potential that Lockheed
Martin has historically dominated.
Optimise EADS’ capabilities to become a major supplier ofmilitary derivatives
The MTA Division relies on its own specialised technologies aswell as those of the DS Division and on EADS’ wide range ofplatforms to promote aircraft satisfying customers’ missionspecific requirements.

MarketMilitary Transport Aircraft
Governments and multinational organisations constitute the
MTA Division’s principal customers in the market for tacticalmilitary transport aircraft. This market consists of threesegments: (1) light transport aircraft, with a payload of one tofour tons, (2) medium transport aircraft, with a payload of five

to fourteen tons, and (3) heavy transport aircraft, with a payloadof fifteen tons or more. According to a study by the TealGroup(1), an independent aerospace and defence industry
consulting firm, the global market for military transport aircraft
for the next ten years is expected to amount to approximately
US$50 billion.
Light Military Transport. This is a mature market that has
diminished in size as countries develop economically and areable to afford medium military transport aircraft. The CASA
C-212 has historically led this market segment, with an average
market share of 15% over the last ten years. The C-212’s maincompetitors are manufactured by Polskie Zaklady Lotnice,
Mielec and HAL.
Medium Military Transport. Management believes that thismarket will continue to experience moderate growth. EADS
models are leading in this market segment, with the CN-235
and C-295 models having an average market share of 45% overthe last ten years, followed by their competitors, the C-27J
produced by Lockheed Martin Alenia Tactical Transport System(“LMATTS”), a joint venture of Alenia and Lockheed, and theAn-32 produced by Antonov.
Heavy Military Transport. This market segment has historically
been driven by U.S. policy and budget decisions and therefore
has been dominated by U.S. manufacturers, in particular
Lockheed Martin’s C-130 Hercules. As the U.S. reduces andupgrades its existing fleet, European transport fleet replacement
and growth needs represent an opportunity for the new A400M
aircraft to effectively compete in this market.
EADS has chosen not to compete in the separate market
segment for super-heavy, strategic airlift aircraft, to which the
Boeing C-17 belongs.
Special Mission AircraftSpecial mission aircraft are derived from existing platforms andadapted to particular missions, generally for military andsecurity customers. It is a market of advanced technology andhigh added value solutions where customers are increasingly
demanding comprehensive systems tailored to their specificoperational requirements. Modern defence and warfare
increasingly require independent access to complex forms of
information in various theatres of operations. This development
and Europe’s unsatisfied defence and security needs are expected
to boost demand for European-produced special mission aircraftin the near term. The MTA Division is well-positioned in thismarket, as it has access, through Airbus, to efficient platforms
that are already well-established in the civil market. However,
U.S. companies currently dominate this market.

(1) Source: Teal Group. EADS confirms that this information has been accurately reproduced and that as far as EADS is aware and is able to ascertain from the information
published by Teal Group, no facts have been omitted which would render the reproduced information inaccurate or misleading.
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Because of the limited size of any single European market andthe significant associated development costs, mission aircraft
programmes in Europe tend to be funded and developed on amultinational basis, with an emphasis on proven technologies.
EADS believes its strong position in Europe will allow it to
exploit opportunities on a worldwide basis.

Products
Military Transport Aircraft/Special Mission Aircraft on
Transport Aircraft Platforms
C-212 – Light Military Transport. The C-212 was designed as asimple and reliable unpressurised aircraft able to operate frommakeshift airstrips in order to carry out both civilian andmilitary tasks. The first model in the series, the S-100, enteredinto service in 1974. With a payload of 2,950 kg, the newversion of the C-212, the Series 400, entered into service in1997. It incorporates improvements such as new avionics andengines for enhanced performance in hot climates and highaltitudes, as well as improved short take-off and landing(“STOL”) performance. The C-212’s rear cargo door provides
direct access for vehicles, cargo and troops. Its configuration can
be changed quickly and easily, reducing turnaround times. The
aircraft can perform airdrops and other aerial delivery missions.
CN-235 – Medium Military Transport. The first model in the
CN-235 family, the S-10, entered into service in 1987. The
latest model in the CN-235 family, the Series 300, entered into
service in 1998 and is a new-generation, twin turboprop,pressurised aircraft. The CN-235-300 is capable of transportinga payload of up to 6,000 kg, representing (1) 48 paratroopers;(2) 21 stretchers plus four medical attendants; (3) four of themost widely used type of freight pallets; or (4) oversized loads
such as aircraft engines or helicopter blades. Paratroop
operations can be performed through the two lateral doors in
the rear of the aircraft or over the rear ramp. Variants of theCN-235-300 are used for other missions, including maritime
patrol, electronic warfare and photogrammetric (mapping)
operations. During 2006, the U.S. company L3 ordered two
CN-235s.
C-295 – Medium Military Transport. Certified in 1999, theC-295 has a basic configuration similar to that of the CN-235,
with a stretched cabin to airlift a 50% heavier payload at greater
speed over similar distances. The C-295 is equipped withintegrated avionics incorporating digital cockpit displays and aflight management system, enabling tactical navigation,planning and the integration of signals from several sensors.
Both the CN-235 and C-295 have been designed ascomplements to or replacements for the ageing C-130 Hercules,
accomplishing most of their missions at a lower operating cost.

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In 2006, MTA signed a contract with Portugal for the deliveryof twelve C-295 aircraft, seven in the transport version and fivein the maritime patrol version. This is EADS-CASA’s firstcontract for maritime patrol on the C-295 platform; deliveries
are expected to commence in 2007. Poland and Finland eachordered two C-295 aircraft, both in the transport version, while
the Spanish MoD ordered an additional C-295. In terms ofdeliveries in 2006, MTA delivered the first four of twelve
C‑295 aircraft to Brazil to replace its existing C-115 Buffalo
aircraft, pursuant to a contract signed in 2005. It also delivered
the C-295s ordered by the Spanish MoD and Finland
during 2006.
Joint Cargo Aircraft (JCA, renamed from FCA). During 2005,
EADS CASA North America and Raytheon established apartnership to bid for the U.S. Army’s JCA programme. Under
the JCA programme, the U.S. Army plans to procure more than
100 JCA, with an initial phase of 55 aircraft. During 2006,
MTA submitted a bid to supply the U.S. Army with C-295
aircraft. The U.S. Army is expected to select the winner of thecontract in 2007.
Maritime Patrol Aircraft. The MTA Division provides different
solutions ranging from Maritime Surveillance to AntiSubmarine Warfare through aircraft based on the C-212, CN235, C-295 or P-3 Orion platforms, for which EADS-CASA
has already developed a new-generation, open architecture
mission system called FITS (Fully Integrated Tactical System), a
proven, reliable and cost efficient solution. Integration of FITS
on an A-319 platform is ongoing.
In 2006, MTA signed a contract with South Korea for thedelivery of a C-212 aircraft. It also signed a contract with the
Irish MoD to modernize two CN-235s with FITS mission
systems. The Spanish MoD ordered the conversion of six
CN-235 military transport aircraft into maritime patrol aircraftwith FITS mission control, while four C-212 aircraft with FITS
maritime patrol mission systems were delivered to Mexico.
Airbus A400M. In May 2003, the Organisation Conjointe en
Matière d’Armement (“OCCAR”) signed a contract with Airbus
Military to develop the A400M aircraft. The A400M is
designed to meet the future large aircraft requirements of seven
European nations seeking to replace their ageing C-130
Hercules and C-160 Transall fleets. In addition to fast andflexible intercontinental force projection, the new aircraft isintended to respond to changing geopolitical requirements(including increased humanitarian and peacekeeping missions).
The A400M will integrate a number of features from existing
Airbus aircraft, including a two-person cockpit, fly-by-wire
controls and advanced avionics. Additionally, the A400M will
benefit from Airbus’ maintenance procedures and worldwide
customer support network.

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Management believes that the A400M programme will allow
EADS to leverage its state-of-the-art commercial aircraft
technology to access a new and attractive market, while
mitigating the impact of civil aircraft market commercial cycles.
Airbus Military, a Spanish sociedad limitada, is a speciallyformed entity dedicated to the development, manufacturing,sale and delivery of the A400M aircraft. Shares in Airbus
Military are currently held by Airbus S.A.S (69.44%), EADSCASA (20.56%), Tusas Aerospace Industries Incorporated ofTurkey (5.56%) and Flabel Corporation NVSA of Belgium(4.44%). The Executive Vice President in charge of the MTA
Division also acts as Chief Executive Officer of Airbus
Military, bringing the MTA Division’s experience in the
management of military transport aircraft programmes and its
extensive client network to the A400M programme.
Airbus Military has subcontracted to Airbus the overallmanagement of the A400M development, to be exercisedthrough a central programme management office (“CPMO”)
headquartered in Toulouse with additional offices in Madrid.
For the production phase of the A400M programme, to be
managed by the MTA Division, the CPMO will beheadquartered in Spain.
The initial contract with OCCAR calls for the delivery of 180
A400M aircraft on behalf of seven nations: Germany (60),France (50), Spain (27), U.K. (25), Turkey (10) and Belgium (8,including one on behalf of Luxembourg). In addition to theinitial 180 aircraft, export orders bring the total order book for
the A400M aircraft to 192 at the end of 2006. The firstcontracts for Integrated Logistic Support were also signed with
OCCAR in December 2006.
Special Mission Aircraft on Airbus Platforms
The MTA Division offers special mission aircraft derived fromexisting Airbus platforms and adapted to particular missions,generally for military customers. Adaptations to the platform
require thorough knowledge of the basic airframe, which generally
only the aircraft manufacturer possesses. The skills necessary foroverall systems integration into such aircraft are extensive and thenumber of participants in the world market is very limited.
Strategic Tanker Aircraft. EADS seeks to provide a competitive
alternative to the near-monopoly enjoyed so far by Boeing
products in the market for strategic tanker aircraft. In light ofthe estimated worldwide market of approximately 600 tanker
aircraft, Management believes that strategic tanker aircraft offer
an attractive opportunity for EADS.
In this regard, the MTA Division is leading a technologicalprogramme aimed at developing a new “air-to-air” refuellingboom system (“ARBS”). The new ARBS is designed to providea refuelling performance that is substantially faster than that of
the competition—a considerable advantage given thevulnerability of aircraft during the refuelling procedure. At theend of 2005, the roll-out of an A310 demo boom occurred at
MTA’s Getafe facilities. Initial flight tests with this A310 demo
boom were conducted during 2006.
A330 MRTT (Royal Australian Air Force). The contract signed
in December 2004 with the Royal Australian Air Force for thedelivery of five A330 multi-role tanker transports (“MRTT”)
equipped with underwing pods and ARBS to replace its
existing Boeing 707 fleet remains on schedule. The first A330
MRTT —based on the A330 derivative, a low-risk and costeffective platform that offers a greater supply capacity thanother competing solutions— is scheduled to enter into service
in 2009. In June 2006, MTA received the first A-330 to beconverted. The remaining four A330 MRTT will be convertedin Australia by Qantas Airways acting as EADS-CASA’s
subcontractor. One A-330 MRTT full-mission simulator has
also been ordered by the Royal Australian Air Force.
A330 Future Strategic Tanker Aircraft (FSTA) (United Kingdom
Royal Air Force). EADS, Rolls Royce, Cobham, VT and Thales
are cooperating through the AirTanker consortium as a single
bidder for the U.K. MoD’s Future Strategic Tanker Aircraft(“FSTA”) programme. Structured as a private finance initiative,
this programme would replace ageing VC10 and Tristar tankers,
currently operated by the Royal Air Force, with a system basedon A330-200 Airbus aircraft. The programme will call for thedelivery of 14 aircraft to provide air refuelling service for 27
years. The contract is expected to be awarded in 2007.
KC-30 Tanker Programme (U.S. Air Force). The U.S. Air Forcehas been conducting a programme to replace its ageing fleet of
air-to-air refuelling aircraft. In this regard, EADS NA Tankers(an ad hoc company) has joined with Northrop Grumman (asprime contractor) on preparing a proposal to satisfy the U.S. Air
Force's requirements. The team will propose a KC-30 tanker,
which is based on an A-330 MRTT with cargo door and boom.
EADS would supply the aircraft to be outfitted in the UnitedStates. The U.S. Air Force is expected to review the competing
proposals during 2007.
A310 MRTT (German Air Force/Canadian Air Force). This ongoingprogramme involves the supply of four aircraft to the German
Air Force and two aircraft to the Canadian Air Force. In 2006,
work began on the upgrade of avionics and other modifications.
Alliance Ground Surveillance (“AGS”). Within the framework ofNATO, several countries have expressed interest in thedevelopment of an Airborne Surveillance System. MTA’s role inthis programme is to perform the “militarization” of the A-321
platform with the DS Division acting as the prime contractor.

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Aerostructures
EADS-CASA has significant expertise in the utilisation ofcomposite materials for aerostructure manufacturing and advanced
automation processes. Based on this expertise, the MTA Division
is actively involved in the design, manufacture and certification ofcomplex aeronautical structures. In 2006, MTA delivered fan
cowls for the A340 as well as for the FX7 programme.

Production
The C-212, CN-235 and C-295 are manufactured at a facility
located at the San Pablo airport in Seville. Aerostructures areproduced in Puerto de Santa María in Cádiz as well as at the
Tablada and San Pablo facilities, both in Seville.
The A400M will be assembled at a new plant, near the San
Pablo airport in Seville.

1.1.4	Eurocopter
Introduction and Overview
Through Eurocopter, EADS is one of the global leaders in theworldwide civil and military helicopter market. Management
expects Eurocopter sales in the military market to increase
substantially due to the start of delivery of the NH90 militarytransport helicopter and the Tiger attack helicopter, and moregenerally the strong backlog in military orders with a numberof European governments and the increasing demand ininternational military and para-military export markets. In
2006, Eurocopter maintained its leadership by capturing morethan 50% of the civil market in terms of deliveries and byachieving strong growth in its military order book.
For 2006, the Eurocopter Division generated revenues of€3.8 billion, representing 9.6% of EADS’ total revenues.

Strategy
The Eurocopter Division aims at further developing businesses
and markets identified by Management as having the potential
for lasting profitable growth. To this end, Eurocopter is actively:
Fostering internal growth and international expansion
Management intends to further develop Eurocopter’s presencein current and future growth markets such as China, India andEastern Europe and to bolster its position in the markets where
it has traditionally held a strong position, such as the U.S. civil
and para-military market. This strategy seeks to foster the
opening of new market segments, such as Eurocopter’s firstsuccessful sale of important quantities of helicopter systems to
the U.S. Army.
To do so, Eurocopter will continue to capitalize on its provenexperience of cooperation with local industries for programme
development and joint production projects. This approach has

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enabled Eurocopter to build solid foundations in promising
growth markets, in particular in Asia.
Eurocopter will also continue to pursue its industrial
deployment strategy in the United States, where it already has
two major industrial and services facilities. Eurocopter isbecoming a truly international industrial company, as nearly
20% of its employees work outside of the Division’s homecountries of France, Germany and Spain.
Implementing an ambitious product and services policy
designed to maintain its market leadership andtechnological superiority
The continuous renewal of Eurocopter’s comprehensive productline of civil and military helicopters is essential in maintaining
the Division’s market leadership and technological superiority.
Management intends to continue this process by (i)strengthening the market position of certain key products suchas the Écureuil family, the Dauphin, the EC 135, the EC 145
and the EC 225/725, (ii) emphasizing Eurocopter’s most recent
products (e.g., entry into service and customisation for exportof the Tiger and NH90) and (iii) enhancing its product line (e.
g., co-development of the medium lift EC 175 with China;
partnership with Korean industry to develop the militaryutility Korean Helicopter Programme (“KHP”). Eurocopter’s
comprehensive product line allows it to leverage coretechnological solutions with its high-value customisation
capabilities, in order to respond to the mission needs andbudget requirements of a wide array of civil and militarycustomers throughout the segmented helicopter market.
One of Eurocopter’s key competitive advantages is its
technological excellence. To maintain its position as atechnological leader, Eurocopter engages in several technology
development programmes, such as the Heavy Transport
Helicopter and Vertical Take Off and Landing Tactical
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Back to Contentsemphasizing technologies that enhance the operational scope,
mission effectiveness and economic performance of its aircraft.
Eurocopter is currently focused on innovation in fields such asenvironmental-friendliness, all-weather flying ability andeconomic affordability throughout an aircraft’s lifecycle.
Because customer service is an important component ofcustomer satisfaction and source of revenue for the Division,
Eurocopter remains committed to strengthening and expanding
its network of marketing, distribution and support systems,
through its “global offer” proposal. The network currently
serves close to 10,000 Eurocopter aircraft with more than 2,500
operators located in 142 countries.

MarketIn 2006, the value of helicopters delivered worldwide wasestimated at over €8.6 billion; a figure Management believes
may grow to €14.6 billion by 2009. According to market
forecasts by The Teal Group, Honeywell and Rolls Royce,
between 5,200 to 5,800 civil helicopters and 5,500 to 6,000
military helicopters are expected to be built globally from 2006
to 2015. This forecast, particularly with respect to the military
segment, depends to a large extent on the large U.S.
development programmes.
Military demand for new helicopters is principally driven bybudgetary and strategic considerations, and the need to replaceageing fleets. Management believes that the advanced age ofcurrent fleets, the emergence of a new generation of helicopters
equipped with integrated systems and the ongoing introduction of
combat helicopters into many national armed forces willcontribute to increased military helicopter procurement over the
next several years. Recent large-scale military programmes, such as
those conducted by Australia, Brazil, Spain, U.K. and the Nordics
Standard Helicopter Project, have confirmed this trend. Demand
from the military segment has historically been subject to large
year-to-year variations, due to evolving strategic considerations.
Military helicopters, which are usually larger and have moresophisticated systems than commercial helicopters, accounted
for 52% of the total value of Eurocopter deliveries in 2006.
The military segment is highly competitive and is characterizedby competitive restrictions on foreign manufacturers’ access tothe domestic defence bidding process, sometimes to the virtual
exclusion of imports. Nevertheless, with the introduction of
the Tiger, NH90 and EC 725 and with a more aggressive
approach to international industrial cooperation, Eurocopter’sshare of the global market for military helicopters has increased,
and the market in 2006 was more balanced between
competitors.
In the military segment, Eurocopter’s main competitors are
Agusta-Westland in Europe, and Bell Helicopter (a division of
Textron Inc.), Boeing and Sikorsky in the United States.
Additionally, the Russian manufacturers have returned after acomplete reorganisation on commercial and industrial fronts.
They are very aggressive in the Asian and Latin American
markets in particular.
The helicopters sold in the civil/parapublic sector provide
transport for corporate executives, offshore oil operations,diverse commercial applications and state agencies, including
coast guard, police, medical and fire-fighting services.
Management expects that the value of global civil deliveries
will continue to grow at an average rate of 10% in the next three
years and after will stabilize at the level of 2005/6. Market data
indicates that in 2006, worldwide deliveries of civil turbine
helicopters stood at approximately 680 units.
Eurocopter’s main worldwide civil competitors are Bell
Helicopter, Agusta-Westland and Sikorsky. The civil helicopter
market has grown more competitive compared to previous years,
with Sikorsky and Agusta-Westland having increased theirmarket share in heavy and medium classes.

Products and Services
Existing Products. Management believes that Eurocopter
currently offers the most complete and modern range ofhelicopters, covering almost the entire civil and military market
spectrum. Eurocopter’s product range includes light singleengine, light twin-engine, medium and medium-heavy
helicopters, and is based on a series of new-generation
platforms designed to be adaptable to both military and civil
applications. The product line is continuously updated withleading-edge technologies, assuring its modernity.

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The following table illustrates Eurocopter’s existing product line, which offers optimised products for different mission types that
may be adapted to other uses as well.
Helicopter TypePrimary Missions

Light Single Engine
EC 120

Corporate/Private, Training

Single Engine
AS 350

Military Utlity, Utility, Law Enforcement, Corporate/Private

EC 130Tourism, Offshore, Corporate/Private

Light Twin Engine
AS 355N
EC 135/EC 635

Civil/Parapublic*, Utility, Corporate/Private
Emergency Medical, Parapublic*, Offshore, Corporate/Private

EC 145

Military Utility, Emergency Medical, Parapublic*, Shuttle

MediumDauphinCoast Guard, SAR, Offshore, Parapublic*

EC 155

Corporate/Private, Offshore, Parapublic*, Shuttle

Medium Heavy
Super Puma/Cougar

Military Transport, Offshore, Shuttle

EC 225/EC 725(*)

Parapublic includes law enforcement, fire fighting, border patrol, coast guard and public agency emergency medical services.

Civil range. In recent years, Eurocopter has invested in the
renewal of its civil product line to enhance its competitive
position in the civil segment, with the result that its share of
the world market currently stands at approximately 50%.
Eurocopter has successfully introduced into the international
market such new products as the light single-engine EC 120
and the light twin-engine EC 135, and such major productupgrades as the EC 155, the latest evolution of the mediumclass Dauphin, and the EC 145, a derivative of the BK117.
Deliveries of the EC 130, the latest single-engine member of
the Écureuil family, started in 2001. The latest addition to theheavy-class family is the EC 225. It is designed for passenger
transport, in particular offshore and VIP, but also for public
service missions, such as search and rescue (SAR).
LUH program. In 2006, the U.S. Army selected the UH-145 (amilitary derivative of the commercial EC 145) as its nextgeneration Light Utility Helicopter (LUH). At the end of 2006,
the U.S. Army had ordered 42 aircraft within the framework of
a contract to order up to a total of 352 aircraft. The first aircraft
were delivered in December 2006, only six weeks after contract
signature.
Products in Development. Current product development projects
in the military segment include (1) the NH90, a militarytransport helicopter with different versions for tactical, naval
and combat-search and rescue applications, and (2) the HAD
version of the Tiger helicopter. Moreover, new productdevelopment programmes, the EC 175 and KHP, were launched

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in 2006 in cooperation with Chinese and South Korean
partners, respectively.
NH90. The NH90 was developed as a multi-role helicopter forboth tactical transport (TTH) and naval (NFH) applications. The
project, principally financed by the governments of France,
Germany, Italy and the Netherlands, was jointly developed by
Eurocopter, Agusta-Westland of Italy and Fokker Services of
the Netherlands as joint partners in Nato Helicopter Industries(“NHI”) in direct proportion to their countries’ expressed
procurement commitments. Eurocopter’s share of NHI is 62.5%.
Production of the first lot of 243 helicopters and 55 optionalhelicopters to be delivered to the four partner countries started
in 2000, with the first deliveries in 2006 (3 TTH to the German
Army). However, ongoing development activities on mission
equipment have led to an additional shift of planned delivery
dates for future aircraft.
Designed for modern multi-mission capabilities and costeffectiveness throughout its lifecycle, the NH90 has rapidly
become the reference military tactical helicopter for armed
forces worldwide. The NH90 has been selected by 12 countries
and its backlog totals 400 firm orders and 100 options. 43
aircraft were ordered in 2006 (34 for Australia and 9 for New
Zealand) and the Spanish Council of Ministers authorized thesigning of a contract for 45 NH90 that became effective in midJanuary 2007.

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The Tiger. The Tiger combat attack helicopter programme
development is nearing completion. It includes four variants
based on the same airframe: the 40 HAP (turreted gun, rockets
and air-to-air missile) for France; the 80 UHT (antitank missile,
air-to-air missile, axial gun and rockets) for Germany; the 22
ARH (antitank missile, turreted gun and rockets) for Australia;
and the 24 HAD for Spain and 40 HAD for France (antitank
missile, air-to-air missile, turreted gun, rockets and upgradedavionics and engines). The manufacturing ramp-up of the
programme is reflected by the delivery of 24 Tigers asof December 2006 (12 HAP to the French and Spanish Army, 6
UHT to the German Army and 6 ARH to Australia).
Tiger HAD (Hélicoptère Appui Destruction). The HAD versionof the Tiger is a multi-role combat helicopter. It is based on the
Tiger HAP and incorporates a more powerful engine, an IFF
interrogation function, a new ballistic protection and an air-toground missile (AGM) capability. The HAD is expected to bequalified in 2010, with deliveries between 2010 and 2014.
EC 175. Eurocopter and Chinese AVIC II Corporation launched
the joint development and production of the EC 175, a civil
helicopter in the 6-ton category, which will broaden bothpartner’s product ranges. The 5-year development phase started
in 2006. The new civil helicopter is due to make its first flight in
2009, with European and Chinese certification set for 2011, theyear in which production is due to begin. Production will beshared on a 50/50 basis and each country will have its own
assembly line. Sales forecasts for this latest-generation helicopter
call for 800 units to be sold worldwide over the next 20 years.
KHP. The Korean government chose Eurocopter as the primarypartner of Korea Aerospace Industries (“KAI”) in the new KHP
programme for the development of Korea’s first militarytransport helicopter in the 8 metric ton class. The 6-year KHP
development phase will run from 2006 to 2011. In thefollowing 10-year production phase, 245 helicopters are to be
manufactured. As the primary partner of KAI, Eurocopter has a
stake of 30% in the development phase and 20% in the
production phase. This programme is groundbreaking for
Eurocopter in a previously U.S.-dominated Korean market.
Eurocopter and KAI have agreed to establish a 50/50 subsidiaryto market the export version of the KHP, which has a forecasted
worldwide demand of 250 helicopters over 20 years.

Customer Support
As of 31st December 2006, Eurocopter products constituted theworld’s second largest manufacturer fleet, with 9,710
helicopters in service worldwide. As a result, customer support
activities to service this large fleet generated 31% ofEurocopter’s revenues for 2006. Eurocopter’s customer support
activities consist primarily of training, maintenance, repairs andspare parts supply. To provide efficient worldwide service,

Eurocopter has established an international network of
subsidiaries, authorized distributors and service centres.
Furthermore, in order to meet global customer demand,
Eurocopter is dynamically extending the range of services it
provides to its customers.
After the creation of a helicopter-training centre with Thales in2002 (HELISIM), and the establishment of Helicopter Flight
Training Services (HFTS) in 2004 (a consortium consisting ofEurocopter, CAE, Rheinmetall, EADS Defence Electronics andThales to manage the contract for the first Private FinanceInitiative (PFI) to design, build and operate three NH90 training
centres in Germany), Eurocopter created Eurocopter Training
Services (ETS) in 2006, a 100% owned subsidiary dedicated tothe training of pilots and technicians.

Customers and Marketing
Eurocopter’s principal military clients are European MoDs, aswell as MoDs in Asia and the U.S. Eurocopter’s penetration of
the civil and parapublic market is globally well-distributed,
placing it first among manufacturers in the markets of Europe,
the U.S. and Canada.
Eurocopter’s global strategy is reflected in the scale of its large
international network. Eurocopter’s network currently
encompasses 17 foreign subsidiaries, complemented by a networkof authorized distributors and service centres aimed at a large
number of existing and potential clients. Eurocopter’s worldwide
footprint was strengthened in 2006 through the creation ofwholly-owned subsidiaries Eurocopter Vostok and Eurocopter
China, located in Moscow and Shanghai, respectively.
In addition, Eurocopter has developed expertise in production
licensing, joint production and subcontracting agreements, andhas been developing links with industrial partners andsuppliers in more than 35 countries.
Approximately 2,612 operators worldwide currently operate
Eurocopter helicopters, forming a broad base for Eurocopter’scustomer support activities. Eighty-five percent of Eurocopter’scustomers have fleets of between one and four helicopters.
The versatility and reliability of Eurocopter products have madethem the preferred choice of the most prominent customers.
The U.S. Coast Guard operates 95 Dolphin (Dauphin)helicopters and the world’s largest offshore operators (Bristow,
CHC, Era, PHI, etc.) use Eurocopter helicopters for passenger
transport and offshore oil industry support. In the Emergency
Medical Service market segment, Eurocopter helicopters
dominate the fleets of large operators such as Air Methods in
the U.S. and ADAC in Germany. Agencies with highserviceability requirements, including police and armed forces,
also rely on Eurocopter products.

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Production
Eurocopter’s manufacturing and development activities arecarried out primarily in four locations, two in France and twoin Germany. The French sites are Marignane, in southern
France, and La Courneuve, near Paris. The German sites arelocated in Donauwörth and Ottobrunn, near Munich.
With the ramping up of the Spanish HAD helicopter assemblyline as well as NH90 assembly line in Eurocopter’s new
Albacete plant, Spain is becoming the third industrial pillar of
the Eurocopter Group.
The new plant in Albacete will play a major industrial role forthe group. It will ensure manufacturing of the rear fuselages
for the EC 135 and Tiger as well as the front fuselage for the
NH90. Manufacturing of the Tiger, NH90 and EC 135
purchased by the Spanish MoI will also be carried out at the
Albacete plant.

The Columbus, Mississippi, factory of American Eurocopter isundergoing a major expansion to support the LUH production,assembly and delivery. Industrial activity is starting with the
LUH’s build-up and acceptance for delivery and willsubsequently transition to full-scale production. In addition,
activity at the Colombus factory includes production/assemblyof AS 350 and EC 120 for U.S. Customs and Border Protection
and other government/law enforcement agencies in North
America as well as support for the U.S. Cost Guard’s
modernization of its Dolphin helicopter fleet.
The final assembly line for Tiger, NH90 and EC 120 inAustralia is also an indication of Eurocopter’s truly global
presence and strategy of being close to its customers.

1.1.5 Defence & Security
Introduction and Overview
The Defence & Security Division (“DS” or the “DS Division”)
was created in 2003 to serve as the main pillar of EADS’
defence and security activities. By combining EADS’ Defence
and Communications Systems (DCS), Defence Electronics (DE),
Military Air Systems (MAS) and Missile Systems (consisting of
EADS’ 37.5% stake in MBDA) within one division, EADS has
streamlined its defence and security business to better meet theneeds of customers that require integrated defence and security
solutions.
In 2006, the DS Division generated consolidated revenues of€5.9 billion, representing 14.9% of EADS’ total revenues.
System Design Centre (SDC)
Within DS, the System Design Centre (with branches inFrance, Germany and the U.K.) supports defence and security
customers in designing, developing and testing their products
and system architectures through use of advanced Modellingand Simulation (M&S) techniques. The SDC thereby provides aframework for systems design and related skills on behalf of
the DS business units and EADS as a whole. Thanks to its useof standardized methods (such as the architecture frameworks
used by the U.S. Department of Defense and the U.K. Ministryof Defence) and other system development tools, the SDC30

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helps to reinforce the DS Division’s strategy of improving
capabilities in Large Systems Integration (LSI) more generally.
One tool at the SDC’s disposal in this regard is a transnational
networked experimentation and test environment, referred to as
Network Centric Operations Simulations Centres (NetCOS).

2006 Highlights for the DS Division
In 2006, the DS Division met all of its streamlining goals andhas now moved major programmes and projects—including
Eurofighter and MBDA’s Storm Shadow, Brimstone, Taurus,
Aster and MICA missiles —into the production phase. In
addition, MBDA received orders from the French and German
defence ministries respectively for 250 SCALP naval cruise
missiles and 680 PARS 3 Long Range precision fire-and-forget
weapon systems. DS also succeeded in enhancing its position in
the area of coastal and maritime surveillance through theacquisition of Atlas Elektronik (jointly with ThyssenKrupp)
and of SOFRELOG, and strengthened more generally its
position in the maritime sector. Furthermore, the acquisition of
professional mobile radio capabilities made a positive
contribution to revenues in 2006 – construction of a nationwide
TETRA digital voice and data transmission radio system to be
used by German public safety authorities being the highlight –and offset the integration of EADS’ German missile house into
MBDA.

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StrategyWith its integrated structure, the DS Division is able to offer aharmonised approach to its customers consistent with the trend
towards capabilities-based procurement, while at the same time
generating internal synergies and savings. In moving beyond
defence to security, the DS Division has also recognised that its
customers increasingly require full-service packages andintegrated solutions to support their own transformation
process from defence to broader security needs. In the future,
the DS Division will seek to sustain its growth by focusing on
further cooperation with its home market customers, while atthe same time fostering and developing its global reach indeveloping markets including Central and Eastern Europe, theMiddle East, India, Asia and the South Pacific, and South
Africa. New technologies being developed by the DS Division(such as unmanned aerial vehicles) aim to generate futurebusiness and address new markets.
Streamlining and enhancing the DS Division
The organisational structures of Defence and Communications
Systems and Defence Electronics have been streamlined
successfully, including completion of the transfer of DS
headquarters to Unterschleißheim, Germany in 2006. In 2007,
the relocation of DS activities conducted in France is also
expected to be completed. Military Air Systems consolidated its
product portfolio in 2006 and announced the relocation of its
Munich activities to Manching (the site of EADS’ Military Air
Systems Centre) over the next two years, thereby centralising
the military air systems support centres as well as thedevelopment centre for advanced UAVs. Finally, successful
centralisation of the System Design Centre as well as its
marketing and sales activities and staff functions has improved
DS’ ability to focus on customer needs. These initiatives,
together with a focus on employee development andimprovement of project risk management, enabled the neworganisation to perform better and more profitably in 2006.
Supporting the transformation process of customers
Through already existing programmes with NATO, the French
Defence Ministry, the U.K. MoD and also Germany’s test bed,
DS is actively promoting European and NATO transformation.
DS is supporting its customers in assessing and satisfying theirsecurity needs by proposing simulation systems such as
NetCOS in three out of its four home countries, with plans to
expand to the U.S. and possibly Spain. DS also participates in
the Network Centric Operations Industry Consortium(NCOIC), an industry-based collaborative forum formed torecommend an architectural approach for system and platform
developers within a global network environment. The focus forthe future will be to continue to work closely with industry
and customer working groups to help define and, mostimportantly, deliver system solutions geared towards customers’
capacity requirements and respective transformation process.
Moving beyond defence into security
Employed already on behalf of organisations countering
asymmetrical threats, DS’ Large Systems Integration approach—which seeks to maximise efficiencies through the optimised useof data and information together and across different security
organisations—is a model for the construction of global
security solutions. DS has been adapting its expertise in
defence to the fast-growing markets of global security(estimated at €35 billion globally per year) and will continue
to do so.
Strengthening the DS Division’s position in home markets
and the U.S.
DS is continuing to focus on its customer orientation in the
U.K., France, Spain, and Germany. Within these respective
markets, further efforts in the core platform and missiles
businesses will remain a strategic goal towards profitable growthin defence. In particular, EADS seeks to raise its visibility in
the U.K. and capitalise on the opportunities that the U.K.
market provides. The DS Division aims to become a market
leader through projects emphasising LSI solutions such as the
U.K.’s defence information infrastructure (DII) programme. DS
recently established a NetCOS centre in the U.K. with others
already existing in France and Germany. In France, further
inroads have also been made in the area of UAV technology
partnerships and command and control systems. As an
important partner in the Eurofighter consortium through EADSCASA, Spain continues to be a significant market for profitable
growth, which DS is focused on developing. Involvementin the NEURON demonstrator is also coordinated throughMAS Spain.
Penetration of the U.S. defence market remains a key objective
for the DS Division, which seeks to expand its current U.S.
industrial presence in defence electronics and test and services.
EADS North America Defense Company (NA DefCo) is part ofthe overall strategy to increase business with the U.S.
Department of Defense and the U.S. industrial primes. NA
DefCo is, however, an independent entity and remains outsideof the DS organisation. Methods for expanding into theUnited States include:●

Pursuing specific market segments where the DS Division
can offer superior products and technologies, such as the
Hellas obstacle avoidance system for helicopters and the
TRS-3D radar for the U.S. Coast Guard. DS successfully
tested its target drone systems for the U.S. Army in 2006

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and has now been selected to provide a limited quantity ofsystems;●●

Building strong transatlantic industrial partnerships with
U.S. prime contractors, including Northrop Grumman (U.S.
Tanker programme, NATO AGS, Ballistic Missile Defence,
EuroHawk®), Lockheed Martin (MEADS, Deepwater,
Littoral Combat Ship, COBRA, Ballistic Missile Defence)and Raytheon (Ballistic Missile Defence) to explore newopportunities driven by military transformation; andSeeking acquisitions and new partnerships to enhance the
DS Division’s U.S. operational footprint across several
market sectors, including platform systems, operational
support and defence electronics.

Defence and Communications Systems (DCS)
Defence and Communications Systems (DCS) is the EADS
“Systems House”. The mission of DCS is to create complete
communication and information system solutions (including
platforms) and provide the means to implement them. DCS
offers its customers comprehensive and tailored solutions,combining the know-how to design, develop and implement
LSI (Large System Integration), and link the widest possible
range of individual platforms and subsystems into a single
effective network.
Information and secured communication system solutions in
global security as well as systems enabling effective bordercontrol and coastal surveillance constitute another major focus
for DCS. System integration is becoming increasingly importantin these areas.
In 2006, EADS and ThyssenKrupp Technologies completed thejoint acquisition of Atlas Elektronik (49% EADS, 51%
ThyssenKrupp Technologies). Both companies will pool theirskills in platform, electronic and system activities in the naval
field to create a strong naval electronics and systems company
based in Bremen, Germany. In addition, EADS acquired theFrench company SOFRELOG in 2006, a world leader in theprovision of Vessel Traffic Systems. These two acquisitions havesignificantly strengthened EADS’ presence in themaritime sector.
In 2006, DCS generated 21% of DS’s total revenues.
Markets
DCS faces competition from large U.S. and European companies
that also specialise in its markets. Major competitors are
Lockheed Martin, Thales, Motorola and SAIC. Key customers
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and Asia.
Products
DCS offers comprehensive mission systems and solutions in thearea of air dominance, battlespace systems, intelligencesolutions and naval systems as well as overall systems support.
It is a leading provider for full systems design architecture andsystems integration responsibility for military land-, sea-, airand space-based systems. DCS delivers airspace dominancesystems for defensive, offensive and support operations in a
combined, joint environment, thus realizing flexible, network
enabled capabilities. DCS is also a major designer and supplierof C3I systems to the armed forces in France and Germany, andthe Joint Staffs in France, Germany and NATO.
Major contracts signed in 2006 include the provision of an
integrated air defence system (FGBAD) for the Dutch MoD andthe complete restructuring of the information andcommunication systems of the French MoD High Command(PSP - Pôle Stratégique Parisien). DCS, the centre of the soldier
modernization programme (SMP) within EADS and home of“Soldier Systems”, will also play a key role in the developmentof the Spanish SMP (COMFUT), a contract awardedin September 2006.
DCS designs, integrates and implements Secure Fixed, Tactical,
Theatre and Mobile information infrastructure solutions,
including all of the services needed to support integrated
mission systems and solutions.
The business unit is focused on customers’ need for
information infrastructure solutions. Its expertise includes adetailed understanding of the technology necessary to achievethis, including interfaces, gateways and the use of Open Systemarchitectures.
DCS provides fully integrated global security solutions andservices in order to mitigate risk exposure in the areas of:border and maritime security, crisis management, large event
protection and critical infrastructure. Due to the increased
connections between different areas of threat and in view of thegrowing interdependence of internal and external security inparticular, the seamless collaboration of different security
organisations has become increasingly important. EADS seeks
to maximise efficiencies through the optimised use of data andinformation together and across these different security
organisations.
In 2005, EADS won a border security contract with Romania
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important milestone of this project was successfully completed
in 2006 with the installation of the ‘Backup IT subsystem’ by
EADS, the basic IT infrastructure of the entire border security
system.
DCS is also a leading provider of Professional Mobile Radio(PMR) and secure networks. EADS solutions for PMR enableprofessional organisations, such as public safety, civil defence,transport and industries, to communicate effectively, reliably,and securely. EADS can offer specialised PMR solutions basedon TETRAPOL, TETRA and P25 technologies, based on
customer requirements. Despite a highly competitive market,
EADS acquired 15 new customers in 2006.
Major contracts awarded in 2006 include the construction of
BOSNet, a nationwide TETRA digital voice and datatransmission radio system to be used by German public safety
authorities, as well as contracts to build national public safety
networks in Hungary and Estonia. DCS has also successfullycompleted the rollout of one of its very large systems,“ACROPOL”, the secure TETRAPOL radio communication
network for French police. Finally, EADS has entered the U.S.
market through SN, which will deliver a new radio system tobe used by safety officials in Cumberland County, Tennessee.
System Engineering and Consulting Services
In 2006, Apsys continued to build on its position as the French
leader in risk management on advanced technology projects.
This operating unit offers different types of services (e.g.,
consulting; studies; training; software; and audit) along allphases of a project life-cycle and utilises various technicalapproaches (e.g., reliability, availability, maintainability andsafety studies; human factor analysis; industrial, environmental
and nuclear risk assessment; and software and system quality).
Major markets include aeronautics, defence, the petroleum
industry and transportation systems. Apsys plans to continue
its long-term partnerships with EADS customers (Airbus,
Eurocopter, DS and Space Launchers), representing the majorityof its revenues, while also diversifying and enhancing its
business with other customers.
Dornier Consulting GmbH
Dornier Consulting continued its direction of profitable growthin 2006 as a company for future-oriented transportation andtechnology consulting with a focus on traffic, transportationand logistic concepts, system specification and integration,
modern technologies for the management of natural resources
as well as professional full-service project management. It is anindependent consulting and engineering company with clientsin the public and private sector in Germany, Central andEastern Europe, Central Asia and the Near and Middle East.

Major clients include national and international institutions(World Bank, UNDP, EU, KfW, GTZ), governments,
authorities, the German Railways (Deutsche Bundesbahn),
DaimlerChrysler and EADS as well as a spectrum of privatecompanies. As part of its future strategy, Dornier Consulting
will seek to develop additional opportunities for other EADS
units while also focusing on international growth.

Defence Electronics (DE)As the Electronic Warfare, Avionics and Sensors House of
EADS, DE provides mission-critical elements for data
gathering, data processing and distribution, and self-defence.
Its business is based on sensors and subsystems as a second-tiersupplier and addresses the market for surveillance andreconnaissance, military mission management, platform selfprotection, network-enabled capabilities and military forces
support.
In 2006, the DE business generated 14% of DS’s total revenues.
Markets
EADS’ main competitors in defence electronics are large andmedium-sized U.S. and European companies (i.e., Raytheon,
Northrop-Grumman, Thales, BAE Systems, Galileo Avionica,
Indra and Saab) as well as competitors from Israel. Following
the integration of ewation GmbH into DE, growth in Electronic
Warfare (EW) systems is a key strategic goal for DE. DE’s key
customers include MoDs, interior ministries, military services,
security forces, the in-house EADS systems suppliers and other
LSI’s worldwide. Through various joint ventures, participations
and cooperations, DE has access to the MoDs of all NATOcountries, particularly in Germany, France, the U.K., Spain and
Italy. Export markets, especially in the NATO- and EU
countries and the Asia-Pacific region, also offer growth
opportunities.
Products
Electronic Warfare and Self Defence. DE supplies electronic
self-protection systems for aircraft, ships and armoured
vehicles, such as laser warning, missile warning and active
electronic countermeasure units, including directed infrared
countermeasures, self-protection jammers and towed decoys. In
this field DE delivers core components to the “EuroDASS”
defensive aids subsystem on Germany's Eurofighters andsupplies additional avionics components to the wider
Eurofighter programme. It has subsystem responsibility for the
A400M's self-protection system, also supplying core EW
equipment such as the Infrared missile warning system MIRAS
contracted in 2005. For military mission aircraft, helicopters(NH90, Tiger) and VIP aircraft, DE is developing solutions to

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Back to Contentscounter threats posed by infrared-guided missiles in particular.
To date, DE has sold approximately 5,000 units of its missile
warning sensor (MILDS), which is deployed on a variety ofhelicopters and transport aircraft. In 2006, DE signed a contract
with the Indian government covering the integration of MILDS
into the self-protection system of the Indian forces as well as
further joint development.
Avionics. As a major partner in the field of military mission
avionics for the A400M, DE assumes subsystem responsibility
for mission management and defensive aids. The DE portfolio
also comprises avionics equipment, such as digital map units(EuroGrid), flight data recording units and obstacle warning
systems for helicopters. Additionally, DE is developing multisensor integration and data fusion technology, which is a key
future technology for network-enabled capabilities. For
example, DE is in charge of sensor fusion software on theNATO AWACS E3A and the similar Australian “Wedgetail”
and the Turkish “Peace Eagle” programmes. Additional products
offered by DE in the field of communication and identification
include wide-band modular data links.
Sensors. DE is a principal partner in the development of
airborne multi-mode radars such as the Captor radar in theEurofighter programme, and also provides integrated logistics
support, maintenance and upgrades. DE is also heavily involvedin the technological development and application of nextgeneration active electronically scanning (AESA) radars for air,naval and ground applications. In 2006, an AESA radar
demonstrator for Eurofighter demonstrated its capabilities inflight for the first time. In addition, DE was awarded a contract
to deliver two system demonstrators of the new Tactical Radarfor Ground Surveillance (TRGS) of the German forces, 80 ofwhich are expected to be delivered by 2012. At the end of
2006, DE was awarded a €120 million contract to develop andproduce more than 40,000 transmit/receive modules of the
MEADS fire control radar, which due to the new technology
employed will be the most powerful radar worldwide.
In the area of air defence, EADS produces mid-range radars forship (TRS-3D) and land (TRML-3D) applications. As
subcontractor for the K-130 corvettes of the German navy andthe Finnish Squadron-2000 programme, EADS is responsible
for major shipboard sensor subsystems. A success in the U.S.
market was a bilateral agreement signed in October 2004 for along-term partnership with Lockheed Martin relating to the
U.S. Coast Guard “Deepwater” programme and the U.S. Navy
Littoral Combat Ship —with respect to which deliveries areprogressing.
DE also takes a lead role in developing and manufacturing
synthetic aperture radars (SAR), which are considered essential
for future reconnaissance and surveillance operations. In thisfield, EADS has developed the European stand-off SAR sensor

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for wide-area surveillance (SOSTAR-X) as well as for use in the
TCAR Radar for the NATO AGS programme.
Test & Services
In 2006, Test & Services sustained its level of orders fromairlines worldwide. This is consistent with Test & Services’
strategy to develop a scalable technical standard that provides
airlines with continuous solutions. The acquisition of Racal
Instruments Group in 2005 and IFR and GET Electronique in2006 resulted in the group’s Test & Services unit becoming theleader in the market for testing equipment, solutions andservices in Europe. Future plans include implementing anddeveloping synergies between the Business Units andgenerating new customers in different countries throughpartnerships or establishment of an industrial presence. One of
the key strengths of Test & Services is its relationships withthe world’s prime avionic system suppliers and thedevelopment of partnerships for the supply of complete
turnkey solutions. The commercial aerospace market isexpanding and growth is being achieved from all of the prime
platform providers. There is increased spending in the military
sector and demands for through life support, contracts foravailability and integrated support strategies. As the world
leader in avionics test systems and provider of general purpose
test systems to the military, test & services is ideally placed toaddress this growing market.

Military Air Systems
The DS Division’s Military Air Systems unit focuses on thedevelopment, production and delivery of the Eurofighter
combat aircraft (46% owned by EADS), maintenance, repair andoverhaul (MRO), logistics support, upgrade of existing combat
air systems, provision of publicly or privately financed training
services and construction and manufacturing of Airbus andA400M aerostructures. In addition, Military Air Systems
designs light combat/training aircraft and unmanned aerial
vehicles (UAV/UCAV). In 2006, Military Air Systems decided
to centralize its military systems activities at its Manching sitein Germany over the next two years in order to increase its
competitiveness and establish a military air systems centre.
In 2006, the Military Air Systems business generated 35% ofDS’s total revenues.
Products and Services
Eurofighter. Eurofighter, known as “Typhoon” for export outsideof Europe, is a network-enabled, extremely agile, highperformance multi-role combat aircraft optimised for swing-role
operations in complex air-to-air and air-to-surface combat
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weapons systems. Regarded as Europe’s largest collaborative
programme currently, Eurofighter is designed to enhance fleet
efficiency through a single flying weapon system capable offulfilling supersonic, beyond‑visual‑range combat, subsonicclose-in air combat, air interdiction, air defence suppression andmaritime and littoral attack roles. The tactical requirements of
the aircraft include all‑weather capability, short take-off andlanding capability, high survivability and operational readiness.
The Eurofighter was designed to be adapted and improved overthe long-term, as new avionics and weapons evolve, to provide
for an extended service life.
The Eurofighter programme is organised through the NATOEurofighter and TORNADO Management Agency (NETMA)
via participating nations. NETMA contracts with Eurofighter
GmbH, the programme management company for theEurofighter programme. The Eurofighter GmbH shareholders
and subcontractors are EADS (46% share), BAE Systems (33%
share) and Alenia Aerospazio, a division of Finmeccanica (21%share). With regard to series production, the respective
production workshares of the participating partners within theEurofighter consortium stand at 43% for EADS, 37.5% for BAE
Systems and 19.5% for Alenia, reflecting the relative number ofaircraft ordered by each country’s programme participant.
EADS is responsible for the centre fuselage, the flight control
systems, the manufacturing of the right wing and leading edge
slats, as well as the final assembly of the 180 aircraft ordered by
the German Air Force and 87 aircraft ordered by the Spanish
Air Force. The final assembly of the Eurofighter takes place inthe relevant contracting country: Manching in Germany, Getafein Spain, Warton in the U.K. and Torino in Italy.
In January 1998, NETMA signed an umbrella Eurofighter
contract for 620 aircraft: U.K. 232 (with 65 options); Germany
180; Italy 121 (with 9 options); and Spain 87 (with 16 options).
The umbrella contract, while fixing a maximum price for theoverall programme, also stipulates that production agreements
are to be awarded in three tranches. The programme includes
the development, production investment and series productionof the aircraft. Currently, 402 aircraft are firmly on order.
Eurofighter’s first tranche of 148 aircraft is being delivered
between 2003 and 2007, with further production expected tocontinue until 2015. 114 Tranche 1 aircraft (including 5
instrumented production aircraft) had been delivered as of theend of 2006, and the rest are in final assembly or advanced
production. Final assembly of the first Tranche 2 aircraft has
already begun. Eurofighter has already sold 18 aircraft toAustria, with the first deliveries scheduled for 2007, andfurther export opportunities are believed to exist in Europe, theMiddle East and the Far East. A government-to-government
agreement has been reached between the U.K. and the Kingdomof Saudi Arabia on the purchase of Eurofighter aircraft, marking
the first export success of the aircraft outside Europe.

Unmanned Aerial Vehicles (UAV), Advanced UAV Systems.
Military Air Systems is working on a technology demonstrator
project to develop new technology for future Unmanned Aerial
Vehicles (UAVs). EADS is also working on a research andtechnology programme for the analysis and refinement ofenabling technologies and concepts of unmanned aerial
reconnaissance vehicles (URAV). The primary objective is thedevelopment of a new system-of-systems approach within a
network-centric operations context.
To respond to the German air force’s need for wide-areasurveillance and stand-off reconnaissance, Military Air Systems
and its U.S. partner Northrop Grumman are, through theirjoint venture EuroHawk GmbH, supplying the HALE-UAV
System “Euro Hawk”. Euro Hawk is a high-altitude unmanned
aerial system for signal intelligence (SIGINT) that has been
specially equipped to meet national requirements. It is based on
the Global Hawk RQ4-B platform developed by Northrop
Grumman. Military Air Systems is responsible for the overall
mission system including situation analysis and report, as well
as sensor-payload and modifications. Procurement of the first
Global Hawk platform to be converted into a full-scaledemonstrator (FSD) of the Euro Hawk HALE for signal
intelligence purposes of the German Armed Forces wasapproved by the German Parliament in January 2007. The Euro
Hawk project calls for the integration of national sensors
developed by Defence Electronics into a total of five systems.
The German air force plans to start operational flying with theEuro Hawk FSD by 2010.
Nato Alliance Ground Surveillance (AGS). NATO intends toclose a significant capability gap by creating its own
autonomous resources for airborne ground surveillance. The
TIPS (Transatlantic Industrial Proposed Solution) consortium –comprising EADS, Galileo Avionica, General Dynamics ofCanada, Indra Sistemas, Northrop Grumman and Thales – wasinvited to submit a proposal for battlefield planning using a“mixed” fleet. This proposal consisted of a “system ofindividual systems” composed of Airbus A321 manned mission
aircraft and Global Hawk UAVs together with mobile andstationary ground stations for data evaluation and distribution.
In October 2006, AGS Industries GmbH submitted its proposal
for the AGS programme in response to a request for a proposal
received from NATO in May 2006. Military Air Systems is
responsible for the central programme management for EADS’
part in AGS.
Pilot Training and Training Aircraft and Services. The training
and light combat aircraft market is competitive, with offerings
from BAE Systems (Hawk 128), KAI/Lockheed Martin (T-50),
Aermacchi (AM-346) and others. EADS' entry in this field isthrough the proposed High Energy Aircraft Trainer (HEAT).
The HEAT is intended to close the growing gap between the
demands made on pilots by modern fighter aircraft and thetraining opportunities provided by aging in-service trainers.
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While EADS will not launch a full-scale design phase for thetime being, efforts to win customers and industrial partners
will continue.
However, EADS has already contributed to the development ofa pilot training programme for European fighter jets:
in January 2007, it launched the new European Advanced
Training Jet Pilot School at Talavera together with the Spanish
air force. The school will provide comprehensive jet pilot
training using an upgraded F-5 with near latest-generation
combat aircraft performance characteristics and sophisticatedground equipment.
Finally, in April 2006 the French MoD awarded EADS the
management and support of the “ab-initio” training for future
military aircrews of the French air force’s flying school at
Cognac. The ten-year, multi-services contract includes the
procurement of new aircraft, line and base aircraft maintenanceas well as ground-based training devices and will be performed
by EADS Socata as primary subcontractor. The project
constitutes the first comprehensive outsourced service solution
initiated by the French armed forces.
Military Air Systems Support Services and Upgrades. In addition
to providing after-sales services to existing customers, EADS
also offers its clients the possibility of upgrading their military
air systems. Upgrading of military air systems is a particularly
attractive alternative for countries with limited national defence
budgets, such as those in Central and Eastern Europe, Latin
America, North Africa and some Asian regions. For thesenations, the purchase of new multi-role aircraft is either
politically or economically unfeasible, making upgrading ofexisting airframes the most cost-effective solution. EADS hasdeveloped expertise in the field of military air systems upgrades
through programmes for such aircraft as the Tornado, F-4
Phantom, F-18, F-5, MiG-29, Mirage F-1, C101 Aviojet, Harrier
AV-8B, E-3A AWACS, P-3A Orion, C-160 Transall andBreguet Atlantic 1.
In the area of support services, MAS is strengthening its
cooperation with the German air force by establishingadditional joint weapon system support centres (for the
Tornado, Transall, and other systems to be operational in thenear future, such as the A400M and Euro Hawk) that will
operate in coordination with the Eurofighter national support
centre already established in 2005.

Missile Systems
MBDA (a joint venture among EADS, BAE Systems andFinmecannica with stakes of 37.5%, 37.5% and 25%, respectively)
is the missile systems group within the DS Division (which
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capabilities in missile systems and covers the whole range ofsolutions for air superiority, land control and sea power
missions, while also providing the most advanced technologicalsolutions in strike weapons and missile defence for all threeservices. The further integration of the four home markets(France, Germany, Italy and the U.K.), the consolidation of thebusiness and increased efforts in the export market remain theprincipal goals for 2007. Enhancing the group’s missile
technology and product portfolio to provide customers with abroader range of cost-effective missile and missile systems
solutions should enable MBDA to continue to offer an
unrivalled range of capabilities and services. The integration of
EADS/LFK into MBDA as MBDA Deutschland is under way
and processing towards completion. This development adds
Germany to the list of MBDA’s home markets and increases
MBDA Deutschland’s access to new markets and technologies,
while at the same time strengthening the group’s overall skills
and capabilities in land systems.
In 2006, MBDA generated 29% of DS’s total revenues.
Markets
MBDA has a geographically diverse customer portfolio. Beyond
its four national home markets, the group has direct access tothe other important European markets, Spain and Sweden. It
also has a stable foothold in growing export markets such as
Asia, the Gulf region and Latin America, and benefits fromtransatlantic cooperation on programmes such as MEADS.
Four principal defence contractors are active in the worldwide
market for tactical missiles and missile systems. In terms ofrevenue in U.S. dollars relating to missile activities, MBDA
ranked second in 2006 sales figures, behind Raytheon andahead of Lockheed Martin and Boeing for the second year in arow. The current worldwide market for missile systems is
estimated to exceed €12 billion, with a downward trend forecast
until 2010/2011. Thereafter, the worldwide market isnevertheless expected to strengthen due to:●

the need to replace older generation missile systems and todevelop new capabilities (such as ground‑based air defence
systems, precision and deep strike weapons and naval
superiority integrated combat systems),●

the entry into service of new missile carrying platforms(Rafale, Eurofighter/Typhoon, Gripen, Tiger helicopter, newfrigates and aircraft carriers and in due course other new
platforms such as F-35 Joint Strike Fighter and UCAVs),●

the appearance of new requirements for future weapon
systems based on new operational tasks and lessons learned
from past conflicts, in particular Network Centric Warfare
related systems as well as indirect line of sight or beyond
visual range target acquisition systems.

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Products
The broad range of MBDA products covers all six principal
missile system categories: air-to-air, air-to-surface, ground-to-air,surface-to-air, anti-ship and surface-to-surface. The table below

lists the programmes in which MBDA participates as prime or
major contractor either directly or through joint ventures:Type of Missile

Purposes

Key Products or Projects

Air-to-Air

Short -range

ASRAAM

Short-range and Beyond visual range

MICA

Long Beyond visual range

MeteorStand-off guided

Storm Shadow/SCALP, Taurus KEPD 350, AFDS, DWS (for fighter aircraft)Long-range

PARS 3 LR (for TIGER helicopter)

Short-range

Diamond Back – Bang

Pre-strategic stand-off

ASMP A

Anti-radar

ALARM

Air-to-Ground

Ground-to-Air

Tactical air defence

Stinger, LFK NG, Gepard

Ground-to-Air/ATBM

Very short-range

Mistral (Atlas and Albi systems) – Stinger (under license)

Medium-range

VL Mica – Roland – Rapier – Spada

Long-range

Aster SAMP/T – MEADS – Patriot/PAC 3

Subsystems

Warheads (TDW)
Propulsion Systems (Bayern Chemie) (e.g., Meteor/ramjet)

Surface–to-Air/Naval

Anti-ship

Anti-tank

Surface-to-Surface, Deep Attack

Very short-range

Mistral (Simbad and Tetral Systems)

Short-range

VL Mica – VL Seawolf

Short-range

Albatros – RAM

Medium-range

Aster/PAAMS – Aster/SAAM – ESSM

Light

Sea Skua – AS 15 TT – NSM – Marte

Heavy

Exocet family – TESEO

Anti-submarine

Milas

Short-range

Eryx

Medium-range

Milan ADT- ER

Long-range

HOT, Pars 3 LR, Brimstone

Ground-to-ground

GMLRS

Sea-to-land

Scalp Naval

The most significant programmes currently under development
are the PARS 3, Aster PAAMS and SAMP/T air defence
systems and the METEOR air superiority missile system, while
those in production include Storm Shadow/SCALP missile
systems, Taurus stand-off missiles.
PARS 3 LR. A long-range precision fire-and-forget weapon
system PARS 3 LR is the main armament for the Tiger
helicopter ordered by the German Army. The contract forindustrialisation and series production of the PARS 3 LR
missiles will be managed by PARSYS, a joint venture between
MBDA (LFK GmbH 50%), and Diehl BGT Defence (50%). The
contract, valued at €380 million, covers industrialisation anddelivery of 680 missiles for the German Army by theyear 2014.
Aster Family. The FSAF Phase 3 contract signed with OCCAR(Organisation Conjointe de Coopération en matière d’Armement)in November 2003 is worth €3 billion (€2.3 billion thereof tobe allocated to MBDA). This contract covers the series
production of approximately 1400 Aster missiles and associatedmissile systems and represents Europe’s first advanced naval andground-based air defence missile system with Anti-Tactical
Ballistic Missiles (ATBM).
Storm Shadow/SCALP. Already in service in the U.K., France
and Italy, the Storm Shadow/SCALP was also selected by

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Greece in January 2004. The Hellenic Air Force has ordered
34 Storm Shadow/Scalp missile systems. Reaching fullproduction in 2004, over 1000 missiles have now been built in
the U.K. For the UAE, where the missile is known as “Black
Shaheen”, deliveries are underway to the country’s air force.
Taurus KEPD 350. MBDA Deutschland and SAAB Bofors areworking together through Taurus Systems GmbH to create anddeliver the Taurus KEPD 350, a precision stand-off guided
missile system for Tornado, Gripen and Eurofighter aircraft.
Taurus KEPD 350 is in series production for the German Air
Force with which the weapon is now in service. In 2005, Spain
also announced its intention to procure 43 Taurus KEPD 350
missiles for its F/A-18 and Eurofighter aircraft.
METEOR. In 2006, the first air-launched demonstration firingsof METEOR were carried out from a Gripen combat aircraft at
the Vidsel range in Sweden. These test flights, using missiles
equipped with full telemetry capability (not with a warhead ora seeker), successfully confirmed METEOR’s release properties,
manoeuvrability and the effectiveness of the motor technology
as it goes through its boost and sustain phases.
MEADS. The MEADS Medium Extended Air Defense System,a ground-based tactical air defence system, is a good example ofdynamic and successful cooperation on a transatlantic level.
MEADS will protect troops during out-of-area missions within

the scope of homeland defence. The financial share of the
programme is 58% U.S., 42% European (German and Italian).
The technical workshare of the companies involved – MBDA
Deutschland, MBDA Italia and Lockheed Martin (UnitedStates) – corresponds to the respective cost contribution
percentages. MBDA’s activities are coordinated through thejoint venture company euroMeads GmbH, which, like Lockheed
Martin, has a 50% share in MEADS International Inc. (MI). On
1st June 2005, MI formally signed a contract to design anddevelop MEADS. The contract value is approximately $2 billion
plus €1.4 billion for the programme’s design and development(D&D) phase. The D&D contract extends the period of
performance of a previous letter contract that was awarded to
MI by the NATO MEADS Management Agency(NAMEADSMA) in September 2004. Award of the contract
followed the German government’s approval on 20th April 2005of entry into the MEADS D&D phase, a step taken earlier by
the governments of Italy and the United States.
Ballistic Missile Defence. EADS is the only company in Europe
with the full range of skills and technologies needed to develop,
deploy and support Ballistic Missile Defence (BMD) systems,
whether for the protection of armed forces or entire countries
and their populations. Recognising this capability, NATO has
selected EADS as a member of a transatlantic consortium toconduct a Theatre Missile Defence feasibility study.

1.1.6	Astrium
Introduction and Overview
Astrium is the third-largest space systems manufacturing
company in the world after Boeing and Lockheed Martin, andthe leading European supplier of satellites, orbital
infrastructures, launchers and associated services. In 2006,
Astrium generated revenues of €3.2 billion, representing 8.1%
of EADS’ total revenues.
Astrium is composed of three main business units: Astrium
Satellites (Astrium Satellites), Astrium Space Transportation(Astrium ST) and Astrium Services (Astrium Services), throughwhich it designs, develops and manufactures satellites, orbital
infrastructures and launcher systems and provides space
services. Astrium also provides launch services through its
shareholdings in Arianespace (Ariane 5 launcher), Starsem(Soyuz launcher) and Eurockot (Rockot launcher), as well as
services related to telecommunications and earth observation
satellites, through wholly‑owned subsidiaries such as Paradigm
Secure Communications and Paradigm Services (“Paradigm”)
and Infoterra, and joint ventures such as Spot Image.

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Astrium confirmed the success of its business model in 2006,
with EBIT* more than doubling from the prior year to€130 million (4% of revenues), compared to €58 million
in 2005.

StrategyWith an established presence in five European countries withactive space programmes (France, Germany, the Netherlands,
Spain and the United Kingdom), Astrium is the only European
company to offer comprehensive expertise in all areas of thespace industry (satellites, launchers, orbital infrastructure andservices). Astrium’s strategy is to build on these key strategic
attributes and to strengthen its position in the market.

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Generate profitable growth in a flat market
Institutional and military spending on space activities iscurrently flat in Europe, due to existing budget constraints.
There is also intense competition in commercial markets forlaunchers and telecommunication satellites. Within thisdifficult context, Astrium has undertaken the following efforts:●●

with respect to development of the Ariane launcher and
M51 missile systems, Astrium ST decided in 2004 to
become a prime contractor (as opposed to a main supplierand industrial architect only). This has strengthened its
position vis à vis suppliers and customers, allowing it torationalise and streamline its activities and thereby generatecost savings. In addition, Astrium is currently the second
largest shareholder of Arianespace with a 31% stake, allowing
it to influence the development of the Ariane family oflaunchers going forward. Astrium ST will build on these
efforts in the future, just as production of the M51 inparticular gains speed;with respect to satellites, Astrium, through its whollyowned subsidiary, Paradigm, has moved from being a sole
hardware supplier to a provider of secured satellite
communication services, in particular for the U.K. Ministryof Defence. This strategy yielded increased revenue andprofit during 2006, and was recently reinforced by theGerman government’s decision in July 2006 to award acontract for the development of a Satcom BW military
satellite communication system to a consortium led byAstrium.

Attain European benchmark profitability
After the extensive restructuring measures that were
implemented in 2003 and 2004 (rationalisation andspecialisation of sites, reduction of workforce by 30%,
reorientation towards institutional customers), management
believes that Astrium will increasingly benefit from theseactions going forward. The encouraging evolution in Ariane
development, the successful turn-around of thetelecommunication satellites business, the progress madetowards deployment of the Skynet 5 secured communication
system in the U.K. and the award of the Satcom BW contractby Germany collectively support this view. In order to further
improve its margins, Astrium has launched additional
improvement plans across its business units (Innovex’08 for
Astrium satellites, Boost’08 for Astrium ST and Impact’08 forthe support sectors).
Extend Astrium’s footprint in communications andobservation
Management believes that the strategic decision it made in
2003 to enter the services area while retaining Astrium’s

technical capabilities in the launchers and satellites area was theright one. The positive development of the Skynet 5 secured
communication system contract in the U.K. was an importantfirst step. Astrium later proceeded to offer similar services tothird party customers and signed contracts with NATO,
Portugal, the Netherlands and other governments for their own
secure satellite communications needs. This culminated with
the German government’s decision to award a consortium led
by Astrium the Satcom BW contract, as described above.
Astrium is also well‑positioned in military reconnaissancesystems (Helios II and Pleiades) and other military-specificcapabilities. In the satellite navigation area, management
believes that the Galileo satellite-based navigation system offers
numerous development opportunities to EADS in the civilian(e.g., air traffic control) and security (e.g., precise positioning
during time of crisis) markets. To solidify its positioning,
Astrium is one of the leaders of Galileo Industries, thehardware provider for the Galileo project, and of theconsortium which is currently in final contract negotiations
with the GNSS Supervisory Authority (GSA) for theconcession to deploy the more than 30 satellites needed tooperate the Galileo constellation over a 20-year period.

Satellites – Astrium Satellites
Overview
Astrium Satellites is the leading European company for thedesign and manufacturing of satellite systems, spanning all
major segments of the satellite market (including platforms,
payloads and equipment). It provides (1) telecommunications
satellites to leading telecommunications service providers, (2)earth observation, navigation and science satellites systems tomajor national and international agencies, and (3) military
applications satellite systems to European MoDs. Astrium
Satellites also designs and manufactures payload equipment andsubsystems for the global space industry market.
Astrium Satellites’ business covers the four categories ofsatellite systems described below:
Telecommunications satellites have multiple applications, such as
long‑distance and mobile telephone links, television and radio
broadcasting, data transmission, multimedia and Internet
trunking. They may be used for civil or military applications.
Observation satellites allow the collection of information forvarious fields, such as cartography, weather forecasting, climate
monitoring, agricultural and forestry management, mineral,energy and water resource management and military
surveillance applications.

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Scientific satellites are tailor-made products adapted to the specificrequirements of the mission assigned to them. They haveapplications such as astronomical observation of radiation sources
within the universe, planetary exploration and earth sciences.
Navigation satellite systems deliver signals that enable users todetermine their geographic position with high accuracy, and areincreasingly significant in many sectors of commercial activity,
such as airlines, transport operators on land, sea and air,emergency services, agriculture and fisheries, tourism andtelecommunications networks.
Market
The commercial telecommunications satellite manufacturingmarket is highly competitive, with customer decisions based
principally on price, technical expertise and track record.
Astrium Satellites has a worldwide market share of
approximately 20%, and its main competitors are Boeing,
Lockheed Martin and Loral of the United States and AlcatelAleniaSpace of France and Italy. Management views thetelecommunications satellite segment as one of slow but
sustained growth, supported by factors such as: (1) increased
telecommunications demand, including Internet, multimedia
and military needs, and (2) greater demand to replace aging
fleets. However, the segment remains a highly competitivemarket, mostly due to the increasing concentration of satellite
operators. EADS will seek to strengthen its position in thismarket going forward.
In the market for observation, scientific and navigation
satellites, competition in Europe is organised either on anational or multinational (European Space Agency, Eumetsat)
level. In the latter instance, a fair return policy—pursuant towhich contracts are awarded to domestic suppliers in proportion
to the respective financial contribution made by theirgovernments—is often employed.
There is also sizable export demand for earth observation
systems, for which EADS is currently the sole significant
European provider. Furthermore, civil state agencies, including
the European Space Agency (ESA), are displaying increased
needs for earth observation satellites in the framework ofEuropean environmental programmes, following the Space
Ministerial Conference held in December 2005. EADS expects
the scientific satellite market to remain stable over the
medium term.
The agreements reached in 2003 at the EU level and among
ESA member states regarding the development andimplementation of Galileo, the new European global satellite
navigation system, led to the establishment of the Galileo Joint
Undertaking (the legal entity that will have the task of
coordinating ESA and EU involvement in Galileo). The Galileo

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programme comprises 30 navigation satellites and a potential
equipment contract valued at more than €3 billion. Full
deployment of the system is expected around 2011. For the
space industry and its customers, the Galileo programme’s
economic, industrial and strategic importance is paramount.
This programme will be a driver of innovative user- andcustomer-oriented solutions, creating new markets fornavigation-related services.
Finally, in the market for military satellites, there has been
increased demand for telecommunications and observation
satellites. In recent conflicts, the shortcomings of European
military capabilities in this field have become increasingly
visible, while the need for preparedness in the face of elusive
threats has grown. The Skynet 5 contract in the United
Kingdom, the Helios 2 and other development contracts inFrance and the Satcom BW contract in Germany illustrate thegrowth potential in this market.
Products
Astrium Satellites manufactures satellite systems, platforms,
payloads, major subsystems and a wide range of equipment,
offering turnkey satellite systems to its customers. Astrium has
several wholly-owned subsidiaries that specialize in different
areas, including:●

Astrium Spain, which supplies platforms, space-borne
antennas, deployment mechanisms and harness subsystems
for telecommunication satellites;●

Tesat in Germany, which is in charge of telecommunicationelectronic equipment and subsystems;●

EADS Sodern in France, which provides satellites sensors; and●Dutch Space in the Netherlands, which provides solar arrays
and other specialized items.

Telecommunications Satellites: Astrium Satellites produces
telecommunication satellites for fixed and mobile applications
and direct-to-home broadcast services. EADS’ geostationary
telecommunications satellites are based on the EUROSTAR
family platforms (45 ordered to date), the latest version ofwhich is EUROSTAR 3000. Three commercial service satellites
were launched in 2006: Hotbird 8, Arabsat 4A (which failed toreach its planned orbit due to a faulty Proton launcher) andArabsat 4B.
The year 2006 was a strong one for Astrium Satellites in termof orders, with seven satellites booked, five of which are basedon the Eurostar platform (Nimiq 4 for Telesat, Badr 6 forArabsat, Hotbird 9 and Hotbird 10 for Eutelsat and Astra 3B
for SES) and two of which are based on the smaller Indian
Antrix platform, for which Astrium Satellites has an exclusive
agreement (W2M for Eutelsat and Hylas for Avanti).

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In the field of military telecommunications satellites, theGerman MoD awarded a consortium led by Astrium theSatcom BW contract in July 2006, thereby reinforcing theposition of Astrium as a provider of secured telecommunication
capacity to the European military. As regards the United
Kingdom, Astrium has completed the first Skynet 5 satellite,
which is now ready for launch.
Observation Satellites: Astrium Satellites is the leading
European supplier of earth observation satellite systems, forboth civil and military applications. In this field, Astrium
Satellites derives significant benefits from the common elementsof its civil and military programmes.
Astrium Satellites designs and manufactures a wide range ofhighly versatile platforms, optical and radar instruments andground segment equipment for the complete scope of remotesensing applications, operations and services. Astrium Satellites
is one of the global market leaders in the field of earth
observation satellites, and the prime contractor for many of
ESA’s and CNES’ principal observation programmes.
Specifically, it is the prime contractor for: (1) the Spot multimission platform series, in use in 15 European earth
observation satellites and recognised as an industry standard;(2) Envisat, a European environmental monitoring satellite
launched in March 2002; (3) Metop, a next-generation polarorbiting meteorological satellite, with the first one out of threelaunched in 2006; (4) Pleiades, two small and highly agile earth
observation satellites for civil and military applications,
expected to be launched in 2008 and 2009; (5) Swarm, aclimatology satellite monitoring the evolution of the earth’s
magnetic fields; (6) Cryosat 2, a radar satellite designed tomonitor the thickness of polar ice caps; and (7) Tandem X, an
imagery satellite.
In the export market, Astrium Satellites signed a contract in2006 with Algeria to provide two observation micro-satellites.
It also successfully launched an observation satellite for South
Korea in July 2006 (Kompsat 2), as well as a meteorologicalsatellite for Eumetsat (Metop) in October 2006.
Science Satellites: In 2006, Astrium Satellites won the two
major programmes awarded by the ESA: GAIA and Bepi
Colombo. GAIA is an ESA scientific mission designed toestablish a galactic cartography; it is expected to be launched in2012 as the successor to Hipparcos, launched in the 1980s. Bepi
Coombo is also an ESA scientific mission, the purpose of whichis to study and analyse the environment of the planet Mercury.
Navigation Satellites: Astrium Satellites together with othershas established a dedicated company to build and implement
the European navigation system Galileo. Astrium holds a 38%
stake in Galileo Industries S.A. (“Galileo Industries”), which
was awarded a contract for the first of two test satellites for theEuropean navigation system in July 2003. As regards the four
satellites needed for the validation phase, Astrium Satellites isprime contractor for the space segment and, through Astrium
Germany, supplies the avionics and part of the solar arrays,
while Astrium U.K. is responsible for payload development andground segment lead.
Military Satellites: In addition to military earth observation
activity, Astrium Satellites is active in the market for various
other advanced applications. These systems demonstrate
Astrium's leading role in complex systems offers, reflecting theefficient use of synergies between Astrium’s space and defence
activities.

Orbital Infrastructure/Launchers and Launch
Services – Astrium ST
Astrium ST is the European space infrastructure and spacetransportation specialist. It designs, develops and produces
Ariane 5 launchers, the Columbus laboratory and the ATV
cargo carrier for the International Space Station (ISS), ballistic
missiles for France’s deterrence forces, propulsion systems andspace equipment.
Orbital Infrastructure
The orbital infrastructure segment in which Astrium ST
operates comprises manned and unmanned space systems. Workon the ISS, together with related vehicle and equipment
development programmes and services, constitutes the
predominant field of activity in this segment. Astrium ST is theprime contractor under an ESA contract relating to two key
elements of the ISS: the Columbus Orbital Facility laboratory(COF) and the Automated Transfer Vehicle (ATV).
MarketDemand for orbital infrastructure systems originates solely
from publicly funded space agencies, in particular ESA, NASA,
Roscosmos (Russia) and NASDA (Japan). These systems are
generally constructed in cooperation with international
partners. In addition to the COF and ATV projects, ESA is
responsible for developing other components relating to theISS’ construction and operational phases, for which Astrium ST
has already been awarded contracts. National space agencies,
such as DLR and CNES, are also involved in the developmentof laboratory facilities to be used on the ISS, representing
additional contract opportunities for Astrium ST.

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Products
Astrium ST is the prime contractor for the development andintegration of the COF. The COF is a pressurised module withan independent life-support system. It will provide a full-scale
research environment under microgravity conditions (materialscience, medicine, human physiology, biology, earth
observation, fluid physics and astronomy) and will serve as atest-bed for new technologies. The COF is expected to betransferred to the ISS by shuttle at the end of 2007.

MarketManagement estimates that the average open commercial market
for launch services will likely remain at 20/25 payloads per
year, relating primarily to the launch of geostationary
telecommunications satellites. However, due to various factors(e.g., technology advances and consolidation of customers), thisfigure is highly volatile. This market does not include
institutional launch services for the U.S., Russian and Chinese
military and governmental agencies.

Astrium ST is also the prime contractor for the development andconstruction of the ATV, which will carry fuel and supplies tothe ISS, as well as provide reboost capability and a waste disposal
solution. The ATV will be the first European vehicle to carry out
a rendezvous in space and dock automatically with an orbital
station. The first ATV (Jules Verne) is scheduled to be launchedby the Ariane 5 rocket in mid-2007, with additional ATV
missions planned through 2013.

In 2006, the market for launch services changed significantly.
Russian companies and state agencies significantly increased theprice of their launchers, thereby making western launchers
more competitive in the market. This has changed theeconomics of various Russian/Western joint ventures inparticular (e.g., International Launch Services, Sea-Launch,Starsem and Eurockot), as the competitive advantage they
enjoyed from being able to obtain low-cost rockets from theformer Soviet Union has eroded.

In addition to its work on the COF and the ATV, Astrium ST,
through Dutch Space, is the prime contractor for developmentof the European Robotic Arm of the ISS, which will be used byastronauts for the assembly and maintenance of exterior station
elements.
Finally, Astrium ST supplies laboratory facilities to be used invarious station modules for research under microgravity
conditions (MSL laboratory, MCS system, RFR refrigerator,
CFR rack, MSG glove box, PCDF and Cardiolab laboratories). It
also supplies CNES with a Declic experiment facility forexperiments in the field of fluid physics.
Launchers & Launch Services
Space systems (including satellites, orbital infrastructureelements and interplanetary probes) depend on rocket propelled
multi-stage launchers, which are consumed during the launch
process, to place them into orbit. Astrium ST is active in two
distinct businesses: (1) designing and manufacturing launchers
for both civil and military purposes; and (2) providing launchservices through its interests in Arianespace, Starsem andEurockot.
Astrium ST is the sole prime contractor for the Ariane 5
system, with responsibility for the delivery to Arianespace of acomplete and fully tested vehicle. Astrium ST also supplies all
Ariane 5 stages, the equipment bay, the flight software, as wellas numerous sub-assemblies. Additionally, Astrium ST is theprime contractor for ballistic missile systems to the French
State. It is responsible for the development, manufacturing andmaintenance of the M45 and M51 submarine-launched missiles
and related operating systems.

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In the area of national defence, Astrium ST has been the
exclusive supplier of ballistic missiles to the French State since
the early 1960s. In addition to conducting development andproduction activities, Astrium ST performs substantial
maintenance work on the ballistic missile arsenal to ensure
system readiness over the life span of the equipment, which
may be several decades. In 2006, Astrium ST built on thisexperience by winning a contract with NATO for the first time
as part of an international partnership.
Products and Services
Launch Services. Astrium ST is active in the field of launchservices through its shareholdings in Arianespace (for heavy-liftlaunchers), Starsem (for medium-lift launchers) and Eurockot(for small-lift launchers).
Arianespace. Astrium ST is Arianespace’s second largest
shareholder (after CNES) with a 31% stake (direct and indirect),and its largest industrial shareholder. Arianespace is the world’s
largest commercial launch service provider in terms of totalorder book. At the end of 2006, Ariane had launched a total of
242 satellites. Arianespace markets and sells the Ariane
launcher worldwide and carries out launches from the Kourou
space centre in French Guyana.
In 2006, Arianespace won nine new commercial contracts,
representing 45% of the accessible market. It also won two
governmental launch contracts in 2006. Five Ariane 5 launches
were carried out in 2006, placing into orbit ten satellites (eightcommercial and two institutional).

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Two versions of Ariane 5 are currently in service: (1) Ariane 5
GS, which is able to launch one or more payloads with a total
mass of up to 6.9 tons into geostationary transfer orbit, and (2)Ariane 5 ECA, which is the workhorse of Arianespace with anincreased launch capacity of 10 tons in geostationary transfer
orbit. Since 1999, when the first Ariane 5 commercial launchoccurred, twenty-five Ariane 5 rockets have been successfullylaunched.
Europe’s commitment to support Ariane as the European
launcher has been demonstrated by the signing of an agreement
between ESA and Arianespace in March 2004 entitled“European Guaranteed Access to Space” (EGAS), and by theissuance of a “buy European” recommendation for institutional
satellites made by the Space Ministerial Conference held in
Berlin in December 2005.
Starsem. Astrium ST directly owns 35% of Starsem, a French
corporation, along with Arianespace (15%), the Russian space
agency (25%) and the Russian state-owned Central Specialised
Design Bureau “Progress” (25%). Through Arianespace, Starsem
markets launch services by Soyuz launchers for medium-weightspacecrafts into low or sun-synchronous orbits as well as forinterplanetary missions. Although no new contracts weresigned in 2006, there were two institutional launches from
Baikonur. Work is also progressing on a new launch pad at
Kourou, with the first launch (to be operated by Arianespace)scheduled for the end of 2008 or early 2009.
Eurockot. Astrium ST (51%) and Khrunichev (49%) jointly
control Eurockot Launch Services, which procures launchservices for small, low‑earth orbit satellites with Rockot
launchers derived from the SS-19 ballistic missiles. In 2006,
Eurockot did not sign any new contracts, although one launchoccurred (Kompsat 2) on behalf of the South Korean
government.
Commercial Launchers. Astrium ST manufactures launchers andperforms research and development for the Ariane programmes.
Member states, through ESA, fund the development cost for
Ariane launchers and associated technology. Since 2004—when
it was awarded a €3 billion contract to provide thirty Ariane 5
launchers—Astrium ST has been working on supplying suchlaunchers to Arianespace. As the industrial prime contractor,
Astrium ST has worked to streamline and simplify the Arianeorganisation and thereby improve its competitiveness. Whileefforts in 2005 focused on the qualification of the 10‑ton
version of Ariane and the organisation of Ariane production
under a single prime contract, the year 2006 was devoted tosupplying a standardised launcher while increasing cost savings.
Ballistic Missiles. Astrium ST is the only company in Europe
which designs, manufactures, tests and maintains ballistic
missiles. Under its contracts with the French State, Astrium ST

has produced the submarine launched MSBS family (M1, M2,
M20, M4 and M45) and launch facilities at the Brest naval base.
The M45 is deployed onboard France’s new-generation nuclearpowered ballistic missile submarine. Astrium ST manages theoperational maintenance of the M45 missile system, assisting
the French armed forces until the end of its operational service.
Astrium ST is under contract to develop the M51, a newsubmarine-based strategic missile system with increased
technical and operational capabilities. The first test flight of thisnew missile was conducted successfully in November 2006. At
the end of 2004, the French MoD awarded Astrium ST acontract for the M51 production phase and test range facilities
with a frame-contract in excess of €3 billion. At the end of
2006 a contract for an enhanced upper‑stage was awarded by
the French MoD for an amount of more than €200 million,
helping to secure Astrium ST’s technical capabilities in thisfield for the long-term.
Management believes that the development and production of
the M51 will provide Astrium ST with high quality work overthe long term. In addition, the relative predictability of demand
provides some stability to the otherwise volatile launcher
market.

Space Services – Astrium Services
Overview
Astrium Services, which includes Paradigm, is a dedicatedentity of Astrium for the development and operation ofsatellite services, with a focus on secured telecommunicationand navigation services. After having been awarded a contractfrom the U.K. MoD in 2003, Paradigm has become the firstcommercial provider of secure military communications
services. Paradigm currently owns and operates the Skynet 4
system and is preparing the Skynet 5 system for entry into
service. Paradigm has enlarged its customer base throughcontracts with NATO, Portugal, the Netherlands and several
other governments.
Within the framework of the Sactcom BW contract awardedin July 2006, Astrium Services, through a joint venture withND Satcom in which it is the majority shareholder (Astrium
Services: 75%; ND Satcom: 25%), will operate the systemprocured by the German MoD on a long-term basis and provide
additional capacity from commercial operators.
In the navigation sector, Astrium Services is one of the leading
partners in the consortium (which includes Inmarsat, Thales,
Alcatel-Alenia Space, Finmeccanica, Hispasat, AENA and
TeleOp) currently negotiating with the GNSS Supervisory
Authority (GNA) for the concession phase of the Galileo
system.

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Astrium Services also manages holdings in satellite
telecommunication service and operation companies: Nahuelsat
in Argentina, and Hispasat and Hisdesat in Spain.
Products and Services
Military Communications. The U.K. MoD selected Paradigm in2003 to deliver global secure satellite communications service
over a 15-year period for its next-generation Skynet 5
programme under a Private Finance Initiative contract. In
addition, Paradigm took over the U.K.’s existing Skynet 4 fleet.
This groundbreaking contract, under which Paradigm now owns
and operates the U.K. military communication satellite
infrastructure, allows the U.K. MoD to place orders and to pay
for services as required. Offering a catalogue of services,
Paradigm delivers tailored in-theatre and back-to-basecommunication solutions for voice, data and video services,
ranging from a single voice channel to a complete turnkey
system incorporating terminals and network management.
Paradigm also provides welfare services, ensuring that deployedtroops can call home and can use the Internet. Following
discussions in 2005, the concession period has been extended
to 20 years and the number of new satellites has been increased
to 3 instead of 2. The first Skynet 5 satellite was launched at
the beginning of 2007, with full operational service scheduled
for the end of 2008 or early 2009.
In 2004, the German Bundeswehr issued a proposal request for
secure satellite communication capacity, comprising a complete
military satellite communication infrastructure, including afleet of satellites, a number of tactical and strategic groundstations and a network control in the system, to be operated on
its behalf for a 10-year period. The system is expected to be
fully operational at the beginning of 2009. In response to this
proposal request, Astrium Services, together with ND SatCom
and Astrium Satelites, was awarded the contract in July 2006.
Navigation. Discussions are ongoing between the Merged
Consortium (Astrium Services, Inmarsat, Thales, Alcatel-Alenia
Space, Hispasat, AENA and TeleOp) and the GNSS Supervisory
Authority in order to find a satisfactory solution for theconcession phase of the Galileo system. The Galileo Joint
Undertaking is expected to award the concession contract in2007. Under this concession contract, a newly formed operatingcompany will deploy and operate the more than 30 satellites
needed to operate the Galileo constellation over a 20-year
period. The Galileo project is a major step forward for Europe,
representing the first major European-level infrastructure
procurement programme with a global dimension that willbring numerous benefits to the continent and the rest of theworld. The market potential is promising, as global demand forsatellite navigation services and derivative products is growing
at approximately 25% per year.

Production
Astrium currently operates production facilities located in
France (Vélizy, Les Mureaux, Bordeaux, Toulouse), Germany(Backnang, Bremen, Friedrichshafen, Lampoldshausen,
Ottobrunn, Rostock, Trauen), Spain (Madrid), the United
Kingdom (Portsmouth, Stevenage), the Netherlands (Leiden)
and French Guyana (Kourou).

1.1.7	Other Businesses
Regional Aircraft – ATR
ATR (Avions de Transport Régional) is a world leader in themarket for regional turboprop aircraft of 40 to 70 seats. ATR
Integrated is a consortium composed of EADS and Alenia, inwhich each hold a 50% stake. The EADS ATR business unit,
which represents EADS’ 50% share of ATR Integrated, is under
the responsibility of Airbus.
Market and Outlook
The regional aircraft industry has experienced growing
concentration in recent years. During the 1990s, a number ofmanufacturers merged, closed or ceased production of regional
aircraft, leading to the withdrawal from the market of BAE
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31st December 2006, the worldwide market for turboprop
aircraft of 40-70 seats in production was dominated by two
manufacturers: ATR and Bombardier.
After a number of years of relatively low activity, the regional
turboprop market has grown dramatically since 2005, due inlarge part to the advantages of turboprop aircraft over jet
aircraft in terms of fuel efficiency and CO2 emissions. In 2006,
ATR delivered 24 new aircraft (compared to 15 in 2005) andrecorded orders for 63 new aircraft (compared to 90 in 2005).
ATR had a backlog of 124 aircraft at 31st December 2006, anincrease of approximately 40% over 2005. ATR’s market sharein 2006 was approximately 60%. The relative fuel efficiency andreduced CO2 emissions of turboprop engines are expected tolead to sustained market activity over the coming years.

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The market for second-hand aircraft also remained strong in
2006, which ledto an increase in the residual value of used
ATR aircraft. ATR conducted 31 transactions in the usedaircraft market in 2006 (for 24 ATR 42s and 7 ATR 72s),
including 12 cash sales of reconditioned aircraft. ATR delivered
29 second-hand aircraft in 2006.
Products and Services
ATR 42 and ATR 72 Series Aircraft. Commencing with the
ATR 42, which entered service in 1985, ATR has developed afamily of high-wing, twin turboprop aircraft in the 40-70
passenger market that are designed for optimal efficiency,
operational flexibility and comfort. In 1996, in order to respondto operators’ increasing demands for comfort and performance,
ATR launched a new generation of aircraft, the ATR 72-500
and ATR 42-500. Like Airbus, the ATR range is based on thefamily concept, which provides for savings in training,
maintenance operations, spare parts supply and CCQ.
Customer Service. ATR has established a worldwide customer
support organisation committed to supporting the aircraft overits service life. Service centres and spare parts stocks are locatedat Toulouse, in the vicinity of Washington D.C. and in
Singapore. An e-market place designed to enhance support
services developed with Embraer is also available to customers.
ATR Asset Management. Consistent with industry practice, asignificant portion of orders received by ATR is conditional on
its assistance in financing these orders either through leasing orloan guarantee arrangements. ATR Asset Management manages
the resulting risk and employs a strategy of consistent reductionof sales financing exposure.
ATR Asset Management also responds to the growing market
for second-hand aircraft by assisting in the placement andfinancing of used and end-of-lease aircraft. By providing quality
reconditioned aircraft at attractive prices, ATR AssetManagement has helped both to broaden ATR’s customer base,in particular in emerging markets, and to maintain the residual
values of used aircraft. In the past, clients for such used aircraft
have subsequently purchased new aircraft as they have gained
experience in the operation of ATR turboprops. Returned
aircraft generally remain out of service for approximately fivemonths as they await reconditioning and resale or leasing,subject to market conditions.
Production
The ATR production facilities are located near Naples, Italy andat Merignac and Saint-Martin near the Toulouse airport inFrance. Final assembly, flight-testing, certification and delivery
occurs at the Toulouse site. ATR outsources certain areas of

responsibility to the Airbus Division, including wing design
and manufacture, flight-testing and information technology.

General Aviation
EADS Socata
EADS Socata manufactures a range of light aircraft for both theprivate civil aircraft market and government fleets, and is also
engaged in aerostructure subcontracting, pursuant to which it
produces materials and subassemblies for major international
aviation programmes, including, but not limited to, EADS
programmes.
In the general aviation field, EADS Socata has developed overthe past 20 years a range of piston engine aircraft, the TB
family, and the monoturboprop pressurised TBM 700.
Continuous development and use of innovative technologies
keep these products well-positioned on the market. These newgeneration aircraft compete with products based on models thatdate back to the 1950s. To strengthen its market position inbusiness and private aviation, EADS Socata has also launched
the newest member of its TBM family – the six-seat TBM 850
pressurised single-engined turboprop. The TBM 850 offers
owners and pilots a maximum cruise speed of 320 KTAS at
FL260 in ISA conditions. This will give TBM 850 operators theadvantage of the cruising speeds typical of light jets, with theeconomical direct operating costs of a single-engined turboprop.
Since launching its aerostructures activity in the early 1960s,
EADS Socata has positioned itself as a first-line global
subcontractor for complete assemblies. Its engineering
department carries out development and design for key
components for major aviation programmes, including Airbus(A400M, A380, etc.), Dassault (F7X), Eurocopter and Embraer.
EADS Socata is experienced in the use of sheet metal forming
and stretching, composite materials and semi-manual structuralassembly for aeronautic programmes. EADS Socata is also
experienced in the use of composite materials for aircraft
structural elements, in particular for the Airbus A330/A340, as
well as in metal-composite combination technology and formingof large-dimension metal panels. EADS Socata carries out
design work for a number of European aviation programmes,
including Airbus, Eurocopter, Mirage and Falcon aircraft.

Aircraft Conversion and Floor Panels
EADS Sogerma
On 10th January 2007, EADS Sogerma sold two of its
subsidiaries dedicated to global support and maintenance—
Sogerma Services and Barfield—to the TAT Group. Accordingly,

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while EADS Sogerma will continue to conduct somemaintenance activities through its subsidiaries Seca and Revima,
its main business currently consists of aircraft and cabincustomisation and aerostructures, primarily on behalf ofAirbus.
EADS Sogerma is an approved outfitter for Airbus’ corporate
jets, with services currently performed in Toulouse. EADS
Sogerma designs and manufactures high-end cabin interior
components and first and business class passenger seats. Aircraft
customisation also includes military transport and mission
aircraft (e.g., C-130 life extension).
In the aerostructures field, EADS Sogerma is involved in thedesign and manufacture of fuselage panels and sections for
Airbus aircraft and in composites activities for aeronautical andgeneral industrial applications. Metal work is conducted in
Rochefort, France, while composites activities are conducted in
France and Canada.
Commercial Aircraft Conversion — EFW
Conversion of passenger aircraft into freighter aircraft(“P to F”) is the most common modification undertaken on
behalf of commercial aircraft owners. Conversion kits compriseoriginal parts, known as Original Equipment Manufacturer or“OEM” parts, from the corresponding Airbus serial freighter
versions, and result in a converted aircraft that is very similar toa freighter from the series production.

Market. The market for civil aircraft freighter conversion
encompasses freight service airlines such as UPS or FedEx,
airlines with small aircraft fleets and finance groups. Two
considerations drive the decision of aircraft operators to convert
existing passenger aircraft to freighters: first, conversion is themost efficient way to obtain a relatively modern freighter;second, it maintains residual values of the aircraft at relatively
high levels by extending revenue-generating service life.
According to Airbus estimates, airfreight is expected to growfaster than passenger traffic in the next 20 years. Given theretirement of older aircraft, an estimated 3,100 dedicated cargo
aircraft should meet this demand, of which roughly 75% would
come from the conversion of passenger aircraft.
EADS’ main competitor in the freighter conversion business is
Boeing, which now offers P to F conversions for its complete
range of aircraft except B777 and ex-MD aircraft. With BAE
Services’ discontinuation of its A300 B4 and A300-600
conversion programmes, EFW has a strong market position for
Airbus P to F conversions.
Products. In the field of P to F conversions, EADS specialises in
the conversion of Airbus A300 and A310 passenger aircraft tocargo usage. EADS is building on this specialisation by adding
versions such as, in 2001, the A310-300, and in 2002, theA300-600, to position itself for future upcoming conversion
programmes. In addition to Airbus freighter conversions, EFW
is also the supplier of Airbus passenger cabin floor panels for all
Airbus models.

1.1.8	Investments
Dassault Aviation
EADS holds a 46.3% stake in Dassault Aviation (listed on theEurolist of Euronext Paris), with Groupe Industriel Marcel
Dassault holding a 50.55% stake and a free float of 3.15%.

Corporate, whereas the Eurofighter programme is managed by
EADS’ Defence & Security Division.

Dassault Aviation is a major player in the world market for
military jet aircraft and business jets. Founded in 1945,
Dassault Aviation has delivered more than 7,500 military andcivil aircraft to purchasers in more than 75 countries. On thebasis of its experience as designer and industrial architect ofcomplex systems, Dassault Aviation designs, develops andproduces a wide range of military aircraft and business jets. In
order to avoid any potential conflict between the military
products of Dassault Aviation and EADS (Rafale andEurofighter) and to facilitate a “Chinese wall” approach, EADS’
Dassault Aviation shareholding is managed by EADS

Military Jet Aircraft
Dassault Aviation offers wide expertise in the design andmanufacture of the latest generation military combat aircraft.

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Rafale. The Rafale is a twin-engine, omni-role combat aircraft
developed for both Air Force and Navy applications. According
to government budgetary documents, France is considering theacquisition of 294 Rafale, 234 for the Air Force and 60 for theNavy, for a total programme cost of €32.3 billion. 120 aircraft
have already been ordered; of these, 82 are destined to the Air
Force, and 38 to the Navy.

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Mirage 2000. The Mirage 2000 family reached the end of its
production phase in 2006. Today, approximately 600 Mirage
2000 aircraft are in service worldwide.

transportation roles. The family of Falcon jets currently
includes four tri-jets: the Falcon 50EX, 900C, 900EX and 7X;
the twin-engine Falcon 2000 and the Falcon 2000EX EASy.

nEUROn. Dassault Aviation is the prime contractor for thedevelopment of the UCAV (Unmanned Combat Air Vehicle)
demonstrator, nEUROn. The programme was open to European
cooperation and five countries have decided to join in and sharethe skills of their aerospace industries: EADS CASA (Spain),
SAAB (Sweden), HAI (Greece), RUAG (Switzerland) and Alenia
Aeronautica (Italy).

2006 was another record year for Falcon business jets, with a
total of 158 firm orders received worldwide . This includes a$1.1 billion U.S. order from Net Jets Europe for 24 Falcon 7X
tri-jets, the largest order ever for business jets in Europe. At theend of 2006, Dassault had a total backlog of more than 300
aircraft. Over 80 aircraft are expected to be delivered in 2007
compared to 61 in 2006. Delivery rates are expected to continue
to increase in 2008.

The nEUROn demonstrator is scheduled to fly in 2011.
Business Jets
Dassault Aviation offers a wide range of products at the top endof the business jet sector. Over 1,700 Falcon business jets havebeen delivered since the first Falcon 20 delivery in 1965. Inservice Falcons currently operate in over 65 countries
worldwide, filling corporate, VIP and government

Dasa-Dornier Luftfahrt
DADC, which is 75% held by EADS, holds a 93.6% stake in
Dornier GmbH, which in turn holds a 1.58% stake in thecapital of Fairchild Dornier Luftfahrt Beteiligungs GmbH,
which is the sole shareholder of Dornier Luftfahrt GmbH.
Through this minority interest, EADS is not involved in any
business decision regarding Dornier Luftfahrt.

1.1.9	Insurance
EADS Insurance Risk Management (“IRM”), centralised at
EADS headquarters, is responsible for all corporate insurance
activities and related protection for the Group. It includes
continuously and consistently identification, evaluation,
prevention and protection of insurable risks. Insurance
techniques are used to manage these risks professional and toprotect the assets and liabilities of EADS against financial
consequences due to unexpected events. Harmonised insurance
policies and standards are in place for all insurable risks
underwritten by the Group.
An integrated reporting and information system is in place toenable IRM, in close relationship with insurance managers
named by the EADS Business Divisions and Business Units to
respond to insurance related risks of the Group. EADS pursues
an insurance risk management strategy that includes operatingprocedures as well as policies regarding procurement and sales
agreements.
A systematic review and monitoring procedure is in place toasses the exposure and protections systems applicable to all
EADS sites, (i) ensuring comprehensive and timely
identification and evaluation of risks, (ii) initiating ofappropriate mitigation and risk avoidance measurements (iii)and/or related adjustments of insurance coverage.

EADS’ insurance programmes cover high risk (Core) and low
risk (Non-Core) exposures.
Core Insurance Policies underwritten by IRM for the Group
cover risks such as:●

Property Damage and Business Interruption;●

Aviation Third Party Liabilities including Product Liabilities;●

Manufacturer’s Aviation Hull Insurance up to thereplacement value of each aircraft;●

Space Third Party Liabilities including Product Liabilities;●

Commercial General Liabilities including non-aviation andnon-space Product Liabilities and risks related toenvironmental accidents; and●Directors & Officers Liability.

Claims related to Property Damage are covered up to a limit of€2 billion per loss and €2 billion as an annual aggregate.
Aviation Liability Coverage is provided up to a limit of€2 billion per loss, with an annual aggregate cap of €2 billion
for product liability claims. Certain sub limits are applicable forCore Insurance Policies as outlined above.

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Non Core Insurance Policies cover risks such as:●

Personal Accidents;●

Company Automobiles;●

Personal and property exposures during business trips; and●Life insurance.

Insurance amounts for Non Core Insurance Lines are covered up
to respective sums and replacement values.
EADS follows a policy of obtaining external insurance coverage
for all main and individual risks that can be insured atreasonable rates, on sufficient terms and limits provided by theinternational insurance markets. All insurance policies are
required to satisfy EADS’ mandatory standards of insurance
protection.

However, to be more independent from volatilities of theinsurance markets, EADS uses the capabilities of a corporateowned reinsurance captive as a strategic tool with respect to theProperty Damage, Business Interruption Programme andAviation Insurance Programme. The captive is sufficiently
capitalised and protected so as to ensure its ability to reimburse
claims without limiting the scope of coverage of the original
insurance policies and not additionally exposing financial assets
of EADS.
The insurance industry is still undertaking efforts to reduce its
overall exposure. These efforts include increasing premiums,
raising deductible amounts and limiting the scope of coverage.
Furthermore, the number of insurers underwriting industrial
risks is still shrinking. No assurance can be given that EADS
will be able to maintain its current levels of coverage on similar
financial terms in the future.

1.1.10	Legal and Arbitration Proceedings
EADS is involved in a number of claims and arbitrations thathave arisen in the ordinary course of business. EADS believes
that it has made adequate provisions to cover current orcontemplated general and specific litigation risks.
Following its unilateral withdrawal from the 1992 E.U.-U.S.
Agreement on Trade in Large Civil Aircraft, the U.S. lodged arequest on 16th October 2004 to initiate settlement proceedings
before the World Trade Organisation (“WTO”). On the sameday, the E.U. launched a parallel WTO case against the U.S. in
relation to its subsidization of Boeing. Despite several
negotiation attempts, the parties have not been able to reach asatisfactory agreement. On 31st May 2005, the U.S. and the
E.U. each requested the establishment of a panel. At its meetingon 20th July 2005, the Dispute Settlement Body established thepanels. Numerous procedural steps, including new filings
by the E.U. and the U.S. in 2006 have delayed commencementof the litigation. However, on 15th November 2006, the U.S.
filed its first written submission, to which the E.U. responded
on 9th February 2007. The E.U. is scheduled to file its firstwritten submission challenging Boeing subsidies
in March 2007, to which the U.S. is scheduled to respondin May 2007. Exact timing of further steps in the WTO
litigation process is subject to ruling of the Panels andto negotiations between the U.S. and the E.U. Unless asettlement, which is currently not under discussion, is reached
between the parties, the WTO Panels will render decisions on
the merits of the cases sometime in the future.

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The French Autorité des marchés financiers (the “AMF”) and
the German Federal Financial Supervisory Authority (the“BaFin”) have started in 2006 investigations for alleged
breaches of market regulations and insider trading rules withrespect to, in particular, the A380 delays in 2005 and 2006.
However, the BaFin formally notified EADS on 3rd March 2007
that it had discontinued its investigations for suspected
breaches of market regulations but the BaFin’s insider
investigations are still ongoing. Following criminal complaints
filed by a shareholders’ association and by an individual
shareholder (also including a civil claim for damages), French
investigating judges are also carrying out investigations on thesame facts. In Germany, several individual shareholders have
filed civil actions against the Company to recover their alleged
losses in connection with the disclosure of A380 programmedelays. On 3rd October 2006, the EADS Board of Directors alsodecided to conduct an independent assessment of individual
discharge of duties in the situation that led to the A380 delays.
This investigation will extend to scrutinizing potential
responsibilities at the management level. The Company reserves
all its rights in the circumstances. As of the date of thisdocument, this assessment is still ongoing.
EADS is not aware of any governmental, legal or arbitration
proceedings (including any such proceedings which are pendingor threatened of which EADS is aware), during a period
covering at least the previous twelve months which may have,or have had in the recent past significant effects on EADS and/or the Group’s financial position or profitability, except as statedabove.

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EADS recognises provisions for litigation and claims when (i) it
has a present obligation from legal actions, governmental
investigations, proceedings and other claims resulting from past
events that are pending or may be instituted or asserted in the
future against the Group, (ii) it is probable that an outflow ofresources embodying economic benefits will be required tosettle such obligation and (iii) a reliable estimate of the amountof such obligation can be made. For the amount provided forrisk due to litigations and claims, see Note 21 d.) “Other
provisions”.

1.1.11	Incorporation by Reference
The English versions of the following documents shall bedeemed to be incorporated in and form part of this Registration
Document:●“Part 2/1.1 Presentation of the Group” of the Document deRéférence filed in French with the Autorité des marchés
financiers on 19th April 2005 and filed in English with the
Chamber of Commerce of Amsterdam; and●“Part 2/1.1 Presentation of the EADS Group” of theRegistration Document filed in English with, and approved
by, the AFM on 26th April 2006.

Copies of the above-mentioned Document de Référence andRegistration Document are available free of charge upon request
in English, French, Spanish and German languages at theregistered office of the Company and on www.eads.com. Copiesof the financial statements referred to above are also available in
English on www.eads.com and for inspection at the Chamber ofCommerce of Amsterdam.

1.2	 Recent Developments
DaimlerChrysler sells part of its stake in EADS toinvestor consortium(2)On 9th February 2007, DaimlerChrysler reached an agreementwith a consortium of private and public-sector investors
pursuant to which it will effectively reduce its shareholding in
EADS from 22.5% to 15%, while maintaining the balance ofvoting rights between German and French controllingshareholders.
DaimlerChrysler has placed its entire 22.5% equity interest in
EADS into a new company, in which the consortium ofinvestors will acquire a one-third interest through a specialpurpose entity. This effectively represents a 7.5% stake in
EADS. The transaction will be executed in the first quarterof 2007. As compensation for the indirect ownership of EADS
shares, the investors will receive from DaimlerChrysler apreference dividend on the 7.5% indirect investment of 175% of
the normal EADS dividend.
DaimlerChrysler has the option of dissolving the new structure
on 1st July 2010 at the earliest. If the structure is dissolved,
DaimlerChrysler has the right either to provide the investors

with EADS shares or to pay cash compensation. If EADS sharesare provided, the German State, the French State and Lagardère
through SOGEADE, will be entitled to pre-empt such EADS
shares to retain the balance between the German and theFrench side.
DaimlerChrysler will continue to control the voting rights ofthe entire 22.5% package of EADS shares.
This transaction constitutes a specific exception to theagreements described in section 3.3.2 Relationships with
Principal Shareholders.

Airbus strengthens its competitiveness throughPower8In order to address the challenges posed by US dollar weakness,increased competitive pressure and the financial burden related
to the A380 delays, and to meet its other future investment
needs, Airbus has announced the implementation of thePower8 programme. Power8 provides for strong cost-cutting(2) E ADS confirms that this information has been accurately reproduced and that as far as EADS is aware and is able to ascertain from the information
published by DaimlerChrysler, no facts have been omitted which would render the reproduced information inaccurate or misleading.
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measures and aims at transformation of the Airbus businessmodel and the development of a global network of partners. It
is intended to allow Airbus to devote its resources to core
activities and eliminate inefficiencies within its current
structure. The programme aims at the full industrial integrationof Airbus by establishing a new industrial organisation withtransnational centres of excellence replacing the existing
national structures. This transformation will occur progressively
over several years and includes the further expansion of Airbus’
global footprint.
As part of Power8, Airbus management will implement cost
reduction and cash generating efforts with the goal of achieving
EBIT* contributions of €2.1 billion from 2010 onwards and an
additional €5 billion of cumulative cash flow from 2007 to
2010. A large part of the cost savings is expected to be realised
through the reduction of Airbus’ headcount (including
temporary and on-site subcontractors) by 10,000 employees.
The planned measures to reduce overhead costs, and specifically
headcount, will require a provision of €680 million to berecorded in the first quarter of 2007.
In addition to headcount reduction, Airbus will also attempt tofocus more on its core business activities in the future. These
activities include overall aircraft and cabin architecture, systems
integration, as well as the design, assembly, installation,equipping, customization and testing of major and complex
components or manufacturing of new technology parts.
Accordingly, Airbus is considering industrial partnerships at its
plants in Filton, Meaulte and Nordenham, in order to facilitate
their transition from metallic to composite design andmanufacturing technology. With respect to its sites in
Laupheim, St. Nazaire-Ville and Varel, Airbus will consider
several options, including their sale to key suppliers,
management buy-outs or combinations with nearby sites.
A number of measures are also being implemented to further
increase the efficiency of the final assembly lines (FALs)
pursuant to Power8. The A350XWB will be assembled andreceive its interior furnishing in Toulouse, in the same facilities
as the current A330/A340, enabling a capacity enhancement of
this FAL. A third A320 Family FAL will be set up in Hamburg
immediately to cope with the steep production ramp-up
currently under way. This FAL will be established in alreadyexisting facilities and will have full type flexibility when
demand for A320s exceeds rate 14 per month. The A320 willcontinue to be assembled in Toulouse up to rate 14. Hamburgwill also perform final assembly of the future New Single Aisle
family. Furthermore, in order to allow parts to be fitted in themost logical place to optimize the overall cycle time, some
upstream preparatory A320 and A380 cabin installation work
will be transferred from Hamburg to Toulouse. Cabin
installation will remain in Hamburg. A380 deliveries will still
be made from both Hamburg and Toulouse.

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Finally, Airbus will introduce a fully integrated andtransnational organisation to support the implementation ofPower8 and the establishment of the new business model. The
new industrial organisation will seek to streamline processes
through the establishment of four truly transnational “centresof excellence” led by the Head of Operations: Fuselage &Cabin, Wing & Pylon, Rear, and Aerostructure, the latter being
in charge of fuselage subassembly and interior furnishingactivities. This will replace the current organisation of eightnationally structured centres of excellence. Further
organisational changes include completing the integration of
support functions such as Finance and HR as well as reinforcing
the authority of core functions such as Engineering,
Procurement and Programmes.

Finnair, First Airline To Sign Firm Contract For the
A350XWB
On 8th March 2007, Finnair signed a firm contract for eleven
A350XWBs, as well as seven additional long-range aircraft (amix of A340-300s and A330s). It is the first airline to convert
its order for nine of the initial A350 aircraft, placedin December 2005, into the new A350XWB, and tosimultaneously increase the number of aircraft ordered.

Eurocopter wins 112 orders at Heli-Expo 2007
Eurocopter won a record 112 orders at Heli-Expo 2007,
including 88 firm orders and 24 options Heli-Expo 2007 is an
exhibition dedicated to helicopters which took place in Orlando
from 1 – 3 March 2007. The majority of the new orders camefrom North American clients.

A380F development frozen
On 2nd March 2007, UPS announced its intent to cancel its
order for 10 A380 freighters. In connection with thisannouncement, Airbus decided to reschedule development of
the freighter version of the A380 and redeploy existing
resources towards production of the passenger version of theaircraft.

UAE selects EADS for its Air Tanker programme
On 21st February 2007, the UAE (United Arabic Emirates)
Armed Forces signed a Memorandum of Understanding with
EADS for the procurement of the A330 MRTT as the new airto-air refuelling aircraft for its UAE Air Force & Air Defense.
The expected order will be for three A330 MRTT aircraft
which are scheduled to be delivered from 2011 onwards.

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Arianespace and Astrium Space Transportation havedecided to increase the Ariane 5 production rate
On 15th February 2007, Arianespace and Astrium SpaceTransportation signed an agreement to undertake theinvestments needed to supply seven Ariane 5 ECA launchers
per year beginning in February 2008 By increasing the
production rate, Arianespace will attempt to keep pace withgrowing demand in the launch services market, in which
Arianespace plays a leading role with a market share of morethan 50%.

EADS sells stake in Embraer
On 14th February 2007, EADS sold its 2.12 percent stake in
Embraer. Before taxes and bank fees, EADS received total
proceeds of €124 million. Following changes in the shareholder
structure of Embraer, EADS’ stake had become a purely
financial investment. The sale of its stake in Embraer will notprevent EADS from further exploring areas of industrial
cooperation with Embraer in the future.

agreements which further specify cooperation programmes
under discussion between the partners. The agreements are
based on the findings of a top-level working group which has
been set up end of last year.
The first agreement covers the partnership in the Airbus
A350XWB programme. Airbus is offering a five percent
airframe participation to the Russian industry. The discussions
about which components of the aircraft will be designed andbuilt in Russia are still ongoing.
The second agreement provides for the establishment of a joint
venture located in Dresden, which will have the task of setting
up freighter conversion centres for the Airbus A320 Family at
Lukhovitsy near Moscow in Russia and the German site.
The third agreement foresees a joint study of the transport
aircraft market and possible cooperation between EADS and theRussian industry in this field.
The fourth agreement defines a shareholder change in theEngineering Centre Airbus Russia (ECAR): UAC will purchase
the Kaskol Group shareholding.

EADS and Russian UAC further develop cooperation
On 22nd March 2007, EADS and Russia’s United Aircraft
Corporation (UAC) announced that they had signed four

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Corporate Social
Responsibility

2.1

Business Ethics

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2.1.1
2.1.2
2.1.3

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2.1.4

Proper Business Practices
Export Control ComplianceCompliance with Law Regarding all EADS’
Activities
Corporate Governance Standards

2.2

Sustainable Growth

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2.2.1
2.2.2
2.2.3

Product Quality and Customer Satisfaction
Sustaining and Protecting Innovation
Supplier Management: Fostering a Mutually
Beneficial Relationship with EADS’ Suppliers

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2.3

Environmental Care

71

2.3.1
2.3.2
2.3.3

PolicyOrganisation
Performance and Best Practices

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72
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2.4

Human Resources: Employer – Employee
Relationship

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2.4.1
2.4.2
2.4.3

Workforce Information and Organisation of Work75
Human Resources Organisation
77
Human Resources Policies and Performance
77

2.5

Corporate Citizenship

2.5.1

Maintaining an Open Dialogue with EADS’
Stakeholders
Encompassing Community Interests in
EADS’ Global Strategy

2.5.2

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EADS was built around shared values of integrity and socialand ethical responsibility. Although 2006 has not been an easy
year for EADS, events within the Company having caused
stakeholders to ask critical questions about the management andthe organisational structure, the Group’s strengths andachievements are not to be underestimated. EADS isdetermined to fulfilling its commitment to a sustainable andbalanced relationship with stakeholders. Ensuring customer
satisfaction, as well as ensuring development of employee andsupplier relationships remains a foundation of EADS’ success,operations and culture. The entire Group remains committed tothe principles and values that are laid down in its Code of
Ethics as well as to the Corporate Social Responsibility (“CSR”)
policies which were formalised in 2004.
The EADS approach to CSR takes into account the Group
specificities:●

It provides a framework setting out guidelines for the BUs
that are responsible for the day to day business and that
ensures dialogue with their direct stakeholders.

●

It addresses the EADS CSR key challenges such as export
control compliance: As a defence company, EADS Group
specifically acknowledges its responsibility in selling defence
products and providing services to nations that contribute totheir security during peace time. EADS delivers products andintegrated solutions pursuant to customer specification. These
products have to comply with the applicable laws put in placeby the responsible government (arms export laws, embargo
rules, Ottawa agreement, and anticorruption policy).

●

It incorporates the specific nature of the Group products,
such as the average lifecycle of over 30 years which requires
a continuous long-term approach.

The present chapter aims at demonstrating that the EADS CSR
policies are increasingly incorporated into the daily business, bydescribing best practices identified throughout the Group andreporting performance indicators. A number of quantitative andqualitative Key Performance Indicators (“KPI”), based upon the
Global Reporting Initiative, the Global Compact principles andthe French Nouvelles Régulations Économiques and tailored to
EADS’ business were indeed defined starting with the 2004
report and reflect some of EADS CSR achievements.

EADS Code of Ethics
At the time of the creation of EADS, the Code of Ethics wasestablished and communicated to the employees of the Group.
This Code of Ethics aimed at emphasizing values that were key
success factors for achieving an efficient integration of different
companies into one group. In 2005, more than four years after
the creation of EADS, in light of its establishment as a market
leader in many of its businesses, and considering the evolving

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legal environment relating to business ethics, EADS updated
the Code of Ethics in order to reflect practices recommended byvarious codes and laws and to align with best practice.
The enhanced EADS Code of Ethics sets out in one single
comprehensive document the EADS Group business guidelines
related to the ethical standards that the Group adheres to.
The Code of Ethics serves as a core EADS business guideline in
an architecture of documents in which the code also refers topre-existing, detailed policies as laid out in the EADS
Corporate Handbook as well as Division or BU specific policies
and processes. It is based on EADS’ underlying values and fullyin line with international recognised standards as laid out incharters, declarations or guidelines, such as the Universal
Declaration of Human Rights, International Labour
Organisation’s Declaration and OECD Convention. EADS, as asignatory of the United Nations Global Compact, is committed
to promoting, within its sphere of influence, the application of
fundamental values regarding Human Rights, Labour,
Environment and Anticorruption. EADS is willing to report on
the Group’s success in implementing its sustainable
development strategy.
Since April 2006, it is available in the four EADS languages on
the Group intranet and can be downloaded from the EADS website www.eads.com.
The Code of Ethics covers the full scope of EADS’ CSR
policies, addressing in its five chapters the principal lines of
ethical behaviour:●“Creating a positive working climate” describes EADS’
principles in terms of, e.g. dialogue and representation, equal
opportunities policy, and management of HR development;●“Doing business ethically” discusses issues such as conflictsof interest, export control and contracting with governments,
as well as the hiring of government officials;●“Fostering sustainable growth” deals with proper use of
information and intellectual property rights, as well as
relationships with suppliers;●“Respecting the environment” covers developing
environmentally sound processes and products;●“Living in our communities” describes the ways in which
EADS contributes to the life and development ofcommunities where it operates.

The Code of Ethics, therefore, gives guidance to all employees
about appropriate conduct in their professional environment.
EADS is committed to implementing the principles describedin this Code, in particular through entrusting an EADS Ethics
Committee with compliance responsibility in ethics matters.

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The Code of Ethics describes the missions of the Ethics
Committee set up by the EADS Board of Directors. In
particular, the Ethics Committee will offer guidance to the
EADS Chairmen, the Board of Directors and its Committees,
the CEOs, COOs and Executive Committee, as well as
management at large regarding all ethical questions. The
Committee will submit at least annually a report to the EADS
Board of Directors with respect to each year’s activities. It will
also implement appropriate coordination with the compliancefunctions of EADS and its Divisions.
In 2006, EADS initiated a review of its compliance activities
and processes; its findings were that EADS had a reasonably
solid base of compliance practices, compliance processes existingfor each of the CSR domains relevant for the business. Within
the aerospace and defence industry, the overall level ofcompliance in the CSR domains is globally rated average orabove average by rating agencies. The level of achievement by
EADS of these agencies’ expectations varies among the covered
topics, depending upon the compliance levels that the Group
has already completed e.g. the international complianceprogramme (see infra 2.1.1) is well perceived by EADS’
stakeholders for it provides clear compliance rules, a structured

compliance organisation and the implementation of compliance
processes is substantiated by KPIs. Notwithstanding, the Groupis considering to further develop its compliance approach andthus, is studying the possible implementation of acomprehensive group-wide compliance organisation to address
overall compliance in a structured way. This organisation would
also aim at further developing the awareness of the principles
laid down in the Code of Ethics as well as at ensuring that
individual behaviours are in line with the Group’scommitments and policies. The contemplated organisation shallincorporate an ethics alert system.

EADS CSR policies
EADS policies have been designed to support and implement
EADS’ long-term vision and strategy in terms of CSR and aresupported by an internal control system in areas such ascompliance with OECD rules, export restrictions, IP protection,
research and development etc. (See “Part 1/2.1.5 Internal
Control and Risk Management Systems”). They give guidancefor day-to-day business and are in accordance with EADS’
underlying values.

CSR Policies on Domains Identified as Most Relevant for EADSCSR Domains

Business Ethics

Sustainable Growth
Environmental Care

Employer-Employee Relationship
Corporate CitizenshipSpecific Policy Items

Proper business practices
Export Control Compliance
Compliance with the laws regarding all EADS’ activities
Corporate Governance standards
Product quality and customer satisfaction
Sustaining and protecting innovation
Fostering a mutually beneficial relationship with EADS’ suppliers
Minimizing environmental impacts of EADS’ activities
Taking into account environmental impacts of EADS’ products throughout their lifecycle
Providing a safe workplace for EADS’ employees and subcontractors
Caring for EADS employees and know-how
Ensuring equal opportunity for all EADS employees
Ensuring efficient management of skills and know-how
Promoting a proactive dialogue with EADS’ employees
Maintaining an open dialogue with EADS’ stakeholders
Encompassing community interests in EADS’ global strategy

The policies and related practices are set out in more detail below.

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2.1	 Business Ethics
2.1.1 Proper Business Practices
Doing international business requires being especially vigilant
so as to ensure that all companies belonging to the EADSGroup always comply with all applicable laws and regulations
relating to international sales, as well as with very highbusiness ethics and integrity standards. EADS aims at setting
standards to govern its business ethics and integrity policies
which often go beyond applicable laws and regulations.
To achieve this aim, EADS International has been
implementing a comprehensive set of rules and processes since2000 aiming at ensuring compliance with such laws, regulations
and business ethics and integrity standards.

bribery and unfair dealing in international sales. This policy has
been published in EADS’ Corporate Handbook, which isavailable to all employees through the company intranet.
The policy entails effective control of international operations,through the conduct of appropriate due diligence of business
partners, regular audit and reporting mechanisms and enhanced
training sessions within all BUs. It also sets out appropriate
guidelines regarding the acceptance of gifts and hospitality.
The main pillars of the Foreign Trade Rules are the following:●Transparency in the selection of all business partners. All
business partners engaged by an EADS company
have undergone a strict engagement procedure, based on (i) adue diligence aimed at confirming that the prospective
business partner is reputable and qualified to work for
EADS, (ii) internationally recognized standards (location,
credentials, ethical track record, etc.) and (iii) a commitment
to abide by the Group policies prohibiting corruption andpayment of bribes;●“Appropriate remuneration for legitimate services”. EADS isvery keen to ensure that all payments due and payable to any
business partner are justified by legitimate services rendered
and do not exceed sound market practices; and●Monitoring of the contractual relationships with suchbusiness partners (and the related payments) until
satisfaction of all contractual duties.

2.1.1.1 Policy●“EADS is active in sectors which are strictly ruled by national
and international regulations. EADS is committed to absolutecompliance with applicable regulations wherever its entities
operate.

●Fighting against corruption and economic crime in foreign trade
has become a major challenge for all international companies.
In order to meet this challenge, EADS is fully committed tocomplying with applicable national and international
legislation, including the OECD Convention of November 1997,
as incorporated into the legislation of 35 countries. EADS’International Compliance Programme (also known as the“Foreign Trade Rules”) is a corporate policy, applicable to allinternational operations of EADS and its affiliated companies,
intended to detect and prevent bribery and unfair dealing.

●

EADS is often involved in proposals, bid preparations orcontract negotiations with governmental authorities because of
the nature of its products and services. The Group’s policy is tocompete fairly and legally for all business opportunities as wellas to conduct negotiations and perform contracts when awardedin compliance with all applicable requirements, specifications
and contractual obligations.”

2.1.1.2	Organisation
The Foreign Trade Rules
EADS has implemented a detailed corporate policy, the Foreign
Trade Rules, which applies to all international operations of theGroup entities, and which is intended to detect and prevent

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Those policies and procedures normally apply to all operations
directly or indirectly relating to foreign trade.
The Group’s business partners must respect these policies andprocedures, and any failure to do so may lead to earlytermination of the contract in place.
Furthermore, EADS conducts regular audits of implementationof all related agreements entered into by BUs to verify thatGroup policies and procedures are properly implemented andthe BUs are instructed to report on a yearly basis on theimplementation of such policies and procedures. This isespecially the case concerning the payments made to thebusiness partners, which must at all times be fully justifiable.

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Since October 2002, EADS has set up a network of 42
International Compliance Officers (“ICOs”) representing each
BU. ICOs are responsible for ensuring the correct application of
the policies and procedures within the Group. They are also incharge of nominating appropriate “ICO correspondents” inforeign subsidiaries with a view to properly cascading thecompliance duties in all operating countries.
Partnerships and initiatives
EADS has also developed regular contacts with international
bodies such as the OECD, the International Chamber ofCommerce (“ICC”) and the European Union (“GRECO”) andpeer companies with a view to setting and promoting integrity
standards in the aerospace and defence sector. In this respect,
EADS is pursuing a business dialogue with the European
Aerospace & Defence Industries Association of Europe(“ASD”) and its members (such as CIDEF and GIFAS in France,
BDLI in Germany, AFARMADE in Spain or SBAC in theU.K.), and also with major European aerospace and defence
companies, in order to launch a platform of principles aiming at
setting high standards, exchanging best practices, promoting
training and compliance programmes, and more generally
generating common European industry positions on ethics andanti-corruption issues.
This platform would be open to all international aerospace anddefence companies and associations, especially those belonging
to OECD countries (e.g., U.S.), but also non-OECD countries
at a later stage. As a matter of fact, EADS views such aninternational initiative as a perfect opportunity to enhance thelevel playing field which the OECD convention, and thereafter
the UN Convention signed in Merida in December 2003, havestarted to establish.
EADS is also maintaining a relationship with the ICC anticorruption Commission and the French Corruption Monitoring
Council (Service central de prévention de la corruption), which
signed a convention with EADS in 2003.
According to a survey conducted by Novethic and the SCPC(Service Central de Prévention de la Corruption) in 2006, only
seven companies amongst those belonging to the French
CAC 40 are reported being transparent and meetinginternational standards. EADS is one of these companies.

2.1.1.3 Performance and Best Practices
In December 2005, EADS amended the Foreign Trade Rules,
as a result in particular of advice received from reputableinternational experts in business ethics and anticorruption laws
and practices. The main objective of these amendments was toadapt the Foreign Trade Rules to the evolution of the Group,and to disseminate the identified best practices across the Group
as a whole.
EADS conducts regular assessments and audits to detect andspread Group best practices in international business ethics.
In addition, the Group has developed a comprehensive training
policy so as to disseminate an awareness culture within all
BUs. All employees dealing with international business attend
such training sessions. In order to communicate and explain theGroup’s corporate values and policies to all concerned, around76 training sessions took place in 2006 across EADS, sometimes
with the attendance of third parties (prosecutors,
representatives of international bodies, lawyers, etc.). This
represents again a very significant increase compared to 2005,
which tends to demonstrate that the dissemination of acompliance culture is a key element of EADS’ management
system.
The Group issued a leaflet “EADS International Business Ethics
Policy For Consultant Agreements: Transparency &Substantiation” in January 2004, which is given to allprospective international marketing consultants. This leaflet
summarises Group policies and procedures regarding selectionof international business partners. Such international business
partners are also invited to attend specific training sessions
when deemed appropriate.
The Group’s ICOs meet periodically to share concerns and bestpractices. An annual ICO Conference has been organised since2003 involving more than 100 people involved in foreign tradebusiness and operations. The last “International Compliance
Officers Workshop” held on June 2006 in Paris was focused on:●

The update of the EADS Rules, publishedin December 2005, which enlarge the scope of
implementation to any international operation directly or
indirectly connected to any commercial campaign;●

The achievements made regarding the implementation of theRules Relating to Foreign Trade within the BUs, including
the EADS Guideline “Gifts & Hospitality”.

Information on criminal law and its consequences for companies
and employees.
EADS also releases Group-wide internal bulletins on a regularbasis, the so-called ICO information letters. These focus on
the evolution of the regulatory environment for foreign tradeand highlight information reported by international media
regarding the fight against corruption and economic crimeworldwide. These bulletins are intended to complete and update
the information given to EADS employees during the training
sessions.

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In relation with its international businesses, EADS uses third
parties, such as consultants and international business partners
in order to provide appropriate assistance and expertise to BUs
on current or potential business for EADS and/or promote
EADS products or services in various countries. The contractual
arrangements for such services are governed by internal rules
and policies that describe the entire contractual process, fromthe selection of the partner to the implementation andConsultant & some other business partners files audited*

execution of the agreed service. In order to ensure that therules are understood and strictly applied, consultant and service
providers agreements are audited. The purpose of these audits
is to check the substantiation of the contractual duties deliveredby the third party in exchange of its remuneration. The tablebelow presents information concerning the percentage ofconsultant files audited in each of the past three years. None of
the audits have revealed any material deficiencies.

2006

2005

2004

91.9%

92.3%

89.50%

Number of ICO information letters issued

3

3

3

Number of training sessions held by ICOs

76

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20

Scope: EADS.
(*) Total audited files/Total active files of consultants and other international business partners (2005 and 2004 figures have been re-calculated accordingly).
Improvement of the Rules‘ implementation process within existing, and new EADS controlled entities, has increased the number of Consultant and other Business Partners files received by EADS IO.

2.1.2	Export Control Compliance2.1.2.1 Policy●“EADS is committed to complying with all import and export
control regulations that govern the exports and imports ofcommodities, technical data and technical support.

●

EADS always obtains export licenses and other government
approvals prior to exporting products and technology controlled
by governments or the EU.”

According to the particular nature of the industries that it isactive in, EADS has put a special focus on the overall
compliance with export control regulations and laws. Especiallyin the area of defence and dual use goods, the governments areimportant customers, EADS has established a cascading systemof export control procedures and policies, also taking into
account that export policy is an important element of foreign
policy of the governments of EADS home countries.

2.1.2.2	Organisation
In the Western world, export legislation has a high degree ofcommonality and export control rules are harmonised byvarious international export control regimes by thegovernments. Therefore, the ultimate decision for exports isalways in the hand of relevant governments and EADS does
not export any product without a respective export licence.

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organisations in each country, assuring compliance with therespective national laws and regulations. They give approval or
advice for all export activities (prospecting, negotiation, offers,
proposals, licensing, shipment…) at the earliest possible point intime. These organisations are also responsible for adequate
education and training of all export control officers in the
Divisions and communication of actual laws and regulations.
They also ensure harmonised licensing procedures according to
the respective national regulations. Meetings between thenational export control organisations are held on a regular basis.
In addition, in each of the Divisions there is a cross country
export control organisation in place handling both thebusiness specific issues and the day to day business andcontrolling compliance with licenses at the final stage of thedelivery of the goods, technologies or services.
In each of its home countries, EADS is known as a reliable
exporter. It works closely together with the government in theultimate goal of preventing proliferation of sensitive goods andtechnologies to non reliable countries or persons. For any
delivery, EADS checks the reliability of the end use and theend users according to various criteria.
In recognition of EADS seriousness and reliability, the Groupis a privileged partner to the governments of its home countries

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and e.g. holds Global Project Licences and simplified approvaland exporting procedures.
Although the responsibility and liability for exports is in thehand of its business units, the CEOs reserve personally theultimate decision for any export in sensitive countries by aspecial directive and special procedures. This procedure is basedon a case by case review in which EADS International provides
EADS’ top management with legal elements and geo-politics
inputs for the final decision.
If a planned export may be of concern for one of EADS homecountries, the situation is checked in the political environment
in close connection with the governmental authorities.

2.1.2.3 Performance and Best Practices

Training and Education
The export control professionals hold training and education
sessions for employees and managers of all operative
organisations involved in export control (e.g. procurement,
sales, and project management). Export control education is alsopart of EADS management development programmes.
Procurement Directive
Due to the extraterritorial application of export and re-export
regulations in some countries (e.g. U.S.), EADS is forced andcommitted to complying with these laws and regulations. In
order to ensure compliance and to manage economic risks,
EADS has issued a procurement directive. This directive asks
for export classification of foreign products already in the phaseof procurement in order to be able to be compliant during thewhole supply chain and to minimize economic risks ofcompliance cost for further phases.

Export Control Committee
The national Heads of Export Control form the Export Control
Committee and hold quarterly meetings for the exchange of
information, establishing specific cross country
recommendations tailored to the operative business (space,defence, aeronautics).

AuditsThe EADS export compliance system is regularly audited andapproved by governmental authorities. Also external ex postcontrols of compliance with laws and regulations are performed.

The Export Control Committee has prepared an EADS
Compliance Directive in export matters and maintains theinformation about sensitive countries up to date. The national
Heads of Export Control are also responsible to issue national
export control compliance manuals on the basis of EADS
common principles and rules.

In 2005, a comprehensive internal audit took place for theexport control systems in each country and in each Division.
There were no major findings neither by external audits nor by
the internal audits concerning legal compliance. However, theinternal corporate audit team requested and recommended
improvements concerning commercial and business risks.
During 2006, all of the requested actions and the majority of
the recommended actions were implemented.

2.1.3	Compliance with Law Regarding all EADS’ Activities
Compliance and verification of compliance with all the laws andregulations of the countries where the Group does business is amust at EADS. Rapid changes in the industry and the overall
global environment constantly present new legal or regulatory
requirements which call for robust internal controls in the fieldof legal compliance. It has also resulted in the adoption in 2000
of EADS Insider Trading Rules.

2.1.3.1 Policy●“EADS is committed to complying with antitrust andcompetition as well as humanitarian law, when applicable, in
all of its activities and throughout the Group.

●

EADS screens new customers and suppliers to ensure that they
do not do banned business.”

The overall compliance with the law programme: Amongst
the various areas of the law which require constant monitoring,
it is worth mentioning a few examples that are of particularimportance to EADS although the list is only indicative.
Examples of this permanent monitoring process are: compliance

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with the laws and regulations governing competition, protectionof the environment, public sector procurement and accounting
and financial reporting.
Compliance with Corporate Governance standards is anotherarea of focus. Governance practices are developed andmonitored to fulfil the Board’s responsibility towards
customers, shareholders and employees, to oversee the work of
the management in the conduct of the Company’s business, andto serve the long-term interest of stakeholders.
Insider Trading Rules: The Dutch AFM, as well as otherstock exchange authorities (the French AMF, the German
BaFin, and the Spanish CNMV), which regulate the markets on
which EADS securities are listed, impose certain rules upon
EADS and require it to enforce these rules internally. Hence,
EADS adopted in 2000, its Insider Trading Rules. EADS
Insider Trading Rules belong to the best practise processes andapply to all EADS employees and even for some time after
people retire or left the company. The guiding principle is that
employees should freely perform any EADS securities
transactions provided that they act in accordance with the
EADS group’s policies which are set out in the EADS Insider
Trading Rules. According to the rules, more than 2,500
managers are strictly subject to no-trading periods over the year.
People in higher and top management functions have only very
limited trading windows after each of the quarterly results
publication. On top of this, those concerned also have to
inform the ITR Compliance Officer in order to proceed withthe transactions. All No-Trading Periods are widely
communicated amongst the respective communities and people
are personally informed by mail when they are subject to suchtrading restrictions.

2.1.3.2	Organisation
From an organisational standpoint, EADS Legal Affairs, incoordination with the Divisions’ and BUs’ legal departments, is
responsible for designing, implementing and overseeing thepolicies and processes aimed at ensuring that EADS’ activities
abide by all applicable laws and regulations. Teamwork amongst
all the legal players is aimed at ensuring consistent andcomprehensive legal processes in compliance with national
requirements. Corporate Legal Affairs is also responsible foroverseeing all litigation affecting the Group, as well as for thelegal safeguarding of the Group’s assets, including intellectual
property.

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Extended networks of professionals (e.g. intellectual property…)
located close to operational players drive legal complianceactivities. These professionals are capable of handling therequirements of the many jurisdictions that are relevant to
EADS, not only in its “home countries” but abroad as well.
The COO Finance is the Insider Trading Rules Compliance
Officer.
The Corporate Secretary with the support of Legal Affairs
departments also plays an essential role in the setting up andadministration of EADS Corporate Governance procedures aswell as legal documentation underlying delegation of powers
and responsibilities.
Finally, all those activities are audited by the Corporate Audit
department which consists of a team of dedicated professionals
who are familiar with the requirements and challenges of theCompany’s international business.

2.1.3.3 Performance and Best Practices
Whatever the legal environment they are subject to, BUs are
extremely vigilant in monitoring legal risks. They constantly
ensure that regulations are applied and track any infringement
risks so as to prevent them. This is based on basic processes:●

Training and awareness: a preventive approach is based on
the combination of Company policies and cultural values
supported by solid infrastructure for legal compliance,
training initiatives and general employee awareness actions
as well.

●

Identifying and mitigating legal risks: Whatever thesource of the legal compliance risk may be, EADS takes
responsibility for finding the facts and analyzing theapplicable laws; measures are then taken to deal with thesituation in a proactive manner.

Sharing of information, especially within the CSR network andthe community of legal professionals is designed to help theCompany learn from mistakes, if any, thus using its experience
to continue raising the bar in its processes.
The EADS Insider Trading Rules are regularly updated inorder to take into consideration recent changes in European
regulations as well as to ensure EADS adherence to best-in-classcorporate governance standards. The EADS Insider Trading
Rules are provided to the relevant Market Authorities forverification and confirmation.

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2006

Court decisions regarding cases pertaining
to antitrust and monopoly regulations
Descriptions of policy, procedures/
management systems, and compliancemechanisms for preventing
anticompetitive behaviour

2005

2004

None

None

None

i) EADS Code of Ethics including but
not limited to all relevant provisions ofCode of Ethics relating to compliancewith competition law; and ii) Regularlegal risk analysis as issues come up.

i) EADS Code of Ethics including but
not limited to all relevant provisions ofCode of Ethics relating to compliancewith competition law; and ii) Regularlegal risk analysis as issues come up.

i) EADS Code of Ethics including but
not limited to all relevant provisions ofCode of Ethics relating to compliancewith competition law; and ii) Regularlegal risk analysis as issues come up.

Scope: EADS.

2.1.4	Corporate Governance Standards
Compliance with Corporate Governance standards is an area ofspecific focus at EADS.
In addition to being a Dutch registered company, EADS islisted in multiple countries. This implies the necessity for
EADS to comply with different regulations.
As a consequence, the Group is permanently monitoring thelaws and regulations, as well as the current market practices in
the countries it is based in, in order to ensure its conformity
with the evolution of Corporate Governance in general.
Governance practices are developed and monitored to fulfil the
Board responsibility towards shareholders, to oversee the workof management in the conduct of the Company’s business andto seek to serve the long-term interest of shareholders.
EADS, in its continuous efforts to adhere to the highest
standards, applies the provisions of the Dutch Corporate
Governance Code (“Dutch Code”), which includes a numberof non-mandatory recommendations and, if the case arises, thereason for non-application of such provisions are explained, in
accordance with the Dutch Code’s “Apply or Explain” principle.
The few non-compliance matters with regards torecommendations of the Dutch Code mostly result from EADS
being aligned with general market practices in the countries it islisted in and its particular governance structure, as laid down in
its Articles of Association.

In 2006, the EADS Board of Directors continued to uphold thedriving principle of conformity with applicable law and the
Corporate Governance principles in the countries relevant for
the Company, while also enhancing its focus on Corporate
Governance best practices.

2.1.4.1 Policy●“EADS is determined to set the standard of excellence in thefield of Corporate Governance. EADS is committed to meet andeven exceed social, legal and statutory requirements to ensuretransparent management and recording.

●

EADS commits to providing the most accurate and reliable
information and records in all decision-making processes andbusiness relations, both inside and outside EADS. To achieve
the highest standard of reliability, EADS continuously improves
its Internal Control and Risk Management procedures.”2.1.4.2	Organisation
See “Part 1/Chapter 2 Corporate Governance”.

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2.2	 Sustainable Growth
EADS supplies some of today’s most advanced technology inthe field of aerospace and defence. EADS strives to meet thecustomers’ requirements for competitive, cost effective andinnovative technology. The Group’s development relies on its

ability to deliver products and services that meet customers’
requirements. Sustaining this development requires focus on
the product quality, continuous innovation and the best
supplier management.

2.2.1 Product Quality and Customer Satisfaction
As an industry leader in aerospace and defence, EADS isconstantly striving to build upon its solid reputation for
excellence in its products, processes and people. With a focus
on continual improvement and on building customer confidence
by improving On-Time and On-Quality Delivery (“OTOQD”),
EADS demands that every area of its operational businesschallenges and improves its levels of Quality and Operational
Excellence, internally and throughout the supply chain.

2.2.1.1 Policy●●“EADS is fully committed to achieving the highest levels ofcustomer satisfaction, driving continuous improvements in thequality of its products, processes and people and deploying themost demanding Quality Management Systems.
EADS actively seeks key customer feedback through astructured Group-wide process of Customer Reviews.”

2.2.1.2	Organisation
The Chief Quality Officer (“CQO”) is in charge of stimulating,coaching and supporting the BUs to implement continual
improvements in operational level OTOQD performance and tomaintain and improve customer confidence in EADS.
In particular, he chairs an EADS Quality Council with seniorlevel representatives from each BU to agree actions andpriorities and to drive OTOQD deployment in all BUs.
CQO animates, supports and drives a network of BU
operational level experts to ensure that the EADS Improvement
Programme (“EIP”) is tuned directly to the needs, priorities andmaturity of each BU.

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He also represents EADS in relevant Quality, Standards andRegulatory bodies at both National and International levelcommensurate with the status of EADS as a global aerospaceand defence company.

2.2.1.3 Performance and Best Practices
A major initiative was launched to deliver enhanced Customer
confidence and satisfaction through driving operational
improvements in those industrial processes which contribute toachieving OTOQD of products and services to end customers.
In 2006, the EADS Improvement Programme was deployedthroughout all EADS BUs.
This EIP programme acts on four key areas for improvement:
Customer Confidence
A common methodology was defined in early 2005, with a view
to deploying it consistently throughout the Group. This
Customer review process (“CRp”) methodology is based on a
structured series of interviews targeting the key decision
makers at EADS’ strategic customers. These interviews are
performed by the BUs’ top management.
The goal is to measure the level of customer confidence, which
is more important than satisfaction in determining its loyalty.
EADS aims to assess and to continuously improve therelationships between the Group and each of its customers.
Improvement plans result from these interviews, and theinterviewer is responsible for reporting the progress of theseplans to the interviewee.
In 2006, a total of thirteen CRps had been launched from the
beginning of the programme. Three had totally completed thelast “action plan” phase and are planning to start a second

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round in 2007. Six have their reporting and analysis phasecompleted and have entered into the “action plan” phase.
More complex CRps take place for Defence customers. They are
conducted at national level rather than at BU level,
governments’ procurement activities being by nature cross BUs.
A Defence CRp was launched in each of the four EADS homenations.
Programme & Risk Management
In order to tackle and improve OTOQ delivery, EADS launcheda group wide project in 2006 to improve Programme & Risk
Management (“P&RM”) performance.
A common P&RM framework is being developed by a crossfunctional & cross-Divisional team to standardise andmodernise the key processes and tools for managing complex
projects and programmes, to provide a common EADS P&RM
language and terminology, to provide streamlined KPIs, reports
and programme reviews, and to upgrade the approach toidentification, training & development of programme managers
in EADS.

●

Forums for sharing and spreading Lessons Learned and Best
Practices and fostering continuous improvement of P&RM
practice & processes.

Lean Operation
Lean Operation in EADS is driving continual improvement in:●

The elimination of non value-adding activity●

Forging closer links throughout the supply chain●

Ensuring processes are robust in all operational workflows

All Divisions in EADS have been actively working in Lean
based performance improvements in the manufacturing areas
for several years. EADS is now focused on leveraging these
individual improvement actions to accelerate deployment acrossthe Group by actively spreading best practices and on extending
the scope to develop Lean Supply Chain improvements.
In order to effectively drive this, EADS has created a Lean
Operations council comprising senior executives from each
Division having both the expertise and authority to drive leanbased improvements within their respective Division.

Some of the key processes being addressed are:●Risk & Opportunity Management to facilitate proactive
identification, tracking and mitigation of risks, and extending
this to identifying and capitalising on opportunities toimprove programme performance.

●

Independent phase reviews to carefully check the maturityof a programme at each of a series of defined phases before
passing to the next phase.

●

Integrated real-time multi-programme planning & execution
to plan and optimise efficiency of the resources (people,
parts, materials, etc.) across all programmes.

●

Technical and Technology Readiness Level Assessments totake an independent expert ‘deep-dive’ look at selected
programmes to assess the health of the programme andfidelity of the planning based on the technical maturity ofthe product or technology.

●●

Simplification of the audits, assessments and reviews that
programmes are subjected to, looking at re-use of data to
avoid asking the same questions over and over again fordifferent reviews.
Career development and succession planning strategies for
programme management to deliver people with the right mixof multi-discipline, multi-functional and trans-national
experience, training and skills.

DRIVER and EADS Black Belt
EADS now equips managers with an “Improvement
Methodology and Toolkit”. This is the purpose of the“DRIVER” methodology defined in 2005, along with thecomplete training syllabus (more than 10 training modules and
30 tools). DRIVER is the EADS specific Improvement
methodology. The corresponding training can be delivered in
the format of “EADS Silver Belt” (2.5 days), “EADS GreenBelt” (one week) or “EADS Black Belt” (four weeks). To berecognised as Qualified Improvers, EADS Black Belts mustcomplete, on top of their training, an improvement project thatcan deliver measured benefits in terms of On Time on Quality
Performance, costs savings, Customer Confidence or a mixtureof the three elements.
A learning management system (“LMS”) supports and monitors
the programme deployment, enabling also candidates to share
best practices and use trans-BU networks for mutual support.
At the end of 2006, more that 200 people has been trained as
EADS Black Belts in the sessions held around EADS Divisions
and BUs. More than 50 EADS Black Belts have achieved theiraccreditation.

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2.2.2	Sustaining and Protecting Innovation
2.2.2.1	Innovation Strategy
Innovation is one of the key areas EADS is focusing on as
growth driver for the future. With the appointment of a Chief
Technical Officer (“CTO”), who is also a Member of the EADS
Executive Committee, the company has invigorated theinnovation process.
The CTO is implementing a new technology strategy with thedevelopment of a technology portfolio, which is fully alignedwith the business strategy of the company.
EADS continues to establish programmes of cooperation with
universities and scientific organisations in its home countries
and abroad to develop cooperation and to take advantage ofcompetencies wherever they exist.
Policy“EADS’ innovation strategy aims at increasing competitivenessthrough continuously improving quality of services and products aswell as efficiency of processes.”
Organisation
Following the appointment of the EADS CTO in April 2006,
innovation, and particularly technology innovation, has beenstrengthened, with greater focus being put on aligning theGroup’s Research & Technology (“R&T”) activities with thecompany’s business strategy.
The new CTO position has been attributed authority through a
new seat on the EADS Executive Committee and now has
responsibility for the entire R&T budget across all Divisions.
This budget will increasingly be aimed at supporting theGroup’s strategic growth priorities.
The CTO has a wide role. In addition to R&T, he is responsible
for Group transversal technical processes, such as Systems
Engineering and common tools for Product Lifecycle
Management. He also carries out specific technical assessmentson behalf of the CEOs and the Executive Committee. The
responsibility for corporate Information Management (IM) has
been passed from Finance to the CTO’s organisation(from February 2007, the CQO is also reporting to the CTO).
The CTO intends to foster a culture of innovation among
EADS employees. Consequently, the CTO and Human
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opportunities similar to those of managers whilst remaining ona technical career path. In further initiatives, an EADS
Innovation Hall of Fame is being created. This will acknowledge
and honour those responsible for generating the highest
number of patents (‘The Great Inventors’), those who are mosteffective in bringing inventions to the business (‘The Great
Innovators’) and workers with unique skills (‘The Great
Craftsmen’).
The EADS Executive Technical Council (“ETC”) made up of
the technical directors of the Divisions and chaired by the
CTO, is responsible for ensuring alignment with the Group’s
technology strategy and implementation through the GroupR&T road map. The ETC ensures that a balance is maintained
between the top-down strategic guidance and bottom-up
expertise, creativity and responsibility. It meets regularly to
discuss and decide forward strategies and it identifies synergies.
The EADS Innovation Works (formerly called Corporate
Research Centre) are in charge of the corporate researchlaboratories that guarantee the Group’s technical innovation
potential with a focus on the long-term horizon. Driven by the
EADS R&T strategy, they identify new technologies that will
create value and competitive advantages. The EADS Innovation
Works have two main sites in Paris and Munich and employ
approximately 600 people including doctorates and university
interns.
EADS – represented by EADS CASA, the Spanish Minister ofIndustry, Tourism and Commerce and the President of theRegional Government of Madrid have signed a co-operationagreement in Madrid in March 2006 to create the Fundaciónpara la Investigación, Desarrollo y Aplicación de Materiales
Compuestos (Foundation for Research, Development andApplication of Composite Materials – “FIDAMC”). Its
objective is to be a centre of excellence in research, development
and application of composites, especially of carbon fibre
materials. The FIDAMC will be a centre with a multi-sector
orientation, with headquarters to be located near the EADSCASA site in Getafe near Madrid. The Foundation is expected
to provide employment for about 40 engineers, scientists andlaboratory personnel, with the possibility to reach the numberof 75 positions for highly qualified technicians in the mid-term.
This will contribute significantly to the reinforcement of theaerospace sector in Madrid. The centre will develop projects
with a highly technological content in which, according to an“open perimeter” philosophy, companies from several sectors
may take advantage, such as the aerospace, automotive androbotics industries.

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Proximity centres are maintained in Toulouse, Nantes (openedin 2005) and Hamburg to support the knowledge transfer to
BUs in these locations. A liaison office is operating in Moscow,which facilitates relations with Russian scientific institutes.
EADS opened a R&T centre in Singapore and also launched acentre in Spain.
The R&T Network coordinates the shared research andtechnology activities, which involve several BUs and the EADS
Innovation Works. The Network is structured around a total of
18 technology domains called Research and Technology Groups(RTG’s), which are of common interest, such as Materials andStructures, Electronics, Navigation and Control as well as Image
Processing. The Network sets up a common R&T programme
and facilitates the circulation of information and research
results.
The existing EADS R&T Network operates as a cluster of five
Global Innovation Networks (“GIN”). The RTGs of the
Network are operated through relevant GIN (for example, the
RTG’s Metallic Materials, Composite Non-Metallic Materials,
Structures and Advanced Manufacturing are operated by the
GIN “Optimized Platform Structures”).
All Corporate and Divisional R&T activities are merged into asingle, comprehensive EADS R&T Group Plan. The portfolioof the EADS Group R&T plan is aligned with the EADS R&T
Strategy, which is in turn oriented by the Strategy of theGroup.
GIN’s executives, under the responsibility of the CTO’s
Deputy and Chief Operating Officer Innovation, are going toplay a key role by reinforcing the ties between corporate R&T
and the Divisions. The GINs are establishing an R&T plan in
their particular technology fields together with the R&T
Groups of the EADS R&T Network and aligned with the
EADS technology strategy. GIN’s will be in charge of thedeliverables and will focus on the assurance of the deliveries of
selected key-projects.
Demonstrators which integrate single technologies into
solutions will play an important role in the future R&T Group
Plan. These will aim to reduce the time required to introduce
new technologies within a product or process.
Members in the support and R&T enabler groups of the CTO’sorganisation ensure that R&T is an integral part of thebusiness, by maintaining strong links with the businessdevelopment organisation, human resources, finance,
intellectual property, standardisation and communication.
The corporate EADS Innovation Works and the EADS R&T
community in the BUs maintain and expand establishedacademic research partnerships with leading universities andhigh-tech engineering schools by employing thesis students,
post-graduate interns and doctorate candidates as well as bycontracting specific research projects.
See also “Part 1/1.1 Management’s Discussion and Analysis ofFinancial Condition and Results of Operations”.
Performance and Best Practices
Continuous innovation will be even more important in the
future. Innovation cycles are shortening and new competitors
are emerging in all fields of EADS business. To be leading themarkets in the future, EADS will always need to be ahead with
innovative solutions.
Technological innovation programmes are managed inconjunction with the EADS R&T Network and the EADS
Innovation Works as well as through a strong network of top
experts in the BUs. EADS aims to make better use of available
resources by interacting even more with external scientific andapplied research organisations. Such cooperation allows EADS
to leverage the resources available in these organisations, which
in turn benefit from EADS’ systems knowledge.
(See also “Part 1/1.1.3.6 Research and Development Expenses”.)
Advanced Technology Initiative

Activities of the Advanced Technology Initiative (“ATI”),
launched in 2004, continued throughout 2006 as a crosscompany drive to increase efficiency in innovation and R&T.
ATI involves benchmarking and forecasting of technologies andgives answers to the questions: What is the scope oftechnologies inside EADS? How good is EADS at thesetechnologies compared to the competition? What will be key
technologies in the future? External expertise is included toprovide perspective and vision. Based on the findings, actionplans are developed to improve the global technology strategy
by correcting any deficiencies and by optimising the allocationof resources. ATI has already led to recommendations andimplementations for managing the technological risks and for
ensuring technological leadership.
EADS Corporate Foundation for Research

The Corporate Foundation for Research (Fondation d’entreprise
EADS) was created in France in September 2004 to promote
multidisciplinary research in air and space technologies andfoster exchanges between researchers in government, private
industry and higher education research institutes.

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With a total endowment of €24 million over 5 years, theFoundation is now in its third year and firmly established. It
has provided grants for 37 doctoral and 19 post-doctoral
fellowships, and 18 research projects were financed.
One of the Foundation’s goals is to build up ties between the
public research community and the worlds of industry andeducation. To this end, it is awarding each year three awards inthe field of Industrial Research Cooperation, which is
promoting exemplary men and women scientists who
demonstrate high standards of excellence in their research workin collaboration with the industrial sector. Every year, it is also
awarding six Best Thesis awards in different domains ofmathematics, physics and computer science. To maximize
interdisciplinary studies, representatives from all of the EADSDivisions sit on the administrative board and a third of themembers are representatives from the outside researchcommunity in France, such as the national aerospace research
centre ONERA, the research agency CNRS, the Atomic Energy
Commission CEA and major universities.
The EADS Corporate Research Foundation also supports otherorganisations with which it shares common objectives, namely
the Institute for Higher Scientific Studies (IHES), which isdedicated to advanced research in mathematics and theoreticalphysics, the French Aeronautics and Space Research
Foundation, and the C. Génial Foundation, which helps topropagate scientific and technical culture, particularly amongst
young people. In this context, the Foundation also supports the“Science in Schools” initiative aimed at creating a new image forscience teaching in middle schools, grammar schools andfoundation courses.
The Foundation also works to promote gender equality as apartner in the Irène Joliot-Curie prize programme. This prize is
bestowed on women in recognition of outstandingachievements in public or private research, and is intended toencourage more young women to study science and technology
and to boost the standing of women within the French researchcommunity. The Foundation also supports public healthprojects, which frequently use technologies that have originatedin the aerospace sector. December 2006 saw the third edition of“Envol Recherche” day, when the various protagonists of theFoundation gathered for round-table debates on the scientificchallenges in the aerospace, defence and space industries andfor the prize-giving ceremonies.
Other initiatives, including foundations, are contemplated inGermany, Spain, the U.K. and the U.S. to improve links withpublic research institutes and universities.

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EADS and the government of the German state of Bavaria
joined forces with three German aerospace companies to fundBauhaus Luftfahrt, a think tank for creative andinterdisciplinary research activities in the field of aeronautics.
Bauhaus Luftfahrt will enable EADS to consider new,groundbreaking courses of action in the field of aeronautics byadopting an innovative approach to future-oriented, visionary
solutions. A total of 20 engineers and scientists had joined the
Bauhaus Luftfahrt team in time for its one-year anniversary
in November 2006.
Academic Partnerships

EADS regards its relationship with the academic world as apriority and is developing this with vigour by reinforcing its
cooperation with academic laboratories through deep andtargeted relationships through establishing a common structurewith several top-level academic partners.
INNO’CAMPUS is operated together with the renowned École
Normale Supérieure (“ENS”) de Cachan, near Paris, by colocating some EADS researchers at laboratories of the ENS, by
students using EADS Innovation Works facilities and by jointly
conducting seminars and workshops in the structures
simulation and structures behaviour domains. In addition, aprofessorship in “Advanced Computational Structural
Mechanics” was established at the ENS, with financing suppliedby the EADS Corporate Foundation for Research.
TECHNO’CAMPUS was established together with Airbus andfour high-tech engineering schools in Nantes: the École
Centrale, École des Mines, Polytech & ICAM. The location was
selected because of the high scientific level of public researchclose to two Airbus production plants. TECHNO’CAMPUS is
actively supported by the French state, the region of “Pays de la
Loire” and the city of Nantes. It gathers students, researchersand engineers from the schools, the Innovation Works andAirbus in joint projects to research thermoplastic composites
technologies and to develop specific non-destructive testing
methods.
The EADS Innovation Works and the Ecole Polytechnique, astate-supported institution of higher education and research andthe most prestigious engineering Grande Ecole in France,
together with the French National Centre for Scientific
Research (Centre National de la Recherche Scientifique, CNRS)
engaged in a new partnership in November 2006 by signing aframework agreement for scientific research in the fields ofaeronautics, space and defence. This agreement bears the nameof “AIRIX” in reference to these fields and increases thescientific and technical interactions between the researchers of
the publicly-owned establishments and those of the industrial

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Back to Contentsgroup in the areas of modelling, physics and associatedmathematical analysis. This agreement is acting as an acceleratorof the transfer of knowledge and results between the academic
and the industrial worlds.

2.2.2.2 Protecting Innovation: Intellectual Property
Intellectual Property (“IP”), such as patents, trademarks andknow-how, plays an important role in the production andprotection of EADS technologies and products. The use of IP
rights enables EADS to remain competitive in the market andto manufacture and sell its products freely.
Policy● “One of EADS’ most valuable assets is its intellectual property
which includes patents, trade secrets, trademarks, copyrights
and other proprietary information. It is EADS’ policy toestablish, protect, maintain and defend its rights in allcommercially significant IP and to use those rights in
responsible ways.

EADS also promotes training about IP matters. For example, aone-day training about IP is included in the Corporate BusinessAcademy (“CBA”) training programme for the experts.
Each of the subsidiary companies of the Group owns the IP
which is specific to its particular business and has been
generated by this subsidiary. Where IP is of common interest
throughout the Group, the subsidiary that generated it may
issue a license allowing its use elsewhere (respecting theinterests of the other shareholders when appropriate). EADS
also owns IP directly or under license agreements with its
subsidiaries. EADS centralises and coordinates the Group’s IP
portfolio, participates with the subsidiaries in its management
and promotes licensing of common IP between the subsidiaries.
EADS controls the protection of its IP made in the strategic
countries.

EADS also respects the valid intellectual property rights ofothers and will not reproduce or use software or othertechnology licensed from other suppliers except as permitted by
the applicable license agreement or by law.”

EADS also ensures that procedures are in place to protect theconfidentiality of the Group’s IP and to ensure contractuallythat third party rights are protected (in the case of joint
ventures). In this respect, suppliers’ contract terms andconditions are currently being strengthened and adapted when
dealing with countries with weaker IP laws. The sourcing
strategy is also to integrate a segmentation of the contract inorder to minimize the risk of industrial espionage andcounterfeiting.

Organisation
The general management of IP in EADS is conducted throughan IP council led by the EADS Group IP Head reporting to the
COO Innovation, with a dotted line to Corporate Legal Affairs.
Executives responsible for IP at the main subsidiaries sit at thiscouncil.

Performance and Best Practices
To increase the added value of the Group, the team of the
EADS CTO promotes the sharing within the Group of all theknowledge of the BUs and the sharing of resources, skills andresearch means and budget to develop new knowledge, while
respecting existing contractual and legal frameworks.

Every year, a meeting of the network of those responsible for
IP at the entities of the Group is held to explain the EADS’ IP
strategy and policy. The IP policy and the rules are defined, in
accordance with the Innovation global strategy, by this Council
which meets approximately every two months.

For example, all the contracts between BUs of the Group
concerning shared R&T must have provisions allowing for theflow of knowledge (EADS R&T Network rules).

●In 2006, the EADS IP portfolio comprised approximately 5,400
inventions (approximately 4,900 in 2005), which are covered bynearly 18,400 patents throughout the world.

2006

New inventions filed (some of which covered by several patents)
EADS patents portfolio (year end)

2005

2004

792

586

521

18,36615,036

13,515

Scope: EADS.

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2.2.3	Supplier Management: Fostering a Mutually Beneficial Relationship with EADS’ Suppliers
The EADS Sourcing Vision is to deliver competitive advantage
by winning, integrating and developing relationships with theworld’s best suppliers. Its Sourcing Strategy is designed tosupport this vision.

2006: the set of procurement commodities has beenreorganised and “Enhanced Lead buyers” have been
nominated;●

The EADS Supplier Evaluation and Development process
guarantees that suppliers’ performances are regularly
evaluated. Suppliers can expect that the same process and thesame criteria are applied by all BUs: Commercial, Logistics,
Quality, Technical and Customer Support. Evaluations areshared with suppliers as a basis to discuss further
improvement and development needs and plans. With regard
to the high proportion of sourcing required for products andthe complexity of the procured systems, equipment andstructures, EADS favours long-term, mutually beneficial,reliable and stable relationships with key suppliers.
Consideration for partnerships is limited to suppliers who
continuously show excellence in their performance, who candemonstrate a credible long term interest and who are able tosupport their business interest with their own developments
and investments. It is a principle for such partnerships that
suppliers are involved and integrated at the early stages of
product development;●

Both business risks and opportunities should be
adequately shared with suppliers. Procurement Policies of
EADS BUs address all typical business risks, including risks
attached to CSR, and suggest how they should be dealt with
in EADS’ contractual agreements. Procurement Policies also
set out the principles and guidelines for conducting businesswith current and prospective suppliers. These guidelines
describe how partnership relations should be handled in an
equitable manner in the interest of all parties concerned andhow disputes should be dealt with professionally and as
quickly as possible in accordance with the agreed partnershiparrangements.

2.2.3.1 Policy
The EADS BUs Procurement Policies reflect the following
statements:●“Suppliers represent a high proportion of the value of EADS’
products, and play an important part in customer satisfaction.
As such, EADS endeavours to integrate them fully in an ethicalway of doing business.

●

Fostering a mutually beneficial relationship with suppliers,
EADS’ sourcing principles require all suppliers to be responsible
and to implement its standards and requirements across alllevels of the supply chain.

●

EADS is committed to long term relationships and partnerships
with its suppliers, in particular in the engagement in thedevelopment of technological know-how”.

2.2.3.2	Organisation
Sourcing Strategy
EADS Corporate Sourcing is the strategic architect of sourcing
functions and provides overall orientation for sourcing activities
across the Group, in particular regarding the key elements of
the Sourcing Strategy, which are Procurement Marketing and
Global Sourcing, Joint Sourcing, Supplier Evaluation and Risk
and Opportunity Sharing:
●

●

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Procurement Marketing and Global Sourcing aim to
identify the best potential suppliers worldwide and toevaluate them with regard to their capabilities and theircertifications. Procurement marketing is becoming
increasingly important as EADS targets new global supply
markets to support EADS’ Global Industrial Development;
Joint Sourcing activities allow purchasing power to beleveraged across EADS. A group of Lead buyers bundles
procurement volumes of selected material groups forcommon negotiation. The Joint Sourcing also allows all
EADS BUs to use a common EADS contract per supplier. In
order to better integrate the internal customers into the
procurement process and to increase EADS group leverage inSourcing, the group of Lead buyers has been strengthened in

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y

Sourcing network
Each EADS Division and BU has its own sourcing function.
The five EADS Divisions’ Chief Procurement Officers compose
the Chief Procurement Officers Council (“CPOC”) which ischaired by the EADS Chief Procurement Officer. This Council
is responsible for implementing the EADS Sourcing Strategy
within each Division of EADS.
The Chief Procurement Officers have organised Sourcing
networks in order to coordinate strategic topics across EADSDivisions. Listed amongst these strategic topics, CSR is
managed by a dedicated Sourcing CSR Network.

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The Sourcing CSR network, pursues the objective offormalising the EADS CSR Sourcing management processes
and associated documentation, in compliance with the EADS
Code of Ethics, values and policies. This Network is composedof focal points in each Divisions’ Procurement organisations
and is coordinated by EADS Corporate Sourcing.

2.2.3.3 Performances and Best Practices
Sourcing context in 2006
With three fourth of its revenues sourced from external
suppliers, efficient and effective supplier relationshipmanagement is a key factor for EADS’ success. For this, EADS
concentrates on its major suppliers. EADS’ top 50 suppliers
already account for 43% of the sourcing volume and the top 250
suppliers account for 74%.
Complex systems and equipment account for 39% of EADS
procurement. Structures, material and product-related services
also account for 38%, while non product related material
accounts for 23%.
While EADS likes to see itself as an important customer for its
key suppliers, EADS wants them to be independent and at theedge of technological development. On average, EADS
suppliers make no more than 10% of their revenues from
EADS.
Most of EADS’ sourcing volume is provided by large
companies. The remaining Sourcing volume (15%) is spread
across a large number of small and medium sized enterprises, as
per the European Commission definition, i.e. with less than 250
employees or less than €50 million turnover.
Sourcing activities focus on the EADS home countries France,
Germany, U.K. and Spain, and on the U.S.. Sourcing outside
the E.U. and North America is still limited. However, EADS
sees its global sourcing activities increasing to better exploit
opportunities and to support sales.
Most of EADS’ suppliers are currently located in the E.U. (77%)
and North America (21%), regions in which social, economicaland environmental practices are well regulated by applicablenorms and laws. EADS Sourcing contractual terms request thatthese suppliers shall comply at any time with laws andregulations on economical, environmental and social standards
and anticipate or at least make their best endeavour to anticipate
forthcoming changes in these standards.
To reinforce supply chain compliance to EADS CSR related
requirements, EADS tier 1 suppliers are contractually bound toflow-down these requirements to tier 2 suppliers.

Procurement policies also reflect the principles of the UN
Global Compact. As a member of the UN Global Compact,
EADS has accepted responsibility to apply these principles in
its supply chain and to require its suppliers adhere to common
standards in the areas of human rights, the environment andemployment.
Influence of the Global Sourcing
As EADS targets to increase global sourcing volumes incountries where existing laws and regulations may not fully
cover EADS CSR requirements, procurement contractual terms
for these domains need to be written in a more extensive way.
Therefore, EADS is on one side engaged in a process forembodying additional CSR requirements into procurement
contracts and on the other side EADS is organising supplier
CSR performance measurement.
CSR activities
2006 CSR projectIn 2006, the Sourcing CSR Network has flowed-down the
EADS code of Ethics into different tools such as a CSR
Supplier Code, a CSR Supplier evaluation Questionnaire, a
CSR contractual clause and various metrics adapted to measure
the compliance of Suppliers to EADS CSR policies. This tool
set has been validated by the Chief Procurement Officers, andits implementation will be launched once approved and adaptedby each Division to fit into its own Sourcing processes.
Due to the decisions made in the frame of EADS cost saving
projects, the number of EADS Tier 1 suppliers is due to bestrongly reduced in the next years. The reorganisation of the
supply base around a reduced number of Tier 1 Suppliers will
go together with a renewed content of the procurement
contracts. When starting, this revision of contractual clausesshould give EADS a good opportunity to deploy the CSR
Sourcing tool set in the same time frame.
Sourcing Contractual terms related to CSR

The decision to further develop CSR requirements is clearlytaken and EADS has already well addressed some key elementsof CSR in the sourcing contracts.
The various CSR aspects are already considered through EADS
Sourcing Risk and Opportunities Management (“ROM”) which
recommends contractual guidelines for the key contractual
chapters. These guidelines are published in the EADS Sourcing
Information Tool which explains the principles for drafting
contracts, disclaims the typical contractual clauses and gives
practical comments for the use by the buyer. For each domain,

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the requirements are contractually cascaded on to sub-tiersuppliers.
For example, regarding environmental responsibility, principles
for drafting contracts state that: “The purchase contract should
provide that the supplier shall comply with all applicable laws,
regulations, etc. as well as all commitment to which EADS has
subscribed (e.g., Global Compact initiative) and end-customer
requirements, in particular: (1) Suppliers are asked to support aprecautionary approach to environmental challenges; (2)Undertake initiatives to promote greater environmental
responsibility; and (3) Encourage the development anddiffusion of environmentally friendly technology.” Therecommendation to the buyer also states that EADS encourages
suppliers to implement an environmental management systemcomplying with international standards such as ISO 14000 or
EMAS.
Moreover, in terms of Compliance with EADS Ethicalcommitments, it is recommended that the contract includes
EADS key engagements such as the support, respect andprotection of international human rights within the supplier’s
sphere of influence; the respect of the freedom of associationand the effective recognition of the right to collective
bargaining; the elimination of all forms of forced andcompulsory labour; the quality of working conditions such as
but not limited to, appropriate level of remuneration, andprotection of health and safety of the employees.
BUs best practices

In addition to the top-down approach described above, CSR in
Sourcing has been well progressing in 2006 as shown throughthe following examples:
AirbusAirbus now addresses the product’s environmental performancethroughout its entire life cycle. In 2006, the sites and the
products of Airbus have been certified against environmental
standard ISO 14001. The supply chain plays a strategic role infulfilling that objective, hence, the Airbus environmental
project received a full support from Airbus Procurement. The
following main milestones took place in 2006:70

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Ya) The head of Airbus Procurement sent to all Procurement
personnel a Statement of Intent about Procurement
environmental Policy in February 2006.
b) An area in the intranet pages of Airbus has been dedicated to
the Environmental policies of Airbus Procurement. Airbus
Procurement staff was also invited last year to go through elearning modules in order to learn how to introduce Airbus
environmental requirements into contractual agreements.
c) Later in 2006, the “Airbus Environmental pocket-guide” wasdistributed to all Procurement employees in Airbus. In thisGuide, the CEO of Airbus presents the Airbus
environmental challenges and the head of Procurement
explains the Environmental Commitment and Objectives for
Procurement, the Golden rules for environmental
contribution. This Guide shows also the organisation in
charge of Environmental Management within Procurement.
d) The Suppliers have been given online access to the Airbus
environmental requirements in a specific chapter of the“Airbus Supplier Portal” in internet.
e) Various external communication events have been organised,in order to raise awareness about environmental issues
within the Supply Chain.
EADS Astrium

The CSR requirements are now considered in the Supplier preselection process as part of the basic Supplier requirements
which are prepared in order to ensure in particular:●

Compliance to EADS code of Ethics and CSR policies●

Awareness and demonstration of compliance with applicablestatutory and regulatory requirements: WEEE, RoHS, CE
Marking (which is a mandatory European marking for certain
products to indicate conformity with European applicablestandards) etc.

The Environmental Health and Safety requirements of EADS
Astrium are presented in a dedicated Intranet page for theattention of EADS Astrium procurement teams.

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Key Performance Indicators
All figures below have been calculated using new euro-dollar exchange rates. Figures for previous years have been recalculated
accordingly (2006: 1.2556; 2005: 1.2441; and 2004: 1.2438).
Importance of sourcing outside of EADSIn percentage of revenues

2006

2005

2004

74%

70%

63%

The increase in value of Sourcing is mainly influenced by A380 production ramp up which started ahead of A380 deliveries,
temporarily increasing sourcing volume vs. sales volumes.
Sourcing volume: breakdown by country for top 10 countries

2006

2005

2004

France

32%

31%

31%

Germany

21%

22%

23%

U.S.

20%

22%

21%

U.K.

14%

12%

12%

Spain

4%

4%

4%

Italy

2%

1%

2%

Netherlands

1%

1%

1%

Belgium

1%

1%

1%

Canada1%

1%

1%

Switzerland

1%

1%

1%

2006

2005

2004

Europe

77%

75%

77%

North America

21%

23%

21%

Rest of the World*

2%

2%

2%

In percentage of total sourcing volume

The geographic Sourcing breakdown is stable and centred on Western countries.

Purchasing breakdown by Geography
In percentage of total purchase

Scope: EADS.
(*) Including < 1% in non-OECD countries.

2.3	 Environmental Care
EADS’ environmental policy embraces all phases of the productlife cycle, from design, manufacturing, including environmental
impact of its sites, operations and maintenance to the end oflife. It seeks to ensure that each of its BUs complies with thelaws and regulations of each country in which it operates.
EADS is subject to numerous international, European, national,

and local environmental laws and regulations which concerns
emissions into the environment, in particular discharges tosurface and sub-surface water, elimination and treatment ofwaste, consumption of natural resources, soils, noise and othernuisances, landscape, etc. as well as those related to permits tooperate.

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2.3.1 Policy“Minimizing environmental impacts of EADS” activities●●

EADS is fully conscious of its operations’ impact on theenvironment and therefore considers that monitoring andreducing those impacts is fundamental for its approach to CSR.
EADS is committed to continuous improvement of its
environmental impact, beyond the simple fulfilment of legal
obligations. It is EADS’ subsidiaries and sites’ role to ensurecompliance with the laws and regulations of the countries inwhich they operate. The Group encourages environmental
certification of its manufacturing processes.

Taking into account environmental impacts of products
along their life cycle●

Improving environmental performance of products throughout
their lifecycle is of significant importance for EADS and its
customers.

●

EADS encourages the active consideration of environmental
criteria, through implementation of Eco-Design approaches, inall phases of its products’ life cycles in order to improve theenvironmental performance of its products.”

2.3.2	Organisation
Limiting environmental impacts of operations is strongly driven
by the business. The management of environmental aspects ofGroup operations is, as result the responsibility of the BUs andsites. Moreover, each of EADS’ businesses is strictly controlled
and audited by relevant authorities, in respect of manufacturing
processes and product certification. Customers, both civil andgovernments increasingly include environmental criteria intheir specifications.
Many EADS Divisions and BUs have successfully implemented
environmental management systems and work towards acontinuous improvement of their respective products‘
environmental performances.
In addition, some coordination at corporate level is organised inorder to implement a periodic follow up on the Group’s
environment performance, to promote a cross-fertilisation ofbest practices and consistently anticipate any new relevant
regulatory framework that may apply to the Group.
Currently the environmental reporting at Group level isprovided by CQO. It is based on networks that already exist
from the founding companies of EADS. In order to enhance
effectiveness of the environmental policy, to define guidelines
and relevant action plans, as well as to provide visibility, EADS
decided to further develop an environmental network

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coordinated by the Group leading companies in managing
environmental matters. Particularly, most of EADS‘ European
sites are now ISO 14001 certified, which provide a solid basis
for developing an enhanced Group environmental approach.
Within the industry; EADS is already participating inenvironmental working groups of industry organisations suchas the GIFAS in France, BDLI in Germany and the SBAC in the
U.K. For example, the Environment Committee of GIFAS ischaired by an Airbus representative. EADS and Eurocopter also
participate to this committee. In 2005, the committee definedand implemented a legal and regulatory tracking system to thewhole benefit of the sector in France. With the view to improve
the sector communication, the committee initiated in 2006 an
inventory of the industry best practices in order to promote
such practices.
At European level, the Environmental Committee of ASD ischaired by Airbus.
On a worldwide basis, the ASD is the European member
ICCAIA (International Coordination Council for Aerospace
Industries Association). The vice-chairman of theenvironmental committee (Aircraft Noise & Engine Emissions)of ICCAIA is an Airbus representative, as per the ICCAIA bylaws, he will automatically become Chairman in 2010.

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2.3.3 Performance and Best Practices
Environmental Management ISO 14001/EMASEADS encourages environmental certification of its industrialsites. As of 31st December 2006, 52 sites (29 as of
31st December 2005) were either ISO 14001 certified or EMAS
registered, representing more than 70% of the total workforce of
EADS. New certification processes were completed at Airbus
but also within EADS Military Aircraft Systems as well as
within the Astrium Division. This important increase in thenumber of certified sites will allow the EADS Group tostrengthen its approach to environmental management.
In 2006, Astrium Space Transportation achieved its ISO 14001
certification objectives. The initial certification of the Frenchsites was approved in November 2006 and followed thesuccessful re-certification of the German sites a couple ofmonths earlier. It marks the start of a continuous improvement
process to which the Astrium ST management has committed.
After the certification of Hamburg and Toulouse plants
in April 2006, Airbus has become the first and only aerospacecompany world-wide to receive the ISO 14001 environmental
certification covering the 16 Airbus production sites, including
the Airbus headquarters as well as all products throughout
their lifecycle. The ISO14001 corporate certification recognizes
that Airbus uses a robust Environmental Management System
to continually monitor and minimize the environmental impactsof Airbus production processes and products throughout theirlife cycle. Environmental innovations in the production processinclude the pioneering use of a greener, chemical-free milling
process for fuselage panels; more environmental friendly
painting processes; and steps to minimise energy and water
consumption during the production phase. The Airbus
Environmental Management System is helping in a new
approach to reduce the environmental impact of products andprocesses throughout the aircraft life cycle. The life cycle covers
design, procurement, manufacturing, transport, in service
operations including maintenance, aircraft end of life andrecycling.
While classical ISO 14001 addresses only SITE-related
certification, Airbus has joined forces with several otherorganisations (Chamber of Commerce, National Trade
Associations, EADS Germany…) to set the rules for an approachto an innovative environmental certification covering both
SITES and PRODUCTS along their lifecycle (production sites
being only one aspect of this lifecycle). This integrated approachcalled SPOEMS (Site and Product Oriented Environmental

Management System) will help Airbus, among otherorganisations, to systematically assess the environmental impact
of its products along their entire life, and to target appropriate
improvements, in particular from the earliest design stage.
SPOEMS was selected by the European Union under its “LIFE”
Programme.

Recycling of waste
Powered by the ISO 14001 certifications, many local initiatives
on waste recycling are taken by the BUs, going beyond theregulatory requirements (identification, separation, managementof disposal). One example is with Astrium UK: introduction of
two recycling waste streams: one for glass and one for paper.

Climate Change
EADS BUs were part of the first Emission Trading Scheme set
up by the E.U., however EADS operations have a very low
impact in terms of greenhouse gas emissions. In the main,
EADS’ energy use results from heating and lighting
requirements (offices, administration buildings, production
facilities etc), as well as from processes.
A potential risk from climate change to EADS operations comesfrom the ever-increasing pressure on energy costs. However,both from a cost and an operational efficiency viewpoint theGroup recognises that it has a responsibility to reduce energy
usage where possible and so EADS views this as an opportunity
to make continuous improvements in this area, particularly
within environmental management systems that are currently
being set up throughout the Group.
In July 2006, Airbus and Eurocopter, together with five othermajor European aerospace manufacturers signed a letter ofintent in a Joint Technology Initiative (“JTI”) that works on the
preparation of an innovative “Clean Sky” policy. The Clean Sky
JTI will be the largest research project ever set up jointly with
the European Commission and would run over a seven year
period with a total budget estimated at around 1,7 billion euros.
The “Clean Sky” JTI is an innovative, large technologicalresearch programme that will radically improve the impact of airtransport on the environment and will deliver innovativetechnologies and solutions enabling step changes in the
reduction of noise, emissions and consumption for the next
generation of aircraft and associated components and operations.

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Its purpose is to demonstrate and validate the technologicalbreakthroughs that are necessary to reach the environmental
goals set by the Advisory Council for Aeronautics Research inEurope (“ACARE”). ACARE goals to be met by 2020 include a
50% reduction of CO2 emissions through drastic reduction offuel consumption, an 80% reduction of NOx emissions and a
50% reduction of perceived noise. It also aims for green productlife cycle design including manufacturing, maintenance anddisposal.

Restriction of Hazardous Substances (RoHS) directive
The European RoHS directive restricts the use of six hazardous
substances (lead, hexavalent chromium, mercury, cadmium,
PBB and PBDE) in electric and electronic applications. The
European Commission has confirmed that “equipment
containing such targeted substances specifically designed to beinstalled in airplanes, boats or other means of transport are outof the scope of the RoHS Directive”. The defence products arealso out of the scope of the RoHS directive. However, it isexpected that the industry will progressively move towards newenvironmentally friendly alternatives in electric and electronic
applications. These substitutions remain highly difficult foraerospace activities due to the length of the aerospace products
life cycle and stringent safety requirements: the introduction ofsubstitute alternatives requiring testing and certification before
replacement.
In 2004, EADS installed a specific network on the RoHS/Waste
Electrical and Electronic Equipment (“WEEE”) issue, managed
by CQO. A prior focus of EADS was on the replacement oflead. A position paper was issued in July 2005 and flowed down
to the supply chain and to the engineering community.
Standards are under preparation to set the rules for the global
aerospace industry’s transition to safety/reliability provensolutions.
EADS and many of its BUs (Airbus, MBDA, DefenceElectronics, Space Transportation) participate to the LEAP
(Lead-free Electronics in Aerospace Project) Consortium which
is preparing these standards. Furthermore, EADS and Boeing
have decided to team up to address this difficult transition, by
jointly defining the technical solutions, the validation tests
protocols and the configuration management rules that will be
enforced throughout the aerospace Industry and its supply
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Dedicated IT tools are starting to be deployed to trace andmanage hazardous substances, such as lead, from supply todisposal.
In addition, a project partnership has been formed between
Airbus, EADS DCS, the EADS Innovation Works, TechCI, aprinted circuit board manufacturer and ACTIA, a board
assembling firm. These partners won a funding from the EU(through the LIFE programme) to develop technologies for lead
substitution under the name Green Electronics in Aeronauticaland Military Communication Systems (GEAMCOS). This
project aims at allowing EADS BUs to reliably perform 100%
lead-free soldering and to obtain 100% lead-free electronics
boards in the medium term.

Aircraft dismantling and recycling
The life span of an aircraft is about thirty years; as aconsequence, the first Airbus aircraft models are about to reach
their end of life. Approximately 200 planes are expected to bewithdrawn from the worldwide market each year for the next
20 years.
So far, old planes were stored in hangars or dismantled in a
non-environmentally friendly way. Airbus has created aconsortium to improve management of the end of aircraft life,
with EADS Innovation Works (former CRC), Sogerma, Sita (awaste management company) and the Préfecture des HautesPyrénées. This €2.4 million project, called PAMELA (Process
for Advanced Management of End of Life of Aircraft), wasapproved in 2005. A special experimental centre has been set up
at Tarbes Airport, where procedures for the decommissioning
and recycling of aircraft in safe and environmentally responsible
conditions are being tested. The aim of this project is todemonstrate that 85 – 95% of aircraft components can berecycled, reused and recovered. It will also position EADS to
anticipate further environmental European Regulations on
waste recycling. The first aircraft which is currently being
dismantled (since March 2006) is an Airbus A300. The
experience gained from this project and further dismantling
will feed back into new aircraft design to help make future
aircraft even easier to recycle.
Further reporting: Airbus publishes an environmental report
every two years which is available on its website at www.airbus.com.
Airbus’s fourth environmental report was published in 2006.

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2006

ISO 14001 certification/EMAS registration - Number of sites covered by a certificate

52

Number of sites covered by EU-ETS

12Total CO2 emissions (in ton)

330,000

Total CO2 emissions declared under EU ETS (in ton)

170,000

Direct Energy use segmented by primary source (in MWh)

2,910,000

Volatile Organic Compound Emissions (in ton)

3,900

Total water use (in m )5,520,000

Total water discharge volumes (in m3)

3,050,000

3

Total hazardous waste production (in ton)

41,300Total Non-hazardous waste production (in ton)

83,000

Scope: c overing approximately 90% of EADS staff, 2006 figures generated on available material, definitions need harmonisation between the various countries in which EADS operates.
Except for the number of sites, all figures are rounded.

2.4	 Human Resources: Employer – Employee Relationship
The HR function ensures that the EADS Group attracts,
develops and retains a world-class workforce.

Maintaining high standards of health and safety in theworkplace is also a major priority of the EADS Group.

In addition, to this on-going role of business partner, the HR
function also supports the business challenges in facilitating
the continuous integration and internationalisation of theGroup and the building up of a common spirit across theGroup’s organisational and operational structures.

In 2006, several initiatives have been taken to give life to thesemissions such as re-shaping the HR organisation for better
integration of the function facing the group integration goal.
With the development of the e-HR project, real change process
has been introduced.

In the field of industrial relations, the Group HR function
coordinates the social dialogue at the Group and Divisional
level.

In the context of the preparation of the Airbus restructuring
and the evolution of EADS organisation, the social dialogue has
been intensified and additional information and consultation
procedure has been defined with the staff representatives.

2.4.1 Workforce Information and Organisation of Work
As of 31st December 2006, the EADS workforce was composedof 116,805 employees. It has globally increased by 3.2%
compared to 2005, with higher rates of increase registered at
Airbus, Astrium and Eurocopter.

In 2006, 8,283 employees worldwide entered employment with
EADS (7,843 in 2005), of which 3,929 were employed by
Airbus. At the same time, 6,261 employees left EADS
(5,471 in 2005).

In 2006, 98.1% of the workforce was permanent employees.
Depending on country and hierarchy level, the average working
time is between 35 and 40 hours a week.

In total, 97.5% of EADS’ active workforce is located in Europe
on more than 80 sites.

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Workforce by Division and by Geography
The tables below set out the number of EADS employees bybusiness sector and by geographic region. Employees ofcompanies accounted for by the proportionate method (such as
ATR, MBDA, LFK) are included in the tables on the same
proportionate basis.

EADS Employees by Division

The figures for 2004 have been adjusted in order to reflect the
new organisational structure which occurred in 2005; “Other
businesses” includes ATR, Elbeflugzeugwerke GmbH, EADS
Sogerma, EADS Socata.

31st December 2006

31st December 2005

31st December 2004

Airbus56,96654,721

51,959

Defence and Security

23,26823,237

24,268Eurocopter

13,422

12,755

11,850

Military Transport Aircraft

4,212

3,976

3,856

Astrium

11,927

10,985

11,053

HQ, Innovation Works and other businesses

7,010

7,536

7,676

116,805

113,210

110,662

Total EADSEADS employees
by geographic region

31st December 2006

31st December 2005

31st December 2004

AmountIn percentage

AmountIn percentage

AmountIn percentage

France44,53638.1

43,28638.2

42,807

38.7

Germany

42,92036.7

41,43836.6

40,325

36.4

Spain

8,991

7,7

8,710

7.7

8,435

7.6

U.K.

14,30912.3

14,297

12.6

14,045

12.7

Italy

701

0.6

729

0.7

734

0.7

U.S.

1,932

1.7

1,877**

1.7

2,166

2.0

Other Countries*

3,416

2.9

2,873

2.5

2,150

1.9

116,805

100.0

113,210100.0

110,662

100.0

Total EADS(*) The “Other countries” figure includes employees from 13 other countries.
(**) This decrease is mostly due to the disposal of EADS Telecom and EADS Aeroframe services.

2006
In percentage

2005
In percentage

2004
In percentage

France

4.1

4

3.7

Germany

3.3

3.2

3.2

Spain

0.0

0.0

0.02

U.K.

1.6

1.4

0.82

U.S.

n/a

0.1

0.0

Part Time Contracts

Other countries

n/a

n/a

1.3

Total EADS

3.2

3.2

2.87

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2.4.2	Human Resources Organisation
In 2006, the HR organisation has been redesigned in a way ofgreater integration of the function, in line with the Groupbusiness requirements. A new HR board and functional
reporting lines from the Divisions to the Group HR head were
designed to foster a coordinated Group policy.

At corporate level, six support departments make up the global
EADS HR management: HR Improvement and Operations;Social Policy and Industrial Relations ; Compensation and
Benefits, Leadership Development and Learning ; Talent andExecutive Management ; as well as Security.

The Corporate HR team operates worldwide as the strategic
leader in HR matters and works in close cooperation with theDivisions and BUs which have the operational HR responsibility
for most of the employees, except for the top Management ofeach BU which is under the Corporate HR operational
responsibility.

Among other, they are responsible for e.g.:

The HR communities work closely together and coordinate andshare best practises at functional level. Regular meetings of HR
heads are organised at both European and national levels. A
global HR database is now available and is being continuously
developed in order to fulfil the needs of EADS integration.

●

Managing HR Development for the top 200 key positions;●

Designing policies, guidelines and tools for all group wide
HR processes, such as appointments, job rotation,international mobility, compensation and benefits, e-HRprojects, data and information systems security policies etc.;●

Organising and delivering executive education for all
executives and potential future executives through the CBA
and coordinating the training activities within the Group for
all employees; and●Improving the sharing of best practises within the EADS
HR community.

2.4.3	Human Resources Policies and Performance
2.4.3.1	Health and Safety: Providing a Safe Workplace for EADS Employees and Subcontractors
Policy●“EADS considers that protection of the health and safety of
employees in the work-place is key and a top priority for theGroup.

●EADS is committed to maintaining safe and healthy working
conditions for its employees. It is EADS BUs’ and subsidiaries’role to implement Health and Safety policies based on
evaluation, anticipation and risk management and taking into
account all specificities as well as people’s needs.”

Organisation and Performances
The management of Health and Safety is essentially dealt withat site level and it accordingly allows that prevention andprotection measures for employees, contractors and partners canbe defined and implemented to meet specific requirements ofeach work place.
AirbusReporting on health and safety obeys national regulations
according to the sites’ locations.
However some health and safety indicators have started to be
drawn up at the Division or BU level which mainly address
work related accidents.
As an example of the Group performances, the incidence andseverity rates of reportable accidents (work related accidents
causing an absence of more than 3 days) recorded at Airbus,
noticeably decreased from 2004 to 2006, while in the same
period aircraft deliveries increased.

2006

2005

2004

Incidence rate (‰)

10.6

12.61

13.18

Severity rate

0.133

0.184

0.236

(1)

(1) Lost days caused by reportable accidents/employees.

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2.4.3.2	Caring for EADS Employees
and EADS Know-How

2.4.3.3	Diversity: Commitment to Ensure Equal
Opportunity for all EADS Employees

Policy“Given the specific nature of the facilities of the EADS Group
which are used for many activities relating to national defence andsensitive civil markets, the conditions governing access to andmovements inside the plants and facilities are specified inministerial orders and are based on two main principles:

Policy● “EADS commits to offering equal opportunities for all its
employees and to refraining from any discrimination against its
employees based on gender, race, religion, nationality, politicalopinion, sexual orientation, social origins, age and handicap
with regard to its personnel.

- access to a plant is subject to prior authorisation by thecompany; and- entry into restricted and sensitive areas is regulated inaccordance with national and company regulations.”
Organisation and Performance
EADS has set up a security policy to improve the security of its
employees and to protect EADS expertise. A Security Committee
has been set up as a combination of Security leaders from eachcountry and each Division who supervise their local security
officers at BU and plant level, and who deal with national
security authorities and European security organisations.
The network of security managers is there to ensure
information exchange and sharing of best practices. Working
groups are created to facilitate constant adaptation of security
measures to actual threats. Access to EADS facilities is subject
to prior authorisation, and entry into restricted and sensitive
areas is regulated in accordance with national and company
regulations. The awareness of the EADS employees is addressed
as a main success factor.
The increasing development of EADS business outside Europe
implies to reinforce the safety of EADS employees in risky
countries and to improve the security of EADS offices abroad.
In terms of IT security, appropriate steps were taken to audit
processes and improve the level of awareness of EADS
employees to the security of the information systems. Given
the sensitive nature of the Group’s business, employees must
be able, in order to meet the business needs, to always work incompliance with group security policies ; hence, the Group
implements, for instance, secured nomad IT solutions
facilitating mobility and business reactivity with confidence.
In 2006, a particular focus was developed on risk management,
addressing and challenging all the security matters and businesssecurity needs. Particularly, new procedures have been defines
and implementation to specific applications has begun (e.g.e-HR).

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EADS commits to developing access for women to all of its
activities and shall ensure fair professional development as wellas equal remuneration for men and women employees for skill
and work of equivalent value.”

Performance and Best Practices
EADS has always promoted diversity through its existing
culture of cross-border collaboration.
EADS principles regarding respecting and promoting diversity
are listed in the Group Code of Ethics as well as in the“International Framework Agreement” signed with theEuropean Works Council.
The following examples illustrate the implementation of theseprinciples:
Nationalities

EADS welcomes 40 different nationalities among its employees
worldwide (each of the nationalities represented by 10
employees at least).
Gender Diversity

The percentage of women employed in 2006 in the Group is
about 15.2%. It has steadily increased since 2004, when theGroup started to reinforce its policy in this field; the increase in
the percentage of women was registered across all Divisions.
As of 31st December 2006, according to a Group-wide internal
grading system, around 5% of executive positions (highest
EADS management levels) were held by women, as well as 8%of senior manager positions.

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31st December 2006
In percentage

31st December 2005
In percentage

31st December 2004
In percentage

Airbus

13.2

12.7

12.4

Defence and Security

18.9

18.7

18.9

Eurocopter

13.1

12.6

12.3

Women at EADS

13

12.6

12.1

19.6

19.2

19.4

HQ, Innovation Works and other businesses

17.6

15.7

15.4

Total EADS

15.2

15

14.8

Military Transport Aircraft
Astrium

EADS has committed to a long-term plan for the promotion of
women in aerospace and has set two priorities: at least 20% of
its annual recruitment will be women, and it will have active
communication within universities and schools in order toconvince female students through lively role models andconcrete examples that the aerospace industry, and more
specifically EADS, is an attractive employer for women.

Airbus also agreed on a partnership with the Academy ofToulouse to facilitate contacts between female professionals andstudents, to provide information to students, teachers andcareer advisors on technological advances and new skills, and toparticipate in relevant events.

From 1st January 2004, BUs have been asked every quarter toreport on their success in recruiting women.

●in Germany, the organisation of a “girls’ day” which is an
open day for girls at the EADS German sites to allow themto find out more about the engineering profession;

The EADS CBA promotes diversity in all development
programmes. In 2006, the percentage of women has increased inthese programmes to be consistent with the Group recruitment
target.

●in France, participation in the “Elles bougent (“they move”)
initiative. Led by major French engineering universities(ENSAM, ESTACA) together with key players from thetransportation industry (EADS, PSA, Dassault, SNCF…),
this project aims at raising young women’s awareness oftechnical studies, as well as interesting them in complex
technologies through plant visits, conferences, as well as
regular contacts with female engineers currently working in
the member companies, plant visits, conferences…

In 2006, the recruitment of women was 22.6% of total
recruitment (20.5% in 2005), and so exceeded the Group’s target.
The Divisions Defence & Security and Astrium as well as the
EADS Innovation Works are leading the way in this field.
Since 2004, EADS has been involved in a partnership with the
FEMTEC university career center for women Berlin GmbH inGermany.
Working in cooperation with well-known companies, the aimof this cooperation between FEMTEC and industrial companies
is to promote engineering studies among young girls andwomen, and to help high potential and specialized female
students enter the aerospace industry. EADS takes an active
part in career advice workshops designed for FEMTEC students
as well as in conference days.
In France, EADS sponsored the Irène Joliot-Curie award forthe third time in 2006 (See “2.2.2 Sustaining and Protecting
Innovation – Innovation Chapter”).
Furthermore, EADS is an active member of the WIST (Women
Initiative in Science and Technology), a programme funded by
the European Commission and aiming at exploring thepartnerships between private and public research, as well as thelinks between diversity and business performance.

Other initiatives include:

Finally, in keeping with this overall strategy, a meeting withparticipants of the IIWE (International Institute for Women in
Engineering) took place in July 2006 at EADS Paris
headquarters, the Astrium ST plant in les Mureaux and at
Eurocopter in la Courneuve. 80 young women took part inworkshops on diversity and scientific vocations.
EADS was also a business partner to the second “Women’s
forum for the economy and society”. This forum, which
took place in October 2006, was created to promote the vision,
influence and impact of women on all the major economic andsocial issues. It gives women an opportunity to express theirviews, ideas and solutions. It aims at defining directions for
progress in the world of tomorrow.
In France, the implementation of the agreement signed in 2004
with trade unions (“Accord sur l’égalité et la mixité
professionnelle”), is monitored by each EADS company, and also
at Group level, using a defined set of common indicators toevaluate results and track progress with an action plan covering
the 2004-2006 period. This action plan is to be re-negotiatedevery three years.

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Age diversity

A group agreement covering EADS entities in France signedwith trade union organisations in 2005 aims at banning all
career development based on age criteria.

Number of employees per age group

Being concerned with the lengthening of working life, theother European entities of the EADS Group are also working
on this issue of second half of career development.

31st December 2006

31st December 2005

31st December 2004

18-25

7,578

7,179

6,812

26-35

29,621

27,30326,081

36-45

37,02637,12737,54446-55

36,54535,35834,56556-65

12,227

11,22910,984

122,997

118,196

115,986

31st December 2006

31st December 2005

31st December 2004

Total EADS
Consolidated companies are counted 100%.

Average age of employees

France

41.3

41.4

41.6

Germany

42.0

42.2

42.1

Spain

42.8

42.4

42.9

U.K.

42.3

41.9

41.7

U.S.

44.2

43.9

42.4

Other countries

n/a

40.8

39.5

Total EADS

41.8

41.9

41.9

2006
In years

2005
In years

2004
In years

Airbus

13.4

13.4

13.6

Military Transport Aircraft

20.1

20.8

21.5

Eurocopter

13.4

14.2

15.1

Defence and Security

16.3

16.7

16.5

15

15

14.9

Average length of service

Astrium
HQ, Innovation Works and other businesses

12.5

13.3

13

Total EADS

14.3

14.6

14.7

2.4.3.4	Career Development: Efficient Managementof Skills and Know-How
Policy● “EADS ensures that working time, including overtime, isregulated so as to support a healthy balance between employees’
work and their private life.
●

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EADS strives to develop the skills and know-how of its
employees, for their individual benefit as well as for its collective
success. The EADS personnel development policy aims at:

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y- supporting training to enhance performance and quality ofwork;- encouraging cross-border and cross functional teamwork, inthe frame of intra-Group mobility;- assessing and recognising individual technical expertise via a
global scheme developed throughout the Group; and- associating personnel to the performances of the Group andits subsidiaries through a success sharing scheme.”

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Performance and Best Practices
Recruitment and retaining of talent

EADS strongly believes that developing close contacts withtarget universities and their students will contribute to thestudents’ growth and will efficiently brand the group among
potential future recruits.
EADS demonstrates its commitment in many different ways: bysitting on boards, advising on classroom content, preparing casestudies, giving technical lectures or on-campus conferences,arranging plant visits, maintaining a presence at career fairs, orby enhancing cooperation in common research areas.
For instance: EADS attends more than 40 recruitment events
per year such as the Bonding student fairs in Germany, thePolytechnique, Centrale and Supaero career fairs in France, as
well as the MIT or Berkeley fairs in the U.S. to name but a few.
Dedicated branding and recruitment meetings are also held
during major air shows such as ILA or Paris Air Show, thus
promoting EADS’ employer brand among real aerospace fans
and attracting talented candidates.
In the framework of the EADS Global Industrial Development
policy and following HR presence at Asian Aerospace inSingapore in February 2006, HR Marketing decided to go one
step deeper in the Asian market. With the aim of developing
EADS employer brand on a group wide level in China, the HRteam was part of the EADS staff at Zhuhai Airshow 2006.
The EADS Group started its own Road Shows around Europe
at key Universities within the Pegasus Network (Partnership ofa European Group of Aeronautics and Space Universities).
EADS, together with all EADS Divisions are present on
campus in order to forge new contacts to the leading“aeronautics and space” universities in Europe as well as tobuild a powerful image of EADS as a desirable employer. In
addition, discussions with faculty members, professors and
EADS engineers helped to develop first steps into future
education and skills of the students to be prepared for a
successful career within the aerospace industry.
Such partnerships also demonstrate EADS’ long-term
commitment to building and maintaining a lasting relationshipwith key universities or networks.

In addition to increasing on-site presence among students
directly at universities, EADS also organises more than
60 factory tours at most of its Divisions and BUs.
After more than one year of intensive project work, EADS wasable to announce the official roll out of the new EADS-wide
eRecruiting@EADS platform. This new platform will respondto the company’s future workforce requirements and will bringtransparency to the Group-wide job market.
Launched in November 2006, this new recruitment platform
will ensure that EADS has the right people in the right place at
the right time. The new eRecruiting@EADS platform has animportant role to play in shaping the future of EADS.
With more than 5,000 internships offered each year in Europe,
EADS provides students with valuable technical and personal
experience as well as with the unique opportunity to have acloser look at the industrial world. Most of EADS’ internships
target students in the fields of aviation and space technology,
electronics, information technology, finance, or management.
In order to enhance the personal skills and abilities of its
former trainees, EADS developed the Juniors programme tofollow-up all EADS interns, and thus retain and recruit highly
motivated interns.
A variety of other opportunities (depending on national
regulations and policies), including vocational training andscholarships programmes, are also offered to students.
In order to increase the efforts of integration, new specificrecruitment and development programmes have been createdinternally to contribute to the ongoing development of EADS’
workforce. A programme called PROGRESS which consists infirst stretching assignments for talented recruitees in addition tomobility within the EADS Group, has been designed and will
be deployed in 2007. Moreover, EADS Development
Programmes (Financial Management Development Programmeand Advanced Marketing and Sales Programme) offered toprofessionals interested to join EADS in key fields such as sales
and finance have now proven their efficiency.
2006
In percentage

2005
In percentage

2004
In percentage

University (4 years and more)

24.4

24

23.9

University (up to 3 years)

19.3

18.9

19.1

Higher vocational school

9.9

11.3

9.5

Vocational school

40.9

41.5

41.4

General school

5.5

4.3

6.1

Breakdown of employees per qualification

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Development and training

Mobility

Development is a priority for EADS employees. Indeed
recognising the development of technical expertise as a major
asset, EADS has developed a specific policy for engineeringexperts, who are key to EADS for maintaining its competitive
advantage through R&T developments.

EADS employees are also offered a wide range of mobility
opportunities. Mobility at EADS means mobility acrossfunctions, BUs and Divisions in its four home countries,
France, Germany, Spain and the U.K., as well as appointments
to regions such as America or Asia.

Aiming at creating attractive career paths for engineeringexperts, the policy also includes development programmes
customised for the specific requirements of technical experts.

As of 31st December 2006, 2,000 EADS employees wererecorded as expatriates(1), 75% of them working in one of theEuropean countries.

Personal development also includes training. EADS’ expenses
amount to approximately 4% of its payroll (over €150 million)
in training per year. EADS trains more than 70,000 employees
every year for a total of 2.5 million hours.
To improve the effectiveness of that significant investment,
EADS has set up a Learning Directorate with the ambition todeliver better training programmes, to share internal resources,
to be more proactive in that domain and to create more value
for the business. The Learning Directorate is managed by the
EADS head of Leadership Development and Learning.
●●●

One of the decisions of that directorate has been to create a“Shared College” which will be the place where all theDivisions will share common training programmes andcommon resources, including internal trainers. Created in
2006, the Shared College will deliver its first programmes in2007 and should ramp up very quickly to face the needs of
EADS. The first programmes targeted within the Shared
College will be on Quality, on System engineering and on
Programme management.
In the same trend of integration, EADS has decided to createa Leadership Model based on 6 principles which illustrate
the successful way of leading and managing within EADS.
This Model is used in development with tools such as
specific EADS 360° feedback processes, or Development
Centers.
The CBA, created in 2000 as a EADS Corporate University
to develop the current executives and prepare the next
generation of executives, has focused some of its
programmes to prepare actively EADS leaders on
internationalisation, improvement and innovation.

In 2006, the Centre for Executive Education of EADS(Domaine de Villepreux) close to Bordeaux has hosted morethan 1,000 guests for its second year. This centre has been
designed to provide facilities to the whole Group for top
management meetings, training sessions and executive seminars.

(2) Scope : approximately 90% EADS.

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Remuneration

The total wage bill amounted to €8.73 billion in 2006 (See“Part 1 – 1.2 Financial Statements” – note 7).
Success Sharing Practices

EADS’ reward schemes policy is strongly linked to theachievement of individual and Company objectives, both foreach Division and for the overall Group. In 2006, a stock option
plan and a performance and restricted shares plan have been
established for the senior management of the group (See“Part 1 – 2.3.3 Long Term Incentives Plans”). In 2006, noemployee offering took place. The employee offering originallyscheduled for June 2006 was postponed to March 2007. (See“Part 1 – 2.3.2 Employee Share Ownership Plans”).
Since 2005, the success sharing schemes which are
implemented in EADS in France, Germany, Spain, and the U.K.
follow one set of common rules of the Group, ensuring aconsistent application in these four countries.

2.4.3.5	Employee Relations: A Proactive Dialogue
Policy●“EADS emphasises its belief that a continuous and high quality
social dialogue is key to the Group. In particular, the European
Works Council (“EWC”) facilitates a pro-active and fluid
dialogue with employee representatives.

●

EADS ensures that the representation of personnel is conducted
throughout all its BUs in a constructive atmosphere. This
maintains a proper balance between the interests of employees
and the economic interests of the Group.”

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Performance and Best Practices
European Works Council

On 23rd October 2000, at an early stage of the formation of
EADS, the management and employee representatives from theunions and works council operating within EADS in France,
Germany, Spain and U.K. signed an agreement for theestablishment of the EWC.
●

The EWC meets twice a year for information andconsultation on evolution of the business and the prospectsof the Group.

●

The EWC also comprises an economic committee whichmeets four times a year and focuses on economic matters.

●

European sub-committees have also been set up in various
BUs such as Airbus, Eurocopter, EADS Astrium and EADSDS and replicate the EADS EWC model.

National committees in France, Germany, and Spain enabledialogue on national matters, under the subsidiarity principle.
In the context of the preparation of the Airbus restructuring
programme and the evolution of EADS organisation, and in
addition to the legal procedure, informal dialogue process has been
agreed with personnel and unions representatives. It thus results inincreasing the number of meetings initially planned and indeveloping cross–divisional coordination and information cascading
down for both the preparation and implementation phases.

conventions, the OECD Guidelines for Multinational
Enterprises and the principles laid down by the UN Global
Compact, which EADS signed in October 2003, and they are incompliance with the Code of Ethics.
They cover the fields of equal opportunities and nondiscrimination in respect of employment, of working conditions
and environmental protection, condemn recourse to childlabour, recognise the principles of freedom of association andthe protection of trade unions’ rights.
EADS expects all its suppliers to recognise and apply theprinciples of this framework agreement.
Overview of collective agreements/works agreements
signed with Unions/Works Councils since 2000

EADS Group Agreements were concluded on the following
matters:- establishment of a European Works Council(2);- linking personnel to the business performance of theGroup(3);- International Framework Agreement.
●

In Germany, Tariff Agreements were concluded in relation
to such matters as holiday pay, Christmas bonus, sick pay,and early retirement, as well as agreements with the works
council on success sharing, insurance package, company
pension, early retirement deferred compensation, suggestion
scheme, family and work life balance, disabled people, andtime saving system.

●

In France, Group Agreements were concluded in relation tosuch matters as employment issues, union’s rights and social
dialogue, pre-retirement, management of second half ofcareer, health cost coverage, French national committee andunions coordinators, professional equality and diversity,
working time, carreer-long training, new frame for healthinsurance.

●

In Spain, a collective bargaining agreement covering various
subjects regarding working time and organisation of work,
includes also social benefits such as aid to children of
employees, collective transport, retirement, life insurance,loans, prize at retirement, canteens, aids to worker
association.

International Framework Agreement

Placed in the context of globalisation of EADS activities and as
an illustration of the continuous dialogue principle the EADSGroup and the Group’s European Works Council concludedin June 2005 an International Framework Agreement. By thisagreement, the signatories expressed their commitment tocommon principles and social standards which they recognise as
fundamental, and which they intend to promote worldwide, inthe countries where EADS activities are implemented. EADS
and the Group’s European Works Council expressed theirstrong belief that CSR is a key to long-term success.
The European Metalworkers’ Federation (EMF) and theInternational Metalworkers’ Federation (IMF) associatethemselves with these principles and are, accordingly,
co-signatories of the agreement.
The principles contained in the International Framework
Agreement are aligned with the general rules of ILO

It has to be noted that collective agreements can be signed at
the BU level on matters directly related to their specific social
perimeters.

(3) Agreement for the establishment of a European Works Council and its sub Committees for information and consultation of the workforce between EADS NV and its Employees Representatives
dated 23 rd October 2000.
(4) Group Agreement on implementation of a success sharing scheme within EADS- NV Group between Head of EADS NV HR and the EADS NV European Worker Council dated 29 th June 2004.

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2.5	 Corporate Citizenship2.5.1	Maintaining an Open Dialogue with EADS’ Stakeholders
2.5.1.1 Policy

2.5.1.3 Performance and Best Practices“As one of the largest European companies, EADS is aware of its
duties and is willing to develop its contribution to the cultural,
educational and social background in the countries where EADS
operates. In particular, EADS aims at reinforcing project
partnerships with universities and research centres, through, forexample, the EADS Research Foundation.
EADS shall do its best to maintain an open dialogue with its
stakeholders and to provide clear answers to requests forclarifications within the limits of its obligations.”

Sponsorships and Donations
In 2006, EADS contributed more than €2 million to social,
cultural, sport or educational projects. A special focus is madeon industry-related initiatives and science oriented projects.
However, this figure does not include contributions to the
EADS Corporate Foundation for Research in France or the
FIDAMC in Spain.

2.5.1.2	Organisation
EADS’ contributions come in different forms; they include
sponsorships, donations, or partnerships. Wherever located,
EADS contributes to a range of activities, conferences or
institutions, which address social, educational, cultural or sport
subjects. In most cases, such activities are initiated by EADS
local entities which are also in daily contact with relevant
stakeholders.
However, EADS has implemented donation guidelines (under
the responsibility of EADS Corporate Secretary) as well as
sponsoring guidelines (under the responsibility of EADS
Corporate Communications) which set out criteria for granting
contributions to projects.
The guidelines also provide certain thresholds above whichsuch activity has to be reported to the Corporate Secretary or
Corporate Communications respectively and approved at thelevel of the CEOs.

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EADS contributes to humanitarian activities by donating andgiving material or providing air transportation capacities whennecessary. Among others, EADS has a long-term partnershipwith “Aviation sans Frontières” (“ASF”) non-profit organisationin France, Germany and Spain, a humanitarian organisation
which provides air transport for, in particular, seriously ill
children. In 2006, ASF France escorted the 10,000th child to a
medical operation in France.
EADS also encourages its employees who individuallyparticipate actively and responsibly to local initiatives which
contribute to the overall development of the local communities.
Dialogue with Stakeholders
EADS is always ready to listen to critical voices and welcomes
constructive contribution. The Group strives to maintain an
open dialogue with any stakeholder who genuinely seeks
additional information on EADS businesses, operations or CSR
activities.
Particularly, in order to provide the most accurate information
to our stakeholders and stockholders, the Group proactively
interacts with the main sustainability rating agencies. EADS
aims at continuously improving the ways of integrating CSR
into its day-to-day business. In keeping with this objective, theagencies’ analysis contribute to the EADS efforts in assessing
the Group strengths and weaknesses and point out possible
gaps in the CSR reporting. They also provide with indication of
the benchmark positioning of EADS within the aerospace anddefence industry which is currently behind the other industries
in terms of CSR reporting.

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2.5.2	Encompassing Community Interests in EADS’ Global Strategy
2.5.2.1 Policy●“EADS is proud of selling its products and providing its
services to an increasing number of countries, thanks to thetrust placed by international customers in its global reputation.

●

EADS is conscious of its responsibility as a global company inthe spreading of sound international business practices that
foster the expansion of a balanced and fair globalisation
benefiting all countries.

●

EADS encourages industrial cooperation with local industries
whenever possible in order to support the development of skills
and competencies.

●

EADS supports local initiatives dedicated to the promotion of
corporate social responsibility-oriented projects.”

2.5.2.2	Organisation
A function, named Global Industrial Development (“GID”), isin charge to design and implement the EADS Group Global
Industrial strategy. This function, which was created at the endof 2005, includes a corporate team and a Division network.
Overall EADS organisation tends to implement globalisation in
full line with EADS policy. The main driver is to establish,
whenever possible, long-term industrial partnerships withbalanced benefits between EADS and the local partner.

2.5.2.3 Performance and Best Practices
In 2006, EADS made significant breakthroughs for
globalisation. Among others, EADS prepared the ground to
significantly enhance industrial footprints in India and China.
The EADS Technology Centre India is expected to open in2008 in Bangalore. It will host both EADS subsidiaries andsuppliers performing engineering, software development andtechnical publication activities. This will represent in total up
to 2,000 jobs creation in the next 10 years.
Eurocopter has started with a Chinese partner the joint
development of EC 175, a new multipurpose helicopter. At thesame time, Airbus is preparing the establishment of an A320
Final Assembly Line in Tianjin province, which should start
operations in 2008.
These milestones in India and China confirm the commitmentof the EADS Group to globalize its industrial footprint instrategic countries, through win-win association with the local
partners. While EADS expects to benefit from sustainable
market access and high skilled resources in specific activities,
the country benefits from the development of its local aerospaceindustry, with the creation of hundreds of jobs in core activities
such as engineering and final aircraft assembly.

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3General Descriptionof the Company
and its Share Capital

3.1

General Description of the Company

3.1.1

3.1.5
3.1.6
3.1.7
3.1.8
3.1.9
3.1.103.1.11
3.1.12

Commercial and Corporate Names, Seat andRegistered Office
Legal Form
Governing Laws
Date of Incorporation and Duration of theCompanyObjects of the Company
Commercial and Companies RegistryInspection of Corporate Documents
Financial Year
Allocation and Distribution of Income
General Meetings
Disclosure of Holdings
Mandatory Tender Offers

3.2

General Description of the Share Capital

3.2.1

Modification of Share Capital or Rights
Attaching to the Shares
Issued Share Capital
Authorised Share Capital
Securities Granting Access to the Company’s
CapitalChanges in the Issued Share Capital Since
Incorporation of the Company

3.1.2
3.1.3
3.1.4

3.2.2
3.2.3
3.2.4
3.2.5

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3.3

Shareholdings and Voting Rights

101

88
88
88

3.3.1
3.3.2
3.3.3
3.3.4

101
103
108

3.3.5
3.3.6
3.3.7

Shareholding Structure
Relationships with Principal Shareholders
Form of Shares
Changes in the Shareholding of the Company
Since its Incorporation
Persons Exercising Control over the Company
Simplified Group Structure Chart
Purchase by the Company of its Own Shares

3.4

Dividends

116

3.4.1
3.4.2
3.4.3
3.4.4

Dividends and Cash Distributions Paid Since
the Incorporation of the Company
Dividend Policy of EADSUnclaimed Dividends
Taxation

116
116
117
117

3.5

Annual Securities Disclosure Report

118

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92
92
92
93
93
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95
96

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98
99
99

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110
110
112

99
100

EADS
EADSBUSINESS,
BUSINESS,LEG
LEG
ALALAND
ANDCORPORATECORPORATERESPONSIBILITRESPONSIBILIT
YY

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3.1	 General Description of the Company
3.1.1	Commercial and Corporate Names, Seat and Registered OfficeCommercial Name: EADS

Seat (statutaire zetel): Amsterdam

Corporate Name: European Aeronautic Defence and Space
Company EADS N.V.

Tel: +31.20.655.48.00
Fax: +31.20.655.48.01

Registered Office: Le Carré, Beechavenue 130-132, 1119 PR,
Schiphol-Rijk, the Netherlands

3.1.2	Legal Form
The Company is a public limited liability company (naamloze
vennootschap) organised under the laws of the Netherlands.

As a company operating worldwide, EADS is subject to, andoperates under, the laws of each country in which it conducts
business.

3.1.3	Governing Laws
The Company is governed by the laws of the Netherlands, inparticular by Book 2 of the Dutch Civil Code and by its
Articles of Association (the “Articles of Association”). The
shares of the Company have been admitted for trading at theTraded but Not Listed Segment of Euronext Amsterdam.
The Company is subject to various legal provisions of the
Dutch Financial Supervision Act (Wet op het financieel toezicht)(the “WFT”). These are summarised below.
Pursuant to section 5:60 of the WFT, certain persons
discharging managerial responsibilities within the Company
and, where applicable, persons closely associated with them(together “Insiders”, as defined below) must notify the
Netherlands Authority for the Financial Markets (Autoriteit
Financiële Markten (the “AFM”)) of all transactions conductedon their own account relating to shares of the Company, or toderivatives or other financial instruments linked to them. In
principle, failure to comply with the requirements of the WFT
is a criminal offence punishable by criminal and administrative
penalties in the Netherlands.

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In particular, “Insiders” include (i) members of the Board of
Directors and the Executive Committee of the Company, (ii)certain senior executives, (iii) persons closely associated withany person mentioned under categories (i) and (ii) (including
their spouses, dependent children and other relatives who haveshared the same household), and (iv) legal entities, trusts orpartnerships whose managerial responsibilities are discharged
by any person referred to in point (i), (ii) or (iii) or which are
directly or indirectly controlled by such a person, or that havebeen set up for the benefit of such a person, or whose economic
interests are substantially equivalent to those of such a person.
Pursuant to Dutch law, EADS has adopted specific internal
insider trading rules (the “Insider Trading Rules”), in order toensure the confidentiality of sensitive company information, thetransparency of EADS share trading and the compliance of
EADS share trading rules with share trading regulations
applicable in the Netherlands, France, Germany and Spain (forexamples of Dutch, German, Spanish and French disclosure
requirements applicable to members of the Board of Directors
and the Executive Committee, see “3.1.11 Disclosure of Holdings– Disclosure Requirements for Members of the Board of

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Directors and of the Executive Committee”). Pursuant to theInsider Trading Rules, (i) all employees and directors areprohibited from conducting transactions in EADS shares or stock
options if they have inside information, and (ii) certain persons
are only allowed to trade in EADS shares or stock options withinvery limited periods and have specific information obligations tothe compliance officer of the Company and the competent
financial market authorities with respect to certain transactions.
The updated version of the Insider Trading Rules effective
1st January 2007 is available on the Company’s website.
Hans Peter Ring, Chief Operating Officer for Finance of EADS,
was appointed Compliance Officer by the Board of Directors of
EADS. The Compliance Officer is essentially responsible forthe implementation of the Insider Trading Rules and forreporting to the AFM.
Pursuant to section 5:59 paragraph 7 of the WFT, the Company
has to maintain a list with all persons working for it by virtueof a labour relationship or otherwise, who may have access to
inside information. Equivalent requirements exist under French,
German and Spanish law.
In addition, given the fact that its shares are admitted for
trading on a regulated market in France, Germany and Spain,
the Company is subject to certain laws and regulations in thesethree jurisdictions. A summary of the main regulations
applicable to the Company in relation to information to bemade public in these three jurisdictions is set out below.

3.1.3.1 Periodic Disclosure Obligations
Pursuant to the Directive 2004/109/EC on the harmonisationof transparency requirements in relation to information about
issuers whose securities are admitted to trading on a regulated
market (the “Transparency Directive”), EADS is required todisclose certain periodic and ongoing information (the“Regulated Information”). The expiry date for the
implementation of the Transparency Directive by the Member
States of the European Community was 20th January 2007.
Pursuant to the Transparency Directive, EADS must
disseminate Regulated Information throughout the European
Community in a manner ensuring fast access to suchinformation on a non-discriminatory basis. For this purpose,
EADS may use a professional service provider (wire). In
addition, Regulated Information must be filed at the same timewith the relevant competent market authority. EADS shall thenensure that Regulated Information remains publicly available
for at least five years.

Dutch Regulations
For the purpose of the Transparency Directive, supervision of
EADS is effected by the member state in which it maintains its
registered office, which is the Netherlands. In addition, thecompetent market authority that shall assume final responsibility
for supervising compliance by EADS shall be the competentmarket authority designated in the Netherlands, the AFM.
As of the date of this document, the Netherlands has
implemented provisions in respect of the requirements on
notification of the acquisition of disposal on major holdings andmajor proportions of voting rights held by shareholders (See
“3.1.11 Disclosure of Holdings”), but not in relation to otherdisclosure requirements.
Once the Transparency Directive is fully implemented in the
Netherlands, EADS will be subject to a number of periodic
disclosure requirements, such as:●

publishing a financial report, together with an audit reportdrawn up by an external accountant, ultimately four months
after the end of each financial year;●

publishing a semi-annual financial report covering the firstsix months of the financial year ultimately two months after
the end of the first six months of the financial year; and●publishing quarterly financial information.

In addition to the requirements of the Transparency Directive,
pursuant to section 5:15 of the WFT, resulting from theimplementation of the EC Directive 2003/71 dated
4th November 2003, the Company may prepare a registration
document, the purpose of which is to provide legal and financial
information on the Company (shareholding, activities,
management, recent events, possible evolution and other financial
information). In practice, the registration document of theCompany may be used as a prospectus provided it issupplemented with a securities note and a summary approved by
the AFM. Such registration document is filed for approval with
the AFM and, once approved, is made available to the public.
Additionally, and pursuant to section 5:24 of the WFT also
resulting from the implementation of the EC Directive 2003/71,
the Company is required to provide at least annually a list ofcertain corporate and financial documents or other informationthat it has published or made available to the public over thelast 12 months and details of where these documents can beobtained (see “3.5 Annual Securities Disclosure Report”).

Finally, Regulated Information must be made available forcentral storage by a mechanism that is to be officially designatedby the issuer’s home member state.

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French Regulations
Since the Transparency Directive has been implemented in France
on 20th January 2007, EADS is no longer obliged to comply withcertain disclosure obligations pursuant to the general regulationsof the Autorité des marchés financiers (the “AMF”).
In line with the requirement set forth in the Transparency
Directive to disseminate Regulated Information throughout theEuropean Community, EADS is required to provide
simultaneously in France the same information as that provided
abroad.
German Regulations
Since the Transparency Directive has been implemented inGermany on 20th January 2007, EADS is no longer obliged tocomply with certain German law disclosure obligations
according to the German Stock Exchange Act (Börsengesetz) and
the German Stock Exchange Admissions Regulation(Börsenzulassungs-Verordnung).
Due to the listing of the Company's shares in the amtlicher
Markt (specifically, in the sub-segment of the amtlicher Markt,
the Prime Standard) on the Frankfurt Stock Exchange, theCompany is subject to the post-listing obligations described
below. In addition, the Company is included in the selection
index MDAX, the MidCap index of Deutsche Börse AG.
According to sections 62 and 63 of the Exchange Rules(Börsenordnung) of the Frankfurt Stock Exchange, the listing in
the Prime Standard of the amtlicher Markt results in the
obligation of the Company to publish consolidated annual
accounts as well as quarterly reports.
In addition, the Company is required as a result of its listing in
the amtlicher Markt (Prime Standard) to prepare a continuous
update of a corporate action timetable at the beginning of eachfiscal year. The Company is also required to hold a meeting ofanalysts at least once a year in addition to the press conference
regarding the balance sheet.
Save for certain exemptions, the Company has to apply foradmission of shares issued at a later date to the amtlicher Marktof the Frankfurt Stock Exchange, see section 69 of the German
Stock Exchange Admissions Regulation.
Spanish Regulations
As of the date of this document, the Transparency Directive
has not been implemented in Spain yet. Therefore, pending theimplementation of the Transparency Directive in Spain, EADS
remains subject to the following regulations as set out below.

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Pursuant to the Ministerial Order of 18th January 1991, theCompany is required to file with the Comisión Nacional del
Mercado de Valores (the “CNMV”) and with the relevant
Spanish stock exchange authorities (who will disclose it to themarket), relevant information regarding its financial situation foreach half year and which is communicated, for each 30th Juneand 31st December, no later than the following 1st Septemberand 1st March respectively. If after this communication theannual accounts are produced by the Board of Directors andthey do not conform with the half-yearly information for
31st December, the Board of Directors must disclose thisinconsistency in the following ten trading days. An exemption
from the obligation to publish quarterly information of afinancial or economic nature was obtained from the CNMV.
According to Article 35 of the Spanish Securities Market Act
24/1988, of 28th July 1988, as amended (the “Spanish
Securities Act”) and Order EHA/3050/2004 of 15th September,the Company must provide detailed information, including,
without limitation, the number and amount of the transactions,in relation to every transaction carried out with any related
party in the half-yearly information which the Company isrequired to file with the CNMV and the Spanish Stock
Exchanges, without prejudice to information to be included in
the annual corporate governance report to be filed with the
CNMV on an annual basis (the “Annual Corporate
Governance report”) pursuant to the Ministry of Economy
Order 3722/2003 dated 26th December 2003 (the “Ministerial
Order”).
Pursuant to the Spanish Securities Act, the Company has toprovide detailed information about transactions carried out
with (i) directors which are outside the ordinary activity of theCompany or which are not in market conditions; and (ii) any
related party transaction which are material due to their amountor for an adequate understanding of the public economic
information.
EADS discloses such information in its Registration Document.

3.1.3.2	Ongoing Disclosure Obligations
Pursuant to the Transparency Directive, Regulated Information
includes in particular inside information as defined pursuant toarticle 6 of Directive EC/2003/6 on insider dealing and market
manipulation (the “Market Abuse Directive”). Suchinformation must be disseminated throughout the European
Community (see introduction to section “3.1.3.1 Periodic
Disclosure Obligations”)
Inside information shall mean information of a precise nature
which has not been made public, relating, directly or indirectly,
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more financial instruments and which, if it were made public,
would be likely to have a significant effect on the prices of
those financial instruments or on the price of related derivative
financial instruments.

Spanish Regulations
The following provisions apply to the Company but may beaffected once the Transparency Directive is fully implementedin Spain.

Inside information must be disclosed to the markets as soon as
possible. However, an issuer may under his own responsibility
delay the public disclosure of inside information such as not toprejudice his legitimate interests provided that such omission
would not be likely to mislead the public and provided that theissuer is able to ensure the confidentiality of that information.

Pursuant to Article 82 of the Spanish Securities Act, theCompany is required to make public, as soon as possible, any
fact or decision that may substantially affect the quotation ofits shares. Any such relevant event must be notified to the
CNMV as quickly and as efficiently as possible, always prior toits communication to third parties or other means ofpublication and, in any event, as soon as the relevant fact isknown, the relevant decision has been made or, the relevant
agreement has been executed, as the case may be. Wherever
possible, the relevant event should be notified to the CNMV
after the close of the markets on the day of notification so as to
avoid impacting on the quotation of the Company’s shares in
the corresponding trading session. Furthermore, pursuant to
Article 117 of the Spanish Securities Act, the Company must
post details of any relevant event on its website. Under certain
circumstances, the CNMV may authorize the issuer not tomake public relevant information, which may affect its
legitimate interests.

Dutch Regulations
Upon implementation of the Transparency Directive into Dutch
law, EADS will disclose and disseminate throughout theEuropean Community any inside information pursuant to therequirements that shall be set out under such law, which has
not been yet defined in the Netherlands.
French Regulations
Upon implementation of the Transparency Directive into thegeneral regulations of the AMF (the “AMF General
Regulations”) on 20th January 2007, the French requirements
to publish inside information in France according to Article
223-1 and following of the AMF General Regulations no longer
apply to EADS.
However, any inside information as defined above will be
disclosed in France beyond the means of dissemination
throughout the European Community, as it will be organised
under Dutch law implementing the Transparency Directive so
as to provide simultaneously in France equivalent information
as that provided abroad.
German Regulations
Upon implementation of the Transparency Directive into German
law on 20th January 2007, the German requirements to publish
inside information according to Section 15 of the Securities
Trading Act (Wertpapierhandelsgesetz) no longer apply to EADS.
However, any inside information as defined above will be
disclosed in Germany beyond the means of dissemination
throughout the European Community, as it will be organised
under Dutch law implementing the Transparency Directive so
as to provide simultaneously in Germany equivalent
information as that provided abroad.

Pursuant to the Royal Decree 1333/2005 of 11th November 2005
(the “MAD Royal Decree”) the Company must try to ensurethat the relevant information is disclosed simultaneously to alltype of investors in the member states of the European Union
where it is listed.
Pursuant to the Spanish Securities Act and the “Ministerial
Order” and Circular 1/2004 of 17th March 2004 of the CNMV(the “Circular”), the Company is required:(i) to have rules of the Board of Directors which must be filedwith the CNMV and published on the Company’s website;(ii) to file with the CNMV a description of the relevant Dutch
law provisions and provisions in the Articles of Association
governing the conduct of shareholders’ meetings and postsuch description on its website;(iii)to have a website which must contain as a minimum theinformation specified in the Ministerial Order and the
Circular;(iv) to file a corporate governance report with the CNMV on anannual basis (the “Annual Corporate Governance Report”)
which must contain the information specified in the
Ministerial Order and the Circular; and(v) in respect of the provisions of any shareholders’ agreement
which relate to the exercise of voting rights at shareholders’meetings or restrictions or conditions on the freetransferability of shares or convertible bonds, to (a)provided the Company is a party to the shareholders’

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agreement, file such provisions with the CNMV who willthen publish the provisions as a relevant event, (b) post theprovisions on the Company’s website, unless the CNMV

exempts the Company from doing so, and (c) set out detailsof the provisions in the Annual Corporate Governance
Report.

3.1.4 Date of Incorporation and Duration of the Company
The Company was incorporated on 29th December 1998 for an unlimited duration.

3.1.5	Objects of the Company

Pursuant to Article 2 of the Articles of Association, the objectsof the Company are to hold, co-ordinate and manage
participations or other interests in and to finance and assume
liabilities, provide for security and/or guarantee debts of legal

entities, partnerships, business associations and undertakingsthat are involved in:(a) the aeronautic, defence, space and/or communicationindustry; or(b) activities that are complementary, supportive or ancillary
thereto.

3.1.6	Commercial and Companies Registry
The Company is registered with the Registry of the Chamber of Commerce of Amsterdam (Handelsregister van de Kamer van
Koophandel en Fabrieken voor Amsterdam) under number 24288945.

3.1.7	Inspection of Corporate Documents
The Articles of Association are available for inspection in
Dutch at the Chamber of Commerce of Amsterdam.

be filed with the Greffe of the Tribunal de commerce of Parisand made available at the Head office of EADS in France.

Pursuant to Article 57 of the French Decree n° 84-406 of
30th May 1984, a certified copy of a translation in French of
the Articles of Association has been filed with the Greffe of the
Tribunal de commerce of Paris. It is also available at the Head
office of EADS in France (37, boulevard de Montmorency,
75016 Paris, France, Tel.: 00 33 1 42 24 24 24). In the event of
amendments being made to the Articles of Association, an
updated certified copy of the translation in French thereof will

In Germany, the Articles of Association are available at the
Head office of EADS in Germany (81663 Munich, Germany,
Tel.: 00 49 89 60 70).

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In Spain, the Articles of Association are available at the CNMV
and at the Head office of EADS in Spain (Avda. Aragón 404,
28022 Madrid, Spain, Tel.: 00 34 91 585 70 00).

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3.1.8	Financial YearThe financial year of the Company starts on 1st January and ends on 31st December of each year.

3.1.9	Allocation and Distribution of Income
3.1.9.1 Dividends
The Board of Directors shall determine which part of the
profits of the Company shall be attributed to reserves. The
remaining distributable profit shall be at the disposal of theshareholders’ meeting.
The shareholders’ meeting may resolve (if so proposed by the
Board of Directors) that all or part of a dividend shall be paid inshares of the Company as opposed to cash.
The declaration of a dividend, an interim dividend or another
distribution to the shareholders shall be made known to themwithin seven days after such declaration. Declared dividends
shall be payable within four weeks of such declaration unless

another date for payment is proposed by the Board of Directors
and approved by the shareholders’ meeting.
Dividends, interim dividends and other distributions on sharesshall be paid by bank transfer to the bank or giro accounts
designated in writing to the Company by, or on behalf of,shareholders at the latest 14 days after their announcement.

3.1.9.2	Liquidation
In the event of the dissolution and liquidation of the Company,
the assets remaining after payment of all debts and liquidation
expenses shall be distributed amongst the holders of the sharesin proportion to their shareholdings.

3.1.10	General Meetings
3.1.10.1	Calling of Meetings
Shareholders’ meetings are held as often as the Board of
Directors deems necessary or upon the request of shareholders
holding, individually or together, at least 10% of the total
issued share capital of the Company.
The Board of Directors must give notice of general meetings in
at least one of the Netherlands’ national daily newspapers, atleast one international daily newspaper and at least one daily
newspaper in each of the countries in which the Company’s
shares are listed. Such publication must be made at least 15 days
before the day of the meeting, not counting the day on whichnotice was given, and shall state either the matters to beconsidered at such meeting or that the agenda is open to
inspection by the shareholders at the offices of the Company
and at such other locations as may be specified in the notice.

Shareholders’ meetings are held in Amsterdam, Den Haag,
Rotterdam or Haarlemmermeer (Schiphol Airport). The Boardof Directors may decide that shareholders' meetings may beattended by means of electronic or video communication
devices from the locations mentioned in the convening notice.
The Board of Directors must announce the date of the annual
shareholders' meeting at least two months before the meeting.
Requests made by one or more shareholders collectively
representing at least 1% of the issued share capital (or shares
having an aggregate market value of €50 million), to put itemson the agenda for the annual shareholders' meeting, must be
effected by the Board of Directors, if such requests to the Boardof Directors have been made at least six (6) weeks prior to thedate scheduled for the meeting except if, in the opinion of theBoard of Directors, important interests of the Company prevailover the insertion of such items into the agenda.

The annual shareholders’ meeting of the Company is held
within six months of the end of the financial year.

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3.1.10.2 Right to attend Meetings
Each holder of one or more shares may attend shareholders’meetings, either in person or by written proxy, to speak and tovote according to the Articles of Association. See “— 3.1.10.4
Conditions of Exercise of Right to Vote”.
A shareholder or person who has the right to attend a meetingcan see to it that he is represented by more than one proxyholder, provided that only one proxy holder can be appointed
for each share.
In relation to holders of registered shares, the Board of
Directors may provide in the convening notice that those
persons are recognised as authorised to exercise the rights toattend, speak and vote at the shareholders’ meetings, who at the
point in time mentioned in the convening notice are authorised
to exercise those rights and as such have been registered in theregister appointed for the purpose by the Board of Directors,
irrespective of who is authorised to exercise those rights on the
day of the meeting.
Any person who is entitled to exercise the rights set out in theabove paragraph (either in person or by means of a writtenproxy) and is attending the meeting from another location (see“— 3.1.10.1 Calling of Meetings”) in such manner that theperson(s) acting as chairman/chairmen of the meeting is/areconvinced that such person is properly participating in themeeting, shall be deemed to be present or represented at themeeting, shall be entitled to vote and shall be counted towards
a quorum accordingly.
As a prerequisite to attending the shareholders’ meeting and to
casting votes, the holders of bearer shares and those who
derived the aforementioned rights from these shares shall beobliged to deposit their share certificate or the documents
evidencing their rights against receipt, at such locations as shallbe determined by the Board of Directors and stated in theconvening notice.
Such convening notice shall also state the day which has been
fixed as the final day on which the share certificates and the
documents evidencing the aforementioned rights may bedeposited. That day may not be earlier than five business days,
but in each case not earlier than the seventh day, prior to themeeting.
As far as registered shares are concerned, the Board of Directors
should be informed in writing within the timeframe mentioned
in the two preceding sentences of the intention to attend themeeting.
Holders of shares that are registered in the shareholders’register kept in Amsterdam have the option of holding them

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through Euroclear France S.A. In this case the shares areregistered in the name of Euroclear France S.A.
Shareholders holding their EADS shares through Euroclear
France S.A. who wish to attend general meetings will have torequest from their financial intermediary or accountholder anadmission card and be given a proxy to this effect fromEuroclear France S.A. in accordance with the instructions
specified by the Company in the convening notice. For thispurpose, a shareholder will also be able to request that it beregistered directly (and not through Euroclear France S.A.) in
the register of the Company. However, only shares registered in
the name of Euroclear France S.A. may be traded on the stock
exchanges.
In order to exercise their voting rights, the shareholders will
also be able, by contacting their financial intermediary or
accountholder, to give their voting instructions to Euroclear
France S.A. or to any other person designated for this purpose,as specified by the Company in the convening notice.
In light of recent changes of Dutch law, the Board of Directors
will propose to the Annual General Meeting of Shareholders tobe held on 4th May 2007, to amend the Articles of Associationof the Company to the effect that they include the possibility
for EADS to (i) set a “registration date” at which the persons
entitled to attend and vote at the shareholders’ meetings arerecorded for this purpose irrespective of who is shareholder at
the time of the meeting, and (ii) provide for electronic means ofconvocation, attendance and voting at the shareholders’meetings. The introduction of such electronic means will
depend on the availability of the necessary technical means andthe market practice.

3.1.10.3	Majority and Quorum
All resolutions are adopted by means of a simple majority ofthe votes cast except when a qualified majority is prescribed by
the Articles of Association or by Dutch law. No quorum isrequired for any shareholders’ meeting to be held. Dutch law
requires a special majority for the passing of certain resolutions:inter alia, capital reduction, exclusion of pre-emption rights inconnection with share issues, statutory mergers or statutory
demergers; the passing of such resolutions requires a majorityof two-thirds of the votes cast if 50% of the share capital withvoting rights is not present at the meeting (or otherwise a
simple majority). In addition, resolutions to amend the Articles
of Association or to dissolve the Company shall only be capableof being adopted with a majority of at least two-thirds of thevalid votes cast at a shareholders’ meeting, whatever thequorum present at such meeting.

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Pledgees of shares and beneficiaries of a usufruct, which do nothave voting rights, do not have the right to attend and to speakat shareholders’ meetings. The owners of shares which are
subject to a pledge or a usufruct, which do not have voting
rights, are entitled to attend and to speak at shareholders’meetings.

3.1.10.4	Conditions of Exercise of Right to Vote
In all shareholders’ meetings, each shareholder has one vote inrespect of each share it holds.
A shareholder whose shares are subject to a pledge or usufruct
shall have the voting rights attaching to such shares unlessotherwise provided by law or by the Articles of Association orif, in the case of a usufruct, the shareholder has granted voting

rights to the usufructuary. Pursuant to the Articles of
Association and subject to the prior consent of the Board of
Directors, a pledgee of shares in the Company may be granted
the right to vote in respect of such pledged shares.
Article 25 (paragraph 2 and 3) of EADS Articles of Association
provides that “The right to vote can be granted to an
usufructuary. The right to vote can be granted to a pledgee, but
only with the prior consent of the Board of Directors. No vote
may be cast at the general meeting of shareholders on a sharethat is held by the Company or a subsidiary; nor for a share in
respect of which one of them holds the depository receipts.
Usufructuaries and pledgees of shares that are held by theCompany or its subsidiaries are, however, not excluded fromtheir voting rights, in case the right of usufruct or pledge wasvested before the share was held by the Company or its
subsidiary.”

3.1.11 Disclosure of Holdings
Pursuant to the WFT, any person who, directly or indirectly,
acquires or disposes of an interest in the capital or voting rightsof the Company must immediately give written notice to the
AFM by means of a standard form, if, as a result of suchacquisition or disposal, the percentage of capital interest or
voting rights held by such person meets, exceeds or falls below
the following thresholds: 5%, 10%, 15%, 20%, 25%, 30%, 40%,
50%, 60%, 75% and 95%. Once in every calendar year, every
holder of an interest in the share capital or voting rights of 5%
or more in the Company must renew its notification to reflectchanges in the percentage held in the share capital or voting
rights of the Company, including changes as a consequence ofchanges in the total issued share capital. The disclosures are
published by the AFM on its website (www.afm.nl).
In order to comply with these disclosure rules under the WFT,
the Board of Directors will propose to the Annual General
Meeting of Shareholders to be held on 4th May 2007, to amend
the Articles of Association of the Company to the effect thatthey reflect the obligation for shareholders to notify thecompetent authorities when crossing thresholds in the sharecapital and/or voting rights of EADS set at: 5%, 10%, 15%, 20%,
25%, 30%, 40%, 50%, 60%, 75% and 95%. Such notification shallalso be made to EADS pursuant to a requirement set out in the
Articles of Association. Previously, such thresholds were set at
5%, 10%, 25%, 33 1/3%, 50%, 66 2/3% and over.
Upon implementation of the Transparency Directive into
German law on 20th January 2007, EADS is no longer required

to publish changes of voting rights pursuant to the German
Securities Trading Act (Wertpapierhandelsgesetz).
Until the Transparency Directive is implemented in Spain, theCompany has to inform the CNMV and the Spanish Stock
Exchanges of any disclosure of holdings exceeding the abovementioned thresholds that it receives.
The Articles of Association also require that any person
acquiring directly or indirectly or with others with whom it isacting in concert more than one tenth of the issued sharecapital or voting rights of the Company must notify theCompany of its intentions (i) to buy or sell shares of theCompany in the following 12 months; (ii) to continue or to stop
acquiring shares or voting rights of the Company; (iii) to acquire
control of the Company; or (iv) to seek to designate a memberof the Board of Directors of the Company. The Company will
provide the AMF with the information received in this context.
The AMF has indicated that it will publish a notice concerning
any communication so transmitted. The CNMV and the
Spanish Stock Exchanges will publish all such notifications
received(5).
Failure to comply with the legal obligation to notify a change inrange of thresholds under the WFT is a criminal offence
punishable by criminal and administrative penalties as well ascivil law penalties, including the suspension of voting rights.

(5) These provisions may be affected once the Transparency Directive is implemented in Spain.
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Disclosure Requirements for Members of the Boardof Directors and the Executive Committee
Disclosure of holdings
In addition to the WFT requirements regarding disclosure ofholdings, members of the Board of Directors must report to the
AFM the number of shares in EADS and attached voting
rights(6) held by him or an entity controlled by him, within two
weeks following their appointment as director, whether or not
such shareholdings reach specified thresholds. Subsequently,
any member of the Board of Directors is required to notify to
the AFM any changes in such number of shares in EADS andattached voting rights.
The Company has to inform the AMF, the German Federal
Financial Supervisory Authority, the CNMV and the Spanish
Stock Exchanges of any disclosure of holdings by the Directors
involving shares of the Company that it receives. The CNMV
and the Spanish Stock Exchanges will publish such received
notifications. In addition, the Company must update theinformation contained in its website related to holding of sharesby Directors(7).
Disclosure of transactions carried out on any securities
issued by the Company
Pursuant to section 5:60 of the WFT, certain persons
discharging managerial responsibilities within the Company(i.e., for EADS, the members of the Board of Directors and of
the Executive Committee) and, where applicable, persons
closely associated with them must in principle notify the AFM
of all transactions conducted for their own account relating toshares of the Company, or to derivatives or other financial
instruments linked to them. These persons have to notify the
AFM of the transactions within five trading days unless theaggregate amount of such transactions does not exceed €5,000
in respect of all transactions in a calendar year.
According to paragraph 15a of the German Securities Trading
Act, persons with significant managerial responsibility withrespect to the Company (i.e., for EADS, the members of theBoard of Directors and the members of the Executive
Committee), or the persons closely associated with them, must
disclose transactions conducted for their own account involving
shares of the Company or financial instruments that relate tothose shares, especially derivatives. These persons have to
notify the Company and the German Federal Financial
Supervisory Authority of the transactions within five trading
days unless the aggregate amount of such transactions does notexceed €5,000 in respect of all transactions in a calendar year.
Upon implementation of the Transparency Directive into
German law on 20 January 2007, EADS is no longer required to
publish such notifications on its website or in a German supraregional mandatory stock exchange newspaper.
Pursuant to Spanish law, EADS must report to the CNMV andthe Spanish Stock Exchanges any disclosures of transactions it
receives and which are carried out by the members of the Boardof Directors on both EADS shares and derivative instruments
linked to them made under the law applicable to the Company(i.e., Dutch law). However, these requirements may be affectedonce the Transparency Directive is fully implemented in Spain.
Pursuant to Articles 223-22 to 223-25 of the AMF General
Regulations, directors, persons with significant managerial
responsibility with respect to the Company and having access ona regular basis to inside information about the Company(members of the Board of Directors and members of the
Executive Committee), and, where applicable, any person closely
associated with them, must report by e-mail to the AMF, withina period of five trading days following completion, anytransactions in securities of the Company carried out by these
persons, unless the aggregate amount of such transactions does
not exceed €5,000 in respect of all transactions carried out in acalendar year. The AMF makes such disclosure information
publicly available on its website. In addition, the Company must
establish, update and provide the AMF with a list detailing thepersons with significant managerial responsibility with respect to
the Company and having access on a regular basis to inside
information about the Company.

3.1.12	Mandatory Tender Offers
3.1.12.1	Takeover Directive
The Directive 2004/25/EC on takeover bids (the “Takeover
Directive”) sets forth the principles governing the allocation oflaws applicable to EADS. The applicable laws refer to the rulesof the Netherlands and the rules of the European Union
Member State of the competent authority that must be chosen
by EADS from among the various market authorities
supervising the markets where its shares are listed.

(6) In this context, the term «shares» also includes for example depositary receipts for shares and rights resulting from an agreement to acquire shares or depositary
receipts for shares, specifically call options, warrants, and convertible bonds. Equally, the term ‘voting rights’ also includes actual or contingent rights to voting rights(e.g., embedded in call options, warrants or convertible bonds).
(7) These provisions may be affected once the Transparency Directive is implemented in Spain.

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For EADS, matters relating to the consideration offered in thecase of a bid, in particular the price, and matters relating to thebid procedure, in particular the information on the offeror’s
decision to make a bid, the contents of the offer document andthe disclosure of the bid, shall be determined by the laws of
the European Union Member State having the competentauthority, which will be selected by EADS at a future date.
For EADS, matters relating to the information to be provided tothe employees of EADS and matters relating to company law, inparticular the percentage of voting rights which confers control
and any derogation from the obligation to launch a bid, theconditions under which the Board of Directors of EADS mayundertake any action which might result in the frustration of
the bid, and the applicable rules and the competent authority
shall be dealt with in accordance with Dutch law.
It is expected that the Takeover Directive will be implemented
soon into Dutch law, which may affect the requirements set out
below.

3.1.12.2	Articles of Association
Pursuant to Article 15 of the Articles of Association, in theevent that a direct or indirect acquisition of shares in the
Company results in a person acting alone or in concert (asdefined in the WMZ) holding shares or voting rights where thecontrol over the number of shares or votes reaches or exceeds
33 1/3% of the issued share capital of the Company then such
person(s) is (are) required to make an unconditional public offer
to all shareholders to acquire all of their shares or to procurethat such an offer is made. Such offer must comply with all of
the applicable regulatory or other legal requirements in eachjurisdiction in which the Company’s shares are listed.
Pursuant to Article 16 of the Articles of Association, in theevent of a failure to launch such an offer (or if the offer does
not satisfy the relevant legal or regulatory requirements in eachof the jurisdictions where the Company’s shares are listed)
within two months after notification to the Company ofshareholdings reaching or exceeding 33 1/3% or failing such
notification, within a period of 15 days of receipt of notice fromthe Board of Directors confirming the obligation to make thepublic offer, then any person(s) who is (are) required to makethe offer shall within the period specified by the notice sent by
the Board of Directors exchange for depository receipts to beissued by the Stichting Administratiekantoor EADS (the“Foundation”), such percentage of shares they hold over andabove the 33 1/3% of the shares issued by the Company (the“Excess Percentage”). From the date specified in the noticesent by the Board of Directors, the right to attend meetings, tovote and to receive dividends shall be suspended in respect of
the Excess Percentage. If, within a period of 14 days from afurther notice from the Board of Directors, the person required
to exchange his shares representing his Excess Percentage fordepository receipts still has not done so, then the Company isirrevocably authorised to exchange such shares for depository
receipts issued by the Foundation. The constitutive documentsof the Foundation provide that the Foundation shall not havethe right to attend shareholders’ meetings of the Company as ashareholder, to speak at such meetings and to exercise thevoting rights attached to the shares it holds, except if, in theview of the Board of Directors of the Foundation (comprising
the two independent Directors and one of the two Chief
Executive Officers of EADS), such action is required for the
performance of the mandatory offer provisions in the Articles
of Association.
The obligation to make a public offer does not apply inthe following situations:(i) to a transfer of shares to the Company itself or to theFoundation;(ii) to a securities custody, clearing or settlement institution
acting in that capacity, provided that the provisions ofArticle 16 of the Articles of Association described above
shall be applicable where shares are held for persons acting
in breach of the provisions of Articles 15 and 16 of the
Articles of Association described above;(iii)to a transfer of shares by the Company or to an issue ofshares by the Company on a merger or on an acquisition by
the Company of another company or business;(iv) to a transfer of shares from one party to another party who
is a party to an agreement as envisaged in the WMZ todefine “concert parties” where the agreement is entered into
before 31st December 2000 (as amended, supplemented or
replaced by a new agreement by the admission of one ormore new parties or the exclusion of one or more parties)
except that this exemption will not apply to a new party
that individually or with its subsidiaries and/or groupcompanies holds at least 33 1/3% of the control over sharesor votes in the Company; this exemption is intended to
exclude the parties to the Participation Agreement (See“3.3.2 Relationships with Principal Shareholders”) as
amended, supplemented or replaced by a new agreement by
the admission of one or more new parties or the exclusionof one or more parties from the obligation to make themandatory offer in the event of a transfer of shares between
themselves; or(v) to a transfer by a shareholder to a subsidiary in which it
holds more than 50% or by a shareholder to a company
which holds more than 50% in such transferringshareholder.

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It is expected that the Takeover Directive will be implemented
soon into Dutch law, which may affect the requirements set out
above.

3.1.12.3	Spanish Law
Until the Takeover Directive is implemented in Spain, thefollowing provisions apply to the Company:
Spanish securities legislation sets forth specific provisions
which are applicable in the event an investor acquires, directly
or indirectly, certain percentages of the share capital of acompany listed on a Spanish Stock Exchange, because they are
deemed to be significant. These provisions, set forth in
Article 1 of the Royal Decree 1197/1991, of 26th July, regarding
Takeover Bids, amended by Royal Decree 432/2003, of
11th April, provide that said investor will have to offer toacquire the following percentages: the offer must be (a) for atleast 10% if the investor acquires 25% of the shares, or othersecurities (such as subscription rights, convertible debentures,
warrants, or any other similar securities that may directly or
indirectly entitle such investor to subscribe or acquire shares) ora threshold that, without reaching such percentage, enables theappointment of a number of directors who, together with thosealready appointed, if any, represent more than 1/3 and less than
1/2 plus one of the total directors of the target company, or, if
the investor already holds between 25% and 50%, and intends topurchase an additional 6% within the following 12 months, and(b) for 100% in the event that the investor reaches or exceeds
the threshold of 50% or a threshold that, without reaching such

percentage, enables the appointment of a number of directors
who, together with those already appointed, if any, represent
more than 1/2 of the total directors of the target company.
Given the different thresholds set forth in Article 1 of theRoyal Decree 1197/1991 and in Article 15 of the Articles of
Association of EADS (which in short requires, in principle, thata tender offer for 100% of the share capital be launched in theevent a shareholder controls (alone, or in concert withshareholders) directly or indirectly a number of shares or voting
rights exceeding 33 1/3% of the share capital of EADS, as
described above), Sociedad Estatal de Participaciones Industriales(“SEPI”), a minority shareholder of EADS, taking the standthat the Royal Decree 1197/1991 is not applicable to EADS, asa Dutch company listed in three different countries (Spain,
France and Germany), the Articles of Association of which
duly provide that a tender offer must be launched whenevercontrol of 33 1/3% of the share capital is taken, consulted on
this issue, on behalf of EADS, with the CNMV, which
confirmed in writing that ‘the event posed does not fall withinthose contemplated in the aforementioned Royal Decree
1197/1991’ and, therefore, said Royal Decree 1197/1991 is notapplicable to EADS.
In addition, the CNMV, responding to a request from certain
shareholders of EADS, stated in a letter dated 19th June 2000
that the Royal Decree 1197/1991 dated 26th July 1991 relating
to takeover bids does not apply to transfers of shares between
parties in the EADS shareholders agreements, provided suchtransfers are made within the framework of the shareholders
agreements and that such agreements remain in force.

3.2	 General Description of the Share Capital
3.2.1	Modification of Share Capital or Rights Attaching to the Shares
Unless such right is limited or eliminated by the shareholders’meeting as described below, holders of shares have a preemptive right to subscribe for any newly issued shares pro rata
to the aggregate nominal value of shares held by them, except
for shares issued for consideration other than cash and sharesissued to employees of the Company or of a Group company.
For the contractual position as to pre-emption rights, see “3.3.2
Relationships with Principal Shareholders”.
The shareholders’ meeting has the power to issue shares. The
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for a period of no more than five years, to issue shares and to
determine the terms and conditions of share issuances.
The shareholders’ meeting also has the power to limit or to
exclude pre-emption rights in connection with new issues ofshares, and may authorize the Board of Directors for a period of
no more than five years, to limit or to exclude preemption
rights. All resolutions in this context must be approved by a
two-thirds majority of the votes cast during the shareholders’meeting in the case where less than half of the capital issued ispresent or represented at said meeting.

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A resolution will be submitted to the annual shareholders’meeting of EADS to be held on 4th May 2007 in order toauthorize the Board of Directors to issue shares representing up
to 1% of the Company’s authorised share capital from time totime, to grant rights to subscribe for shares for a period up to
and including the date of the annual shareholders’ meeting to
be held in 2009 and also in the case where the subscription
rights may be exercised thereafter, and to determine the terms
and conditions of the shares issuances. Further resolutions will
be submitted to such shareholders’ meeting to authorize theBoard of Directors to limit or exclude the preferential

subscription rights for the period up to and including the dateof the annual shareholders’ meeting to be held in 2009.
The shareholders’ meeting may reduce the issued share capitalby cancellation of shares or by reducing the nominal value ofthe shares by means of an amendment to the Articles of
Association, the latter requiring the approval of at least twothirds of the votes cast at the general meeting. In the annual
general of shareholders to be held on 4th May 2007, it will be
proposed to cancel up to a maximum of 4,568,405 shares.

3.2.2	Issued Share Capital
As at 31st December 2006, the Company’s issued share capital is €815,931,524 comprising 815,931,524 shares of a nominal value of€1.0 each.

3.2.3	Authorised Share Capital
As at 31st December 2006 the authorised share capital of the Company is €3 billion comprising 3,000,000,000 shares of €1.0 each.

3.2.4	Securities Granting Access to the Company’s Capital
Except for stock options granted for the subscription for EADS shares (See “Part 1 – 2.3.3 Long Term Incentive Plans”), there are
no securities that give access, immediately or over time, to the share capital of EADS.
The table below shows the total potential dilution that would occur if all the stock options issued as at 31st December 2006 were
exercised:

EADS‘ potential share capital

Total number of EADS shares issued
as of 31st December 2006
Total number of EADS shares which may be issued
following exercise of stock options
Total potential EADS share capital

Number of shares

Dilution percentage
in capital

Numberof voting rights

Dilution percentage
in voting rights*

815,931,524

96.34%

807,427,380

96.30%

31,028,689

3.66%

31,028,689

3.70%

846,960,213

100%

838,456,069

100%(*) T he potential dilutive effect on capital and voting rights of the exercise of these stock options may be limited as a result of the Company‘s share purchase programmes and in the case of subsequentcancellation of repurchased shares. See “3.3.7.1 Dutch Law and information on share buyback programmes”.

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3.2.5	Changes in the Issued Share Capital Since Incorporation of the Company

Date

Nature of Transaction

29 December 1998

Incorporation

3 April 2000

Conversion into €Issue of shares in exchange
for contributions by Aerospatiale Matra,
Dasa AG and SEPI
Issue of shares for the purpose of the initialpublic offering and listing of the Company
Issue of shares for the purposeof the employee offering carried out
in the context of the initial public offeringand listing of the Company
Issue of shares for the purposeof an employee offering (note d’opération
approved by the COB** on
13th October 2001 under number 01‑1209)
Issue of shares for the purposeof an employee offering (note d’opération
approved by the COB on
11th October 2002 under
number 02‑1081)
Issue of shares for the purposeof an employee offering (note d’opération
approved by the COB on
25th September 2003 under
number 03-836)
Cancellation of shares upon authorisation
granted by the annual shareholders‘meeting held on 6th May 2004
Issue of shares for the purposeof an employee offering (note d’opération
approved by the AMF on
10th September 2004 under
number 04-755)
Issue of shares following exercise
of options granted to employees***
Cancellation of shares upon authorisation
granted by the annual shareholders‘meeting held on 11th May 2005
Issue of shares for the purposeof an employee offering (note d’opération
approved by the AMF on 4th May 2005
under number 05-353)
Issue of shares following exercise
of options granted to employees***
Cancellation of shares upon authorisation
granted by the annual shareholders‘meeting held on 4th May 2006
Issue of shares following exercise
of options granted to employees***thrd

8th July 2000

13th July 2000
21st September 2000

5th December 2001

4th December 2002

5th December 2003

20th July 2004

3rd December 2004

In 2004
25th July 2005

29th July 2005

In 2005
20th July 2006

In 2006

Premium*

Total number
of issued shares
after transaction

Total
issued capital
after transaction

100

-

100

NLG 100,000€1

50,000-50,000€50,000€1

715,003,828€1,511,477,044

715,053,828€715,053,828€1

80,334,580€1,365,687,860

795,388,408€795,388,408€1

11,769,259€168,300,403

807,157,667€807,157,667€1

2,017,894€19,573,571.80

809,175,561€809,175,561€1

2,022,939€14,470,149.33

811,198,500€811,198,500€11,686,682€19,363,109.36

812,885,182€812,885,182€1

5,686,682-

807,198,500€807,198,500€12,017,822€34,302,974

809,216,322€809,216,322€1

362,747€6,133,436

809,579,069€809,579,069€1

1,336,358-

808,242,711€808,242,711€1

1,938,309€34,618,198.74

810,181,020€810,181,020€17,562,110€144,176,031.61

817,743,130€817,743,130€1

6,656,970-

811,086,160€811,086,160€1

4,845,364€89,624,589

815,931,524€815,931,524

Nominalvalue
per share

Number of sharesissued/cancelled

NLG 1,000(*) The costs (net of taxes) related to the initial public offering of the shares of the Company in July 2000 have been offset against share premium for an amount of €55,849,772.
(**) Former name of the Autorité des marchés financiers (the “AMF”).
(***) For information on stock option plans under which these options were granted to EADS employees, see “Part 1 – 2.3.3 Long Term Incentive Plans”.

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3.3	 Shareholdings and Voting Rights
3.3.1	Shareholding Structure
EADS combined the activities of Aerospatiale Matra(“Aerospatiale Matra” or “ASM”), DaimlerChrysler
Aerospace AG (“Dasa AG”) (with the exception of certain
assets and liabilities) (“Dasa”) and Construcciones Aeronauticas
SA (“CASA”) pursuant to a series of transactions completed
in July 2000.
In this document, the term ‘Completion’ relates to
the July 2000 completion of the contributions made by
Aerospatiale Matra, Dasa AG and SEPI to EADS to combine
such activities into EADS.
The term ‘Indirect EADS Shares’ relates to EADS shares heldby DaimlerChrysler AG (“DaimlerChrysler”), SEPI and
Société de Gestion de l’Aéronautique, de la Défense et de l’Espace(“SOGEADE”), for which EADS Participations B.V. exercises
all the attached voting rights as well as Lagardère SCA(“Lagardère”) and Société de Gestion de Participations
Aéronautiques (“SOGEPA”), or the companies of their group,
the number of EADS shares held indirectly via SOGEADE,
reflecting by transparency, their respective interest in
SOGEADE.
Unless the context requires otherwise, the shareholdings of
Dasa AG in EADS are referred to in this document asshareholdings of DaimlerChrysler, and the rights andobligations of Dasa AG pursuant to the agreements describedherein are referred to as rights and obligations ofDaimlerChrysler.
As at 31 December 2006, 22.47% of the EADS shares were
held by Dasa AG, which is a subsidiary of DaimlerChrysler
Luft- und Raumfahrt Holding AG (“DCLRH”), a 93.85%
subsidiary of DaimlerChrysler. SOGEADE, a French
partnership limited by shares (société en commandite par actions)whose share capital is held 50% by SOGEPA (a French stateholding company) and 50% by Désirade (a French société paractions simplifiée wholly owned by Lagardère), held 29.96% of
the EADS shares. Thus, 52.43% of the share capital of EADSst

was held in equal proportions by DaimlerChrysler and
SOGEADE who jointly control EADS through a Dutch law
contractual partnership (the “Contractual Partnership”). SEPI(a Spanish state holding company), being a party to theContractual Partnership, held 5.48% of the share capital of
EADS. The public (including EADS employees) and theCompany held, respectively, 40.99% and 1.04% of the sharecapital of EADS. The République française (the “French State”)
held directly 0.06% of such share capital, such shareholding
being subject to certain specific provisions.
On 8th July 2004, DaimlerChrysler announced that it had
placed on the market (in the context of a hedging transaction)
all of its EADS shares (22,227,478 EADS shares), representing
2.73% of the capital and 2.78% of the EADS voting rights atthat date, except for its Indirect EADS Shares. Thus,
DaimlerChrysler does not hold directly any EADS shares at thedate of this document.
On 11th November 2005, Dasa AG transferred its entire interest
in EADS to its wholly owned subsidiary DaimlerChrysler
Luft-und Raumfahrt Beteiligungs GmbH & Co. KG(“DC KG”). However, in November 2006, DC KG thentransferred its entire interest in EADS back to Dasa AG.
On 4th April 2006, DaimlerChrysler and Lagardère reduced by
7.5 percent each their respective stakes in EADS in coordinatedsteps.
On 8th September 2006, the Company was notified that Russianbank for Foreign Trade (“JSC Vneshtorgbank”) acquired
41,050,705 shares of EADS, representing 5.02% of the sharecapital of EADS at that time.
On 9th February 2007, DaimlerChrysler reached an agreementwith a consortium of private and public-sector investors bywhich it will reduce its shareholding in EADS by 7.5%. For
more information on this transaction, see “1.2 Recent
Developments”.

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The diagram below shows the ownership structure of EADS as at 31st December 2006 (% of capital (voting rights) before exercise ofoutstanding stock options granted for the subscription of EADS shares. See “Part 1 – 2.3.3 Long Terms Incentive Plans”.
Ownership structure of EADS as at 31 st December 2006

French StateSOGEPA

Spanish State

Lagardère

DaimlerChrysler****
93.85%

100%

Désirade

DCLRH
50%

50%

SOGEADE

100%

100%

(Managed by
SOGEADE Gérance)

SEPI

Dasa

29.96%

5.48%

22.47%(30.27%)(5.54%)(22.71%)

Contractual partnership(Managed by EADS Participations B.V.)

57.91%(58.52%) *0.06%(0.06%) **/***EADS N.V.

40.99%(41.42%)Public1.04%(-) *****(*)
EADS Participations B.V. exercises the voting rights attaching to these EADS shares pledged by SOGEADE, DaimlerChrysler and SEPI who retain title to their respective shares.
(**)	The French State exercises the voting rights attaching to these EADS shares (such shares being placed with the Caisse des dépôts et consignations) in the same way that EADS Participations
B.V. exercises the voting rights pooled in the Contractual Partnership.
(***)	Shares held by the French State following the distribution without payment of consideration to certain former shareholders of Aerospatiale Matra as a result of its privatisation in June 1999.
All the shares currently held by the French State will have to be sold on the market.
(****)	DCLHRH is 93.85% held by DaimlerChrysler; almost all the balance is held by the City of Hamburg.
(*****)	A s at 31 st December 2006, the Company holds, directly or indirectly through another company in which the Company holds directly or indirectly more than 50% of the share capital,
8,504,144 of its own shares. The EADS shares owned by the Company itself do not carry voting rights.

For the number of shares and voting rights held by members of
the Board of Directors and Executive Committee, “see Part 1– 2.2.1 Compensation Granted to Directors and Principal
Executive Officers”.

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Approximately 1.72% of the capital and 1.74% of the voting
rights are held by EADS employees.
For further information on changes to shareholdings since
31st December 2006, see also “1.2 Recent Developments”.

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3.3.2 Relationships with Principal Shareholders
The principal agreements governing the relationships between
the founders of EADS are an agreement (the “Participation
Agreement”) entered into on Completion between
DaimlerChrysler, Dasa AG, Lagardère, SOGEPA, SOGEADE
and SEPI, and a Dutch law Contractual Partnership agreement
entered into on Completion between SOGEADE, Dasa AG,
SEPI and EADS Participations B.V. (the “ContractualPartnership Agreement”), which repeats certain terms of theParticipation Agreement and a certain number of otheragreements (notably, a shareholder agreement (the “SOGEADE
Shareholders’ Agreement”) entered into on Completion
between SOGEPA and Lagardère and an agreement between the
French State, DaimlerChrysler and DCLRH). EADSParticipations B.V. is a Dutch private company with limited
liability (besloten vennootschap met beperkte aansprakelijkheid)
and is the managing partner of the Contractual Partnership.
The Indirect EADS Shares held by DaimlerChrysler,
SOGEADE and SEPI have been pledged to EADS Participations
B.V., which has been granted the exclusive power to exercise
the voting rights attaching to the pledged shares (including theright to attend and speak at shareholders' meetings) inaccordance with the Contractual Partnership Agreement.
The agreements above contain, among other things, provisions
relating to the following matters:●

the composition of the Boards of Directors of EADS, EADSParticipations B.V. and SOGEADE Gérance (gérant
commandité of SOGEADE);●

restrictions on the transfer of EADS shares and SOGEADE
shares;●pre-emptive and tag-along rights of DaimlerChrysler,
SOGEADE, SOGEPA and Lagardère;●

defences against hostile third parties;●

consequences of a change of control of DaimlerChrysler,
SOGEADE, Lagardère, SOGEPA or SEPI;●

a put option granted by SOGEADE to DaimlerChrysler overits EADS shares in certain circumstances;●

specific rights of the French State in relation to certain
strategic decisions, regarding among other issues, EADS'
ballistic missiles activity; and●certain limitations on the extent of the French State's
ownership of EADS.

Further details on the agreements among the principal
shareholders of EADS are set out below.

Organisation of EADS Participations B.V.
The board of directors of EADS Participations B.V. has an equal
number of directors nominated by DaimlerChrysler and by
SOGEADE, respectively (taking into account proposals made by
Lagardère in respect of the SOGEADE-nominated directors).
DaimlerChrysler and SOGEADE each nominate four directors,
unless otherwise agreed, and each nominates from among its
nominated directors a chairman and a chief executive officer. In
addition, although from 8th July 2003, SEPI no longer has aright to nominate a director, based upon the proposal ofDaimlerChrysler and SOGEADE, the board of directors of
EADS Participations B.V. decided to propose to theshareholders’ meeting of EADS Participations B.V. held on
11th May 2005 the appointment of an additional Spanish
director bringing the total number of directors to nine.
This structure gives DaimlerChrysler and SOGEADE equal
nominating rights in respect of the majority of the directors ofthe decision-making body of EADS Participations B.V. Alldecisions of EADS Participations B.V.’s board of directors shallrequire the vote in favour of at least six directors, except for
certain specified matters which require the prior unanimous
approval of DaimlerChrysler and SOGEADE.

Transfer of EADS Shares
During the period commencing at Completion and ending on
1st July 2003 (the “Standstill Period”), there were restrictions on
DaimlerChrysler’s, SOGEADE’s, SEPI’s, Lagardère’s, SOGEPA’s
and the French State’s ability to transfer EADS shares.
Following the expiration of the Standstill Period, as of
1st July 2003, each of DaimlerChrysler, SOGEADE, SEPI,Lagardère and SOGEPA has the right to sell its EADS shares on
the market, subject to the following conditions:●if a party wishes to sell any EADS shares, it shall first sell its
shares other than its Indirect EADS Shares before exercising
its right to sell its Indirect EADS Shares in accordance withthe provisions set out below;●

on the sale of Indirect EADS Shares, DaimlerChrysler(in the case of a sale by SOGEADE), SOGEADE(in the case of a sale by DaimlerChrysler) or SOGEADE
and DaimlerChrysler (in the case of a sale by SEPI) may
either exercise a pre-emption right or sell its Indirect
EADS Shares on the market in the same proportions
as the respective Indirect EADS Shares of the relevant
parties bear to each other;

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any transfer of Indirect EADS Shares by either SOGEPA or
Lagardère is subject to a pre-emption right in favour of
Lagardère or SOGEPA, as the case may be. In the event thatsuch pre-emption right is not exercised, the Indirect EADS
Shares may be sold (a) to an identified third party subject toLagardère’s or SOGEPA’s consent (as the case may be) andalso to DaimlerChrysler’s consent and (b) if such consent is
not obtained, the Indirect EADS Shares may be sold on themarket, subject to DaimlerChrysler’s pre-emption rightreferred to above;●

each of Lagardère and SOGEPA shall have a proportionalright to tag-along on a sale of its Indirect EADS Shares; and●the pre-emption and tag-along rights of Lagardère and
SOGEPA referred to above do not apply to a transfer of
EADS shares directly held by one of them.

Any sale on the market of EADS shares in accordance with theParticipation Agreement shall be conducted in an orderly
manner so as to ensure the least possible disruption to themarket of EADS shares. To this effect, the parties shall consult
with each other before any such sale.

Control of EADSIn the event that a third party to which DaimlerChrysler or
SOGEADE objects (a “Hostile Third Party”) has a direct orindirect interest in EADS shares equal to 12.5% or more of thenumber of such EADS shares the voting rights of which arepooled through the Contractual Partnership (a “Qualifying
Interest”), then, unless a Hostile Offer (as defined below) has
been made by the Hostile Third Party or until such time as
DaimlerChrysler and SOGEADE agree that the Hostile Third
Party should no longer be considered a Hostile Third Party or
the Hostile Third Party no longer holds a Qualifying Interest,
the parties to the Participation Agreement shall exercise allmeans of control and influence in relation to EADS to avoid
such Hostile Third Party increasing its rights or powers in
relation to EADS.
Following the expiration of the Standstill Period, as of
1st July 2003, the parties to the Participation Agreement may
accept an offer (whether by way of tender offer or otherwise)
by a Hostile Third Party which is not acceptable to either
DaimlerChrysler or SOGEADE (a “Hostile Offer”), subject toprovisions requiring, inter alia, the party wishing to accept, tofirst offer its EADS shares to DaimlerChrysler and/or
SOGEADE, in which case DaimlerChrysler and/or SOGEADE
may exercise their pre-emption rights in respect of all or someonly of the EADS shares held by the party wishing to accept
the Hostile Offer.

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Any sale of EADS shares, other than the EADS Indirect
Shares, by DaimlerChrysler, SOGEADE or Lagardère, at a time
when a Hostile Third Party is a shareholder and purchaser of
EADS shares on the market, is subject to the pre-emption rightof SOGEADE, DaimlerChrysler and SOGEPA respectively. In
the case of a sale by Lagardère, if SOGEPA does not exercise its
right of pre-emption, DaimlerChrysler has in turn a pre‑emption
right.
Dissolution of Contractual Partnershipand EADS Participations B.V.
The Contractual Partnership and EADS Participations B.V. will
be dissolved and wound up upon the occurrence of certain
events (each, a “Termination Event”) including:(i) if the proportion which the Indirect EADS Shares of either
DaimlerChrysler or SOGEADE bears to the total number
of EADS shares is less than 10%, unless the difference
between the holdings of DaimlerChrysler and SOGEADE(calculated as a percentage by reference to the number ofIndirect EADS Shares held by each of them as against the
total number of EADS shares) is 5% or less, in which casethe dissolution and winding up shall only occur if the
proportion which the Indirect EADS Shares ofDaimlerChrysler or SOGEADE bears to the total number
of EADS shares is 5% or less; or(ii) if, on a change of control of either Lagardère, SOGEPA,SOGEADE or DaimlerChrysler, no notice of an offer by athird party to purchase the SOGEADE shares or the
Indirect EADS Shares held by the party undergoing thechange of control (the “Changed Party”) (which offer the
Changed Party wishes to accept) has been served inaccordance with the Participation Agreement (see below “—Change of Control”) within 12 months of the date of thechange of control occurring (the absence of notice of an
offer by a third party to purchase the Indirect EADS Shares
held by SEPI upon a change of control of SEPI does not
trigger a dissolution of the Contractual Partnership or
EADS Participations B.V. but shall cause SEPI to lose its
main rights or liabilities under the Participation Agreement
or the Contractual Partnership Agreement).
On the occurrence of a Termination Event, EADS Participations
B.V. is prohibited from conducting further business except as isnecessary to its liquidation or the liquidation of the ContractualPartnership.

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Change of Control

Events of Default Other Than Change of Control

The Participation Agreement provides, inter alia, that if (a)Lagardère or SOGEPA undergoes a change of control andDaimlerChrysler so elects (b) SOGEADE undergoes a change ofcontrol and DaimlerChrysler so elects (c) DaimlerChrysler
undergoes a change of control and SOGEADE so elects (d) SEPI
undergoes a change of control and SOGEADE or
DaimlerChrysler so elects then:

The Participation Agreement provides for certain actions
following events of default (other than a change of control)(i.e., insolvency-related or a material breach of the Participation
Agreement). In particular, if such an event of default occurs in
relation to DaimlerChrysler, SOGEADE or SEPI, the nondefaulting party (respectively SOGEADE, DaimlerChrysler and
SOGEADE and DaimlerChrysler acting together) has a call
option over the defaulting party’s EADS shares and interest in
EADS Participations B.V. If such an event of default occurs in
relation to Lagardère or SOGEPA, such party is obliged to use
its best efforts to sell its interest in the capital of SOGEADE
on bona fide arm’s length terms to a third party purchaser (whomust not be a competitor of EADS or DaimlerChrysler). In thecase of a sale by Lagardère, the third party purchaser must be
nominated by SOGEPA with DaimlerChrysler’s consent (which
may not be unreasonably withheld). In the case of such a saleby SOGEPA, DaimlerChrysler must consent to the sale (again,such consent may not be unreasonably withheld).

(i) the party undergoing the change of control shall use its
reasonable efforts to procure the sale of its SOGEADE
interest (if the party undergoing the change of control is
Lagardère or SOGEPA) or of its Indirect EADS Shares(if the party undergoing the change of control is
DaimlerChrysler, SOGEADE or SEPI) to a third party
purchaser on bona fide arm’s length terms. When the party
subject to the change of control is Lagardère or SOGEPA,
the third party purchaser shall be nominated with
DaimlerChrysler’s consent, not to be unreasonably
withheld; and(ii) in the event that a third party offers to purchase the
SOGEADE interest held by Lagardère or SOGEPA or the
Indirect EADS Shares held by DaimlerChrysler, SOGEADE
or SEPI as the case may be, is received and the party
undergoing the change of control wishes to accept thatoffer, such offer shall immediately be notified to (a)DaimlerChrysler in the case of a change of control
occurring to Lagardère or SOGEPA, (b) SOGEADE in thecase of the change of control occurring to DaimlerChrysler,(c) DaimlerChrysler in the case of the change of control
occurring to SOGEADE, or (d) DaimlerChrysler or
SOGEADE in the case of the change of control occurring to
SEPI (the party notified under (a), (b), (c) or (d) being the“Non-Changed Party”). The Non-Changed Party shallhave a first right to purchase the SOGEADE interest or the
Indirect EADS shares being offered for sale at the pricebeing offered by the third party. In relation to (d), if
DaimlerChrysler and SOGEADE have both elected thatSEPI procure a third party purchaser, then they shall eachhave the right to acquire SEPI’s Indirect EADS Shares in therespective proportions which the number of their EADS
shares bear to one another at that time. In the event that the
Non-Changed Party does not give notice of its intention topurchase the SOGEADE interest or the Indirect EADS
Shares within 30 days of the offer being made, then the
Changed Party is obliged to sell such SOGEADE interest or
Indirect EADS Shares to the third party on the terms of thethird party’s original offer.
The third party purchaser may not be a competitor of EADS,SOGEADE or DaimlerChrysler (as the case may be) nor amember of the Group which has taken control of the Changed
Party.

Specific Rights and Undertakings of the French StateThe French State, not being a party to the Participation
Agreement, entered into a separate agreement, governed by
French law, with DaimlerChrysler and DCLRH on
14th October 1999 (as amended) pursuant to which:●

the French State undertakes to hold an interest of no morethan 15% of the entire issued share capital of EADS through
SOGEPA, SOGEADE and EADS Participations B.V.;●

the French State undertakes that neither it nor any of its
undertakings will hold any EADS shares directly;●

in each case disregarding (i) those EADS shares held by the
French State following the distribution without payment ofconsideration to certain former shareholders of
Aerospatiale Matra as a result of its privatisation in June 1999
and which will have to be sold on the market; (ii) those shares
held by SOGEPA or the French State which may be sold or
acquired pursuant to the Participation Agreement or the
SOGEADE Shareholders’ Agreement (see below); and (iii)
those shares held for exclusively investment purposes.

Moreover, pursuant to an agreement entered into between
EADS and the French State (the “Ballistic Missiles
Agreement”), EADS has granted to the French State (a) a vetoright and subsequently a call option on the ballistic missiles
activity exercisable in the event that (i) a third party which is
not affiliated to the DaimlerChrysler and/or Lagardère Groups
acquires, directly or indirectly, either alone or in concert, morethan 10% or any multiple thereof of the share capital or voting
rights of EADS or (ii) the sale of the ballistic missiles assets orof the shares of such companies carrying out such activity is

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considered after the termination of the SOGEADE
Shareholders’ Agreement and (b) a right to oppose the transfer
of any such assets or shares during the duration of the
SOGEADE Shareholders’ Agreement.

SOGEADESOGEADE is a French partnership limited by shares (société encommandite par actions) the share capital of which is split
between SOGEPA (50%) and Désirade, a French société paractions simplifiée (50%). The share capital of Désirade is itself
wholly owned by Lagardère. Lagardère hence owns indirectly
50% of SOGEADE.
The general partner (associé commandité) of SOGEADE,SOGEADE Gérance, is a French société par actions simplifiée
which is the manager of SOGEADE.
SOGEADE Gérance's board of directors consists of eight
directors, four of them nominated by Lagardère and four by
SOGEPA. Decisions of SOGEADE Gérance's board shall beapproved by a simple majority of directors except for the following
matters which require the approval of a qualified majority of six ofthe eight directors: (a) acquisitions or divestments of shares orassets the individual value of which exceeds €500 million; (b)agreements establishing strategic alliances, or industrial or
financial co-operation; (c) a capital increase of EADS of more than€500 million to which no preferential right to subscribe for theshares is attached; (d) any decision to divest or create a security
interest over the assets relating to prime contractor status, design,development and integration of ballistic missiles or the majority
shareholdings in the companies Cilas, Sodern, Nuclétudes and the
GIE Cosyde. The decisions contemplated under (d) above are also
governed by the Ballistic Missiles Agreement (see above “—Specific Rights and Undertakings of the French State”).
When a vote of SOGEADE Gérance’s board on such matters
does not reach the qualified majority of six directors by reasonof any of the SOGEPA-nominated directors casting a negative
vote, the SOGEADE-nominated directors on the board of
EADS Participations B.V. are obliged to vote against the
proposal. This means that the French State as the owner of
SOGEPA can veto any decisions on these matters within EADSParticipations B.V. and in turn within EADS as long as the
SOGEADE Shareholders’ Agreement remains in existence.
The shareholding structure of SOGEADE shall reflect at all
times the indirect interests of all the shareholders of
SOGEADE in EADS.
In certain circumstances, in particular in the event of a change ofcontrol of Lagardère, Lagardère shall grant a call option over its
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SOGEPA and approved by DaimlerChrysler. This option may be
exercised during the term of the SOGEADE Shareholders’
Agreement on the basis of the market price for the EADS shares.
The SOGEADE Shareholders’ Agreement shall terminate if
Lagardère or SOGEPA ceases to hold at least 20% of the capitalof SOGEADE, except that: (a) the provisions relating to the call
option granted by Lagardère described above shall remain inforce as long as the Participation Agreement is in force, (b) as
long as SOGEPA holds at least one SOGEADE share, it willremain entitled to nominate a SOGEADE Gérance Director
whose approval will be required in respect of any decision todivest or create a security interest over the assets relating toprime contractor status, design, development and integration ofballistic missiles activity or the majority shareholdings in thecompanies Cilas, Sodern, Nuclétudes and the GIE Cosyde; and(c) the SOGEADE Shareholders’ Agreement will be terminatedin the event of a dissolution of EADS Participations B.V.
caused by DaimlerChrysler. In the latter case, the parties haveundertaken to negotiate a new shareholders’ agreement in thespirit of the shareholders’ agreement between them dated
14th April 1999 relating to Aerospatiale Matra and having regard
to their respective shareholdings in SOGEADE at the time ofthe dissolution of EADS Participations B.V.
Put Option
Under the Participation Agreement, SOGEADE grants a put
option to DaimlerChrysler over its EADS shares which shall be
exercisable by DaimlerChrysler, (i) in the event of a deadlock
arising from the exercise by SOGEPA of its rights relating tocertain strategic decisions (listed above under the description of
SOGEADE) other than those relating to the ballistic missiles
activity or (ii) during certain periods provided that in both cases
the French State still holds any direct or indirect interest in
EADS shares. The put option may only be exercised in respectof all and not some only of DaimlerChrysler’s EADS shares.
The exercise price of the option will be calculated on the basisof an average market price for EADS shares.
In the event that DaimlerChrysler exercises the put option
granted to it by SOGEADE, SOGEADE will acquire the EADS
shares from DaimlerChrysler. However, Lagardère has the rightto require SOGEPA to substitute itself for SOGEADE in
relation to the acquisition of DaimlerChrysler’s EADS sharesfollowing the exercise by DaimlerChrysler of the put option.
Such substitution right has been accepted by DaimlerChrysler.
In the event that Lagardère does not exercise such substitution
right, Lagardère would have to provide its pro rata part of thefinancing necessary for such acquisition. SOGEPA undertakes
to provide its pro rata part of the financing corresponding to its
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SOGEADE to buy the shares sold by DaimlerChrysler as aresult of the exercise of its put option and SOGEPA or
Lagardère may request the liquidation of SOGEADE and EADSParticipations B.V. and the termination of the SOGEADE
Shareholders’ Agreement (notwithstanding the termination
provisions of the SOGEADE Shareholders’ Agreement
described under the paragraph “SOGEADE” above). In thatcase, Lagardère could freely sell its EADS shares on the market
or in a block sale to a third party.
Pledge over EADS Shares Granted to EADSParticipations B.V.
Upon Completion and in order to secure their undertakings
under the Contractual Partnership Agreement and theParticipation Agreement, SOGEADE, DaimlerChrysler and
SEPI granted a pledge over their respective Indirect EADS
Shares to EADS Participations B.V. for the benefit of EADSParticipations B.V. and the other parties to the ContractualPartnership Agreement.
Contributions to EADS — Specific Undertakings of EADSEADS has agreed not to dispose of the shares contributed to it
by Aerospatiale Matra, Dasa AG and SEPI for a period of sevenyears. The contribution agreements entered into between EADS
on the one hand and Aerospatiale Matra, Dasa AG and SEPI on
the other hand, provide that EADS may, if it determines that
this is desirable, dispose of such shares provided that EADS
shall, on demand, indemnify Lagardère and SOGEPA (in thecase of a sale of shares contributed by Aerospatiale Matra), Dasa
AG or SEPI, as the case may be, for all tax disadvantages (taxactually paid or borne by them as well as any consumption ofloss-carry-forward potential) they suffer as a result of the lossof the tax benefit triggered by the disposal of the shares by
EADS. Such obligation to indemnify shall cease after sevenyears from the date of contribution. In the event that theindemnification would be made to all three of Lagardère,
SOGEPA and Dasa AG, the Board of Directors would decide on
the amount of the indemnity on the basis of a report made andpresented by the two independent Directors of EADS. The
amount and the conditions of this indemnification will bereported to the shareholders’ meeting.

DADC
EADS holds 75% of the shares in DADC Luft- und Raumfahrt
Beteiligungs AG (“DADC”) (the other 25% being held by
DCLRH). The share capital of Dornier GmbH is held as to97.1% by DADC and as to 2.9% by the Dornier family. In
shareholders’ meetings, DADC is entitled to more than 95.2%

and the Dornier family to less than 4.8% of the voting rights in
Dornier GmbH. DADC and Dornier GmbH have entered into acontrol and profit and loss transfer agreement.
A considerable number of shareholders’ resolutions in DornierGmbH require a majority of 100% of the votes cast in theshareholders’ meeting notably resolutions to dissolve thecompany, alterations of the Articles of Association if theyterminate, limit or have an impact on the rights of the minority
shareholders, reduction of share capital, mergers (unless DornierGmbH is the surviving entity), the transfer of holdings in otherenterprises or the transfer of whole areas of enterprise activities
with the exception of transfers of assets in return for shares or asa contribution in kind or to a company associated with
DaimlerChrysler, which is assumed to be the case if
DaimlerChrysler controls at least 20% of its share capital. The
same requirement applies with regard to all transfers of shares of
Dornier GmbH held by the DaimlerChrysler Group (including
associated enterprises) subject to certain exceptions including thetransfer to other DaimlerChrysler Group companies (including
associated enterprises). Furthermore, the Dornier family receives
a guaranteed dividend from Dornier GmbH (depending on thenature of the shares) of 8.7% or 15% of the nominal amount of
their shares plus any corporation tax credits. The guaranteed
dividend is indexed. DaimlerChrysler has guaranteed thepayment of the minimum dividend to the Dornier family
shareholders. In the case of the profit and loss transfer agreement,
which presently exists between DADC and Dornier GmbH, theDornier family shareholders are entitled to receive payments
corresponding at least to the amount which they would beentitled to in the absence of such profit and loss transfer
agreement. Internally DADC has assumed this obligation.
On 30th November 1988 DaimlerChrysler and the Dornierfamily entered into a separate agreement to strengthen therights of DaimlerChrysler and, simultaneously, to protect theeconomic interests of the minority shareholders. The latter can,in particular, demand that their shares in Dornier GmbH bebought (i) for cash consideration or (ii) in exchange forDaimlerChrysler shares or (iii) in exchange for shares in acompany in which, or under which, DaimlerChrysler
concentrates its aerospace activities by DaimlerChrysler oranother company associated with DaimlerChrysler andnominated by DaimlerChrysler. On 29th March 2000
DaimlerChrysler, DCLRH, DADC, EADS Deutschland GmbHand Dasa AG entered into an agreement according to which
DaimlerChrysler has the right to demand from DADC to buy
the shares so offered by the Dornier family shareholders.
DaimlerChrysler shall reimburse DADC for any amount to be
paid being above the fair market value of the shares. Moreover,
DADC will assume certain other rights and obligations relating
to the protection of the interests of the Dornier family.

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On 29th December 2004, Silvius Dornier and DaimlerChrysler
entered into an agreement to transfer all of the remaining sharesof Silvius Dornier in Dornier GmbH (3.58%) to DaimlerChrysler
or another company of the DaimlerChrysler Group nominated byDaimlerChrysler and to settle all of the rights and potential
claims of Silvius Dornier resulting from or in connection withhis shareholding in Dornier GmbH. None of the other family
shareholders exercised their three months’ right of first refusal toacquire these shares so that the legal transfer became effective on
17th April 2005. According to the above mentioned agreement
between DaimlerChrysler, DCLRH, DADC, EADS DeutschlandGmbH and Dasa AG (“Handhabungsvereinbarung”), DADC had
irrevocably offered to DaimlerChrysler to buy these shares atmarket value upon effectiveness of their sale to DaimlerChrysler,
which offer was accepted by DaimlerChrysler and the deal beingbrought to closure on 3rd May 2005.
Under the terms of the business combination agreements
entered into in the context of the creation of EADS, DCLRH
has undertaken to indemnify Lagardère (for itself and on behalfof each member of the Lagardère Group) and SEPI and shallkeep them indemnified, against (save in respect of any

consequential loss not foreseeable by DCLRH (or any memberof the DaimlerChrysler Group) all or any costs, claims,
demands, expenses, losses or liabilities that they (or any ofthem) may suffer or incur from the date of the businesscombination agreements entered into in the context of thecreation of EADS as a result of all or any of the shareholders of
Dornier GmbH other than a member of the Dasa Groupobtaining or seeking to obtain any rights or remedies against
Lagardère (or any member of the Lagardère Group), SEPI, theContractual Partnership, EADS Participation B.V., Dasa AG,
EADS or any entity contributed by or on behalf ofDaimlerChrysler which is to become a member of the Group or
any member of the Dasa AG Group. This indemnity shall also
extend to EADS to the extent such protection is not provided
for in the transfer of the Dasa business to EADS.
Other than the relationships between the Company and its
principal shareholders described above in this Section 3.3.2, to
the Company's knowledge, there are no potential conflicts ofinterest relative to the Company between the duties of the
Directors and their respective private interests or other duties.

3.3.3	Form of Shares
The shares of EADS are in registered form. The Board of
Directors may decide in respect of all or certain shares, onshares in bearer form.
Shares shall be registered in the shareholders’ register without
the issue of a share certificate or, should the Board of Directors

so decide, in respect of all or certain shares, with the issue of acertificate. Share certificates shall be issued in such form as theBoard of Directors may determine. Registered shares shall benumbered in the manner to be determined by the Board of
Directors.

3.3.4	Changes in the Shareholding of the Company Since its Incorporation
The Company was founded with an authorised share capital of
500,000 Netherlands Guilders (“NLG”) divided into 500 shareseach having a nominal value of 1,000 NLG, of which 100 were
issued to Aerospatiale Matra on 29th December 1998. Theseshares were transferred to Dasa AG by way of notarised transfer
certificate on 28th December 1999.
The changes in the shareholding of the Company since its
initial public offering and listing are set forth below (for a
description of the changes in the issued share capital of theCompany since its incorporation, see “3.2.5 Changes in theIssued Share Capital Since Incorporation of the Company”).

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Since July 2000, 4,293,746 EADS shares have been distributed
without payment of consideration by the French State tocertain former shareholders of Aerospatiale Matra as a result of
its privatisation in June 1999. The last distribution took placein July 2002.
In addition, in January 2001, the French State and Lagardère
sold on the market all of their EADS shares (respectively
7,500,000 and 16,709,333 EADS shares) other than their
Indirect EADS Shares (and, in the case of the French State,other than the EADS shares to be distributed to former
shareholders of Aerospatiale Matra, see “— 3.3.2 Relationships

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with Principal Shareholders — Specific Rights andUndertakings of the French State”) that they held as a result of
the non-exercise of the over-allotment option granted to theunderwriters in the context of the initial public offering carriedout by the Company for the purpose of its listing in July 2000
(including, in the case of Lagardère, those shares other than its
Indirect EADS Shares purchased from the French Financial
Institutions at the end of the exercise period of the overallotment option).
On 8th July 2004, DaimlerChrysler announced that it had
placed on the market (in the context of a hedging transaction)
all of its EADS shares (22,227,478 EADS shares), representing
2.73% of the capital and 2.78% of the EADS voting rights atthat date, except for its Indirect EADS Shares.
On 4th April 2006, DaimlerChrysler and Lagardère announced
the entry into simultaneous transactions aimed at reducing by
7.5% each their respective shareholdings in EADS. DaimlerChrysler
entered into a forward sale agreement of approximately
61 million EADS shares with a group of investment banks.
DaimlerChrysler indicated that it lent these shares to the banks
in anticipation of the settlement of the forward sale. Lagardère
issued mandatory exchangeable bonds. The EADS sharesdeliverable at the maturity of the bonds will represent a
maximum of 7.5% of the share capital of EADS, orapproximately 61 million EADS shares.

Position as at 31st Dec. 2006

On 9th February 2007, DaimlerChrysler reached an agreementwith a consortium of private and public-sector investors bywhich it will effectively reduce its shareholding in EADS from
22.5% to 15%. DaimlerChrysler has placed its entire 22.5%
equity interest in EADS into a new company, in which theconsortium of investors will acquire a one-third interest
through a special-purpose entity. This effectively represents a
7.5% stake in EADS. DaimlerChrysler has the option ofdissolving the new structure on 1st July 2010 at the earliest. If
the structure is dissolved, DaimlerChrysler has the right either
to provide the investors with EADS shares or to pay cash
compensation. If EADS shares are provided, the German State,
and the French State and Lagardère through SOGEADE, will beentitled to pre-empt such EADS shares to retain the balance
between the German and the French side. DaimlerChrysler willcontinue to control the voting rights of the entire 22.5% package
of EADS shares.
As from the date of filing with the AFM of the Registration
Document of the Company for the financial year 2005
(26th April 2006), the Company received a threshold notification
stating that, as of 8th September 2006, JSC Vneshtorgbank held
41,050,705 EADS shares. As of 31st December 2006, JSC
Vneshtorgbank held 5.03% of the share capital of the Company.
The Division of the issued shares and voting rights of theCompany before exercise of outstanding stock options granted
for the subscription of EADS shares (see “Part 1 – 2.3.3 Long
Terms Incentive Plans”) in respect of the past three years isindicated in the table below:
Position as at 31st Dec. 2005

Position as at 31st Dec. 2004

Shareholders% ofcapital% of voting
rightsNumberof shares% ofcapital% of voting
rightsNumberof shares% ofcapital% of voting
rightsNumberof shares

Dasa AG22.47%

22.71%

183,337,704

29.89%

30.29%

244,447,704

30.20%

30.43%

244,447,704

SOGEADE

29.96%

30.27%

244,447,704

29.89%

30.29%

244,447,704

30.20%

30.43%

244,447,704

SEPI
Sub-total ContractualPartnership

5.48%

5.54%

44,690,871

5.47%

5.53%

44,690,871

5.52%

5.56%

44,690,871

57.91%

58.52%

472,476,279

65.25%

66.11%

533,586,279

65.92%

66.42%

533,586,279

French State

0.06%

0.06%

502.746

0.06%

0.06%

502,746*

0.06%

0.06%

502,746

Public40.99%

41.42%

334.448.355

33.39%

33.83%

273,061,396**

33.25%

33.52%

269,248,792

Own share buy-back***
Total

1.04%

—

8,504,144

1.30%

-

10,592,709

0.77%

-

6,241,252

100.00%100.00%815,931,524

100.00%100.00%817,743,130

100.00%100.00%809,579,069(*)	S hares held by the French State following the distribution without payment of consideration of 4,293,746 shares to certain former shareholders of Aerospatiale Matra as a result of its privatisationin June 1999. All the shares currently held by the French State will have to be sold on the market.
(**) Including EADS employees. As at 31 st December 2006, EADS employees hold approximately 1.72% of the share capital and 1.74% of the voting rights.
(***) The EADS shares owned by the Company itself do not carry voting rights.

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To the knowledge of the Company, except as disclosed
previously in “3.3.2 Relationships with Principal Shareholders”,
there are no pledges over the shares of the Company.

held by Iberclear on behalf of the Spanish markets and36,606,433 shares held by Clearstream on behalf of the Germanmarket).

The Company requested a disclosure of the identity of thebeneficial holders of its shares held by identifiable holders(“Titres au porteur identifiables”) holding more than 2,000 shares
each. The study, which was completed on 29th December 2006,
resulted in the identification of 1,590 shareholders holding a
total of 296,788,586 EADS shares (including 9,566,454 shares

The shareholding structure of the Company is as shown in the
diagram in “3.3.1 Shareholding Structure”.
For further information on changes to shareholdings since
31st December 2006, see also “1.2 Recent Developments”.

3.3.5 Persons Exercising Control over the Company
See “3.3.1 Shareholding Structure” and “3.3.2 Relationships with Principal Shareholders”.

3.3.6	Simplified Group Structure Chart
The following chart illustrates the simplified organisational
structure of EADS, comprising five Divisions and the main
BUs. For ease of presentation, intermediate holding companies
have been omitted. The shaded boxes represent Divisions (withrespect to the MTA Division) or BUs (with respect to Military
Air Systems) that are part of the legal entities referred to inparentheses. The coloured boxes denote entities forming part of110

EAD S B U S I N E S S , L E G A L A N D CO R P O R AT E R E S P O N S I B I L I T Y

one of EADS’ five Divisions. The non-coloured boxes denote
entities that are holding companies or participations not within
one of EADS’ five Divisions and do not directly form part ofthe management responsibility of a specified director. Socata,
EADS ATR, ATR GIE, EFW and Sogerma are ‘Other
Businesses’ and do not form part of EADS’ five Divisions.
See “1.1.1 Overview – Organisation of EADS Businesses”.

Military Air Systems(EADS Deutschland/EADS Casa)

DEFENSE &SECURITY

Arianespace

ASTRIUM

EUROCOPTERAIRBUSMILITARY
TRANSPORTAIRCRAFTATR GIE***

1(*) EADS holds its interest in Dassault Aviation through EADS France.
(**) EADS’ interest in Eurofighter is jointly held by EADS Deutschland and EADS Casa.
(***) EFW, Sogerma ATR and Socata are allocated to “Other Businesses”.

Irkut

Eurofighter

EADS ATR***

Socata***MTA Division(EADS CASA)

Airbus Military

EADS CASA

3.3

EADS France*

EADS Casa**

Atlas Electronik

Sogerma***Secure Networks

Airbus

EFW***

AviChina

Dassault Aviation

Eurocopter

EADS France

Defense &Security

Dornier

DADC

MBDA

Paradigm Services

Paradigm Sec Com

EADS Astrium N.V.

EADS Deutschland

PatriaEADS N.A. Defense

EADS North America

EADS N.V.

(Simplified Structure)

EADS Group main shareholdings

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3.3.7 Purchase by the Company of its Own Shares
3.3.7.1	Dutch Law and Information on Share
Buy-Back Programmes
Pursuant to Commission Regulation (EC) No. 2273/2003, theCompany is subject to conditions for share buy-backprogrammes and disclosure relating thereto, as described below.
Under Dutch Civil law, the Company may acquire its own
shares, subject to certain provisions of the law of theNetherlands and the Articles of Association, if (i) the shareholders’equity less the payment required to make the acquisition does
not fall below the sum of paid-up and called portion of theshare capital and any reserves required by the law of theNetherlands and (ii) the Company and its subsidiaries would
not thereafter hold or hold in pledge shares with an aggregate
nominal value exceeding one-tenth of the Company’s issued
share capital. Share acquisitions may be effected by the Board of
Directors only if the shareholders in general meeting haveauthorised the Board of Directors to effect such repurchases.
Such authorisation may apply for a maximum period of 18
months.
Shares held by the Company do not carry voting rights.
Usufructuaries and pledgees of shares that are held by theCompany are, however, not excluded from their voting rights insuch cases where the right of usufruct or pledge was vested
before the share was held by the Company.
The annual shareholders’ meeting of EADS held on 4th May 2006
authorised the Board of Directors, in a resolution that renewed
the previous authorisation given by the annual shareholders’meeting of EADS held on 11th May 2005, for a period of 18
months from the date of such meeting, to repurchase shares of
the Company, by any means, including by derivative products,
on any stock exchange or otherwise, as long as, upon such
repurchase, the Company shall not hold more than 10% of theCompany’s issued share capital and at a price not less than thenominal value and not more than the higher of the price of thelast independent trade and the highest current independent bid
on the trading venues where the purchase is carried out.
As of July 2006, the Company had purchased in aggregate
15,161,114 of its own shares, 6,656,970 of which werecancelled on 20th July 2006.
As of the date of this document, the Company had purchasedin aggregate 8,680,253 of its own shares.

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A resolution will be submitted to the annual shareholders’meeting of EADS called for 4th May 2007 in order to supersede
and replace the authorisation given by the annual shareholders’meeting held on 4th May 2006 and authorize the Board of
Directors, for a new period of 18 months as from the date ofsuch meeting, to repurchase shares of the Company, by anymeans, including by derivative products, on any stock exchange
or otherwise, as long as, upon such repurchase, the Company
shall not hold more than 10% of the Company’s issued sharecapital and at a price not less than the nominal value and not
more than the higher of the price of the last independent trade
and the highest current independent bid on the trading venues
where the purchase is carried out.

3.3.7.2	French Regulations
As a result of its listing for trading on a regulated market inFrance, the Company is subject to the regulations summarised
below.
Pursuant to Articles 241-1 to 241-6 of the AMF General
Regulations, the purchase by a company of its own shares, inprinciple, requires the publication of the description of theshare-buy programme. Such description must be publishedprior to the implementation of the share buy-back programme.
Under Articles 631-1 to 631-4 of the AMF General Regulations,a company may not trade in its own shares for the purpose ofmanipulating the market. Articles 631-5 and 631-6 of the AMF
General Regulations also define the conditions for a company’s
trading in its own shares to be valid.
After purchasing its own shares, the Company is required todisclose on its website specified information regarding such
purchases within at least seven trading days and publish on amonthly basis a release gathering all the specified information
regarding such purchases previously published on its website.
Additionally, the Company must notably report to the AMF, on
at least a monthly basis, information concerning thecancellation of such repurchased shares.

3.3.7.3	German Regulations
As a foreign issuer, the Company is not subject to German
rules on repurchase its own shares, which only apply toGerman issuers.

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EADS Group and/or (ii) carried out or to be carried out inthe context of the exercise of stock options granted or to
be granted to certain EADS Group employees, it being
understood that the repurchased shares shall not carry any
voting or dividend rights,

3.3.7.4	Spanish Regulations
As a foreign issuer, the Company does not have to comply with
the Spanish rules on trading in its own shares, which only
apply to Spanish issuers.
However, according to the Conduct Rules under the Spanish
Securities Act 24/1988 of 28th July 1988, the Company may nottrade in its own shares for the purpose of manipulating themarket.

- the owning of shares for the performance of obligations
related to:(i) debt financial instruments convertible into EADS’ shares,(ii) employee share option programmes or other allocationsof shares to the EADS Group employees,

3.3.7.5 Description of the Share Buy-Back
Programme to be Authorised by the Annual
General Shareholders’ Meeting to be held on
4th May 2007

- the purchase of shares for retention and subsequent use forexchange or payment in the framework of potential external
growth transactions, and- the liquidity or dynamism of the secondary market of the
EADS shares carried out pursuant to a liquidity agreement
to be entered into with an independent investment services
provider in compliance with the decision of the AMF
dated 22nd March 2005 related to approval of liquidity
agreements recognised as market practices by the AMF;

Pursuant to Articles 241-2-I and 241-3-III of the AMF General
Regulations, below is a description of the share buy-backprogramme (“descriptif du programme”) to be implemented by
the Company:●●●

date of the general shareholders’ meeting to authorise
the share buy-back programme to be held: 4th May 2007;
number of EADS shares and corresponding percentageof share capital held directly and indirectly by theCompany: 8,680,253 shares representing 1.06% of the sharecapital as at the date of this document;
intended use of the EADS shares held by the Company
as at the date of this document: the reduction of sharecapital by cancellation of all or part of the repurchased
shares, in particular to avoid the dilution effect related tocertain share capital increases for cash (i) reserved or to bereserved for employees of the EADS Group and/or (ii)carried out or to be carried out in the context of the exerciseof stock options granted or to be granted to certain EADSGroup employees: 8,680,253 shares.

For information on shares held by EADS at the date of theentry into force of EC Regulation n° 2273/2003 of
22nd December 2003 on 13th October 2004 and still held by
EADS at the date of this document, see below:●

Purposes of the share buy-back programme to be
implemented by the Company (by order of decreasingpriority, without any effect on the actual order of useof the buy-back authorisation, which shall be
determined according to needs and possibilities):- the reduction of share capital by cancellation of all or partof the repurchased shares, in particular to avoid the
dilution effect related to certain share capital increases forcash (i) reserved or to be reserved for employees of the●Procedure:- maximum portion of the issued share capital to be
repurchased by the Company: 10%,- maximum number of shares to be repurchased by the Company
upon authorisation by the general shareholders’ meeting:the portion of 10% would represent 81,602,573 shares of
the Company issued share capital representing 816,025,734
shares as of the date of this document. This maximum
portion of 10% would represent 84,680,356 shares basedon the 846,803,563 shares which would make up theentire fully-diluted share capital of the Company after theissue of 30,777,829 shares as a result of the exercise ofstock options, which can still be exercised as of the date ofthis document, which the board of directors decided to
grant to certain EADS Group employees in 2000, 2001,
2002, 2003, 2004, 2005 and 2006,- furthermore, the amounts to be paid in consideration forthe purchase of the treasury shares must not, in accordancewith applicable Dutch law, exceed the equity components
which are, per se, repayable or distributable to the shareholders.
“Equity components repayable or distributable to theshareholders” means the contribution premiums (inrelation to contributions in kind), the issue premiums (inrelation to cash contributions) and the other reserves as set
out in the financial statements of EADS, from which therepurchase price for the treasury shares must be deducted.
As at 31st December 2006, the respective values of each ofthese EADS’ equity components which are by nature

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repayable or distributable to the shareholders were:€8,160,000,000 (contribution premiums), €(742,000,000)(other reserves) and €(349,000,000) (treasury shares), i.e.,
an aggregate amount of €7,069,000,000.

●

Term of the share buy-back programme: this share
repurchase programme shall be valid until 4th November 2008
inclusive, i.e., the date of expiry of the authorisation
requested from the Annual General Meeting of 4th May 2007.
One of the main aims of this EADS share repurchaseprogramme is linked to the possible exercise by EADS Group
employees of stock options granted to them in 2000, 2001
and 2002, it is currently intended (i) that such a programme
be continued and renewed so that it expires on
9th August 2012 (8th August 2012 being the latest date uponwhich an employee of the EADS Group may exercise all orpart of his/her stock options granted in 2002) and (ii) that
the EADS annual general meeting be asked to renew theauthorisations until such date.

●

Declaration by the Company of transactions carried out
in relation to its own shares from 4th May 2006
to the date of this document:

EADS reserves the right to implement the share purchaseprogramme to its full extent and undertakes not to exceed,
directly or indirectly, the threshold of 10% of the issued
share capital as well as the amount of €7,069,000,000
throughout the term of the programme.
Finally, EADS undertakes to maintain at any time asufficient number of shares in public hands to meet thethresholds of Euronext Paris S.A.
- Shares may be bought or sold at any time (including
during a public offering) to the extent authorised by thestock exchange regulations and by any means, including,
without limitation, that the part of the programme which
may be carried out by means of sale or purchase of blocktrades and including the use of options, combinations ofderivative financial instruments or the issue of securities
giving rights in any way to EADS shares within the limits
set out in this prospectus. Moreover, EADS will use call
options and swap that have been acquired pursuant to theagreements it had entered into during the previous share
repurchase programme (see below) and does not exclude
the possibility of using a structure of transaction similar tothe one that had been used in the previous share
repurchase programme in order to repurchase its own
shares.
The portion of shares repurchased by means of the use ofblock trades may amount to all the shares to be
repurchased in the context of this programme.
In addition, in the event that derivative financial
instruments are used, EADS shall ensure that it does notuse mechanisms which would significantly increase thevolatility of the shares in particular in the context of call
options.
- characteristics of the shares to be repurchased by theCompany upon authorisation by the general shareholders’meeting: shares of EADS, a company listed on the marché
Eurolist of Euronext Paris S.A., on the Amtlicher Handelmarket of the Frankfurt Securities Exchange (“Frankfurter
Wertpapierbörse”) and on the Madrid, Bilbao, Barcelona
and Valencia Stock Exchanges,- DaimlerChrysler, Dasa AG, the French State, Lagardère,
SEPI, SOGEADE and SOGEPA will retain all of theirrights, depending on the circumstances, to sell theiravailable EADS shares to EADS as part of this share buyback programme,- maximum purchase price per share: €70.

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Percentage of share capital held directly and indirectly
Number of shares cancelled during the last 24 months

1.06%
7,993,328

Number of shares held in portfolio

8,680,253

Book value of portfolio€m 158,45

Market value of portfolio€m 189,33

The 1,843,814 EADS shares held by EADS at the date of theentry into force of EC Regulation n° 2273/2003 of 22nd December 2003
on 13th October 2004 and still held by EADS at the date of thisdocument shall be, in order of decreasing priority, either (i)cancelled pursuant to a decision to be made, according to Dutch
law, by an EADS annual general meeting, to avoid the dilution
effect related to certain share capital increases for cash carriedout, during the fiscal year preceding such annual general
meeting, in the context of an EADS employee share ownershipprogramme and/or upon the exercise of stock options granted tocertain EADS Group employees, or (ii) kept in order to allow
the performance of certain obligations described within theaims of the share repurchase programme referred to in thisdocument, or (iii) used for exchange or payment in theframework of a potential external growth transaction, or (iv)sold in the context of a liquidity agreement in compliance withthe provisions of Instruction AMF No. 2005-07.
In addition, it is envisaged that the EADS Annual General
Meeting to be held on 4th May 2007 be requested to decideupon the cancellation of 4,568,405 repurchased shares to avoid
the dilution effect related to the share capital increases for cash
carried out upon the exercise in 2006 of stock options granted
to certain EADS Group employees in 2000, 2001 and 2002 (inan amount of 100% of the shares issued in such context).

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As of the date of this document, EADS has not entered into
any liquidity agreement with an independent investment
services provider in the context of this share repurchaseprogramme.

In the context of this share repurchase programme, EADS usedderivative financial instruments (see below). These derivative
financial instruments (call options) have the characteristics set
out in the table below.

Gross cumulative flows

Number of Shares

Purchases

Sales/Transfers(Exercise of Option)

650,953-

Average Maximum Maturity Date*

Opening Position on the Sale

Call purchased
8,804,774

Forward sale

Call purchased

Sale

9 August 2012

-

-

-

-

-

-

-

th

Average Price of the Transaction*-

Average Exercise Price*
Total

Opening positions as of the date of this document
Opening Position on the Purchase€12,424,336-(*) See “Part 1 – 2.3.3 Long Term Incentive Plans”.

A share repurchase programme is being implemented since2004 in order to avoid the dilution effect related to the sharecapital increases in cash which would result from the exerciseof the stock options granted to certain employees of the EADSGroup in 2000, 2001 and 2002. This share repurchaseprogramme is implemented according to the neutral delta
method as a means of repurchase in order to compensate for the
dilution effect of such stock option plans as approved by the
Board of Directors on 5th December 2002 and 10th October 2003.
In relation to this repurchase programme, EADS entered into
the following agreements: (i) call options agreements allowing
EADS to acquire from a top ranking French bank a number of
EADS’ shares equal to the number of shares to be created as aresult of the exercise of stock options granted to certain
employees of the EADS Group in 2000, 2001 and 2002, and (ii)swap agreements for the periodical adjustment of an amount incash equal to the premiums paid by EADS to a top ranking
French bank pursuant to the call options agreements, inaccordance with the neutral delta method.
Pursuant to these agreements, the call options which EADS
acquired from a top ranking French bank, have the same terms(as to exercise prices, exercise dates, quantities and expiry dates)as the stock options granted pursuant to the 2000, 2001 and2002 stock option plans. If the EADS share price increases, thetop ranking French bank must buy the number of EADS shares
which then derived from the increase in price according to thedelta neutral method formula. The total amount paid for theseshares by the top ranking French bank corresponds to thefinancial charge borne by EADS, as determined from thevariable amounts in the swap agreement. On the other hand, inthe case of a reduction in the EADS share price, the top
ranking French bank must sell a number of EADS shares which
derived from the reduction in the share price according to theneutral delta method formula. The total amount received by the
top ranking French bank for the sale of these shares corresponds
to the financial revenues received by EADS as determined fromthe variable amounts in the swap contract. Under these
conditions, the final amount due as a result of the purchases of
the call options is only known at the time of the payment as
determined from the last variable amount of the swap contract.
The structure of the transaction aims at covering off thedilution effect and the price risk for EADS linked to theexercise of stock options granted to certain EADS Group
employees in 2000, 2001 and 2002.
Within this context, EADS uses the internal control procedures
put in place by the Company in order to ensure the reliabilityof the management of the risks linked to these call options andswap. The procedures and tools for reporting have been set up,
the responsibility and powers have been delegated to the
Finance and Treasury department of EADS which has
responsibility for all operational decisions and all activities
within its competence. The relevant competent bodies within
the organisation must be made aware of all substantial
transactions, activities and risks.
From an accounting standpoint, the call options qualify as
equity instruments, provided that they are physically settled in
EADS’ own stock (IAS 32.16). The initial accounting led to a
reduction in cash balances for the premiums paid and instockholder’s equity for the same corresponding amount. With
each variable payment made in application of the delta neutral
method formula, there is a corresponding impact on cash andon equity to reflect the cumulative premiums paid on the call
options. Upon exercise of the call options, EADS decreases cashby the amount paid (strike price times number of options) anddeducts treasury shares from shareholder’s equity. Variations in

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the market value of the call options are not recognised in thefinancial statements. All such transactions are therefore neutral
on the income statement.

The top ranking French bank has contractually undertaken tocomply with the regulations in force in relation to repurchaseprocedures applicable to EADS and in particular the provisionsof Articles 241-1 to 241-6 and 631-1 et seq. of the General
Regulations of the AMF.

3.4	 Dividends
3.4.1 Dividends and Cash Distributions Paid Since the Incorporation of the Company
Cash distributions, paid to the shareholders since the incorporation of the Company, are summarized in the table below:
Financial Year

Date of the cash distribution payment

Gross amount per share

2000

27th June 2001

€0.50

2001

28 June 2002

€0.50

2002

12 June 2003

€0.30

2003

4th June 2004

€0.40

2004

8 June 2005

€0.50

2005

1st June 2006

€0.65

th
th

th

3.4.2 Dividend Policy of EADSGiven the extraordinary circumstances and the important
challenges that came to light during the year 2006, and which
are not tied to the commercial air transportation economic
cycle, the Board of Directors unanimously agreed that theamount of the proposed cash distribution should besubstantially reduced.

distribution in relation to the liquidity and capital structure of
EADS, and to the opportunity of accessing capital market. It
also considered Management’s account of investor concerns andinterpretation of a dividend payment, in the light of stock
performance through the past year. Following this debate,
directors could not finally agree on a dividend proposal.

While this opinion constitutes a departure from the policy
adopted last year, the Board of Directors does not recommend
to rescind such policy, but endorses a temporary suspension.
Looking forward, EADS’ Board of Directors still believes that
continuity and growth of dividends is a desirable shareholder
objective, which must however remain subject to factors such as
EADS’ distribution capacity arising from performance, itspriorities for cash utilisation and future prospects.

In the absence of a proposal by the Board of Directors, and inaccordance with Dutch law and the Company’s Articles of
Association, shareholders present at the Annual General
Meeting of Shareholders to be held on 4th May 2007 may
propose that the result of the financial year 2006, i.e.
€99 million, is either added to retained earnings or distributed
entirely or partially as a dividend. A total distribution of theresult of the financial year 2006 would represent a grossamount of €0.12 per share. The proposals made by theshareholders will be submitted to the vote at the Annual
General Meeting of Shareholders to be held on 4th May 2007.

To determine whether to effect a cash distribution or not, andif so, at what level, the Board of Directors considered dividend

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3.4.3	Unclaimed Dividends
Pursuant to Article 31 of the Articles of Association, the claim
for payment of a dividend or other distribution approved by thegeneral meeting shall lapse five years after the day on which suchclaim becomes due and payable. The claim for payment ofinterim dividends shall lapse five years after the day on which
the claim for payment of the dividend against which thedividend could be distributed becomes due and payable.

3.4.4	Taxation
The statements below represent a broad analysis of the present
Netherlands tax laws. The description is limited to the material
tax implications for a holder of the Company’s shares (the“Shares”) who is not, or is not treated as, a resident of theNetherlands for Netherlands tax purposes (a “Non-Resident
Holder”). Certain categories of holders of the Company’s
shares may be subject to special rules which are not addressed
below and which may be substantially different from thegeneral rules described below. Investors who are in doubt as totheir tax position in the Netherlands and in their state ofresidence should consult their professional advisors.

Withholding Tax on Dividends
In general, a dividend distributed by the Company in respect ofShares will be subject to a withholding tax imposed by the
Netherlands at a statutory rate of 15%. Dividends include
dividends in cash or in kind, deemed and constructive
dividends, repayment of paid-in capital not recognised as capitalfor Netherlands dividend withholding tax purposes, andliquidation proceeds in excess of the average paid-in capital
recognised as capital for Netherlands dividend withholding tax
purposes. Stock dividends paid out of the Company’s paid-inshare premium, recognised as capital for Netherlands dividend
withholding tax purposes, will not be subject to thiswithholding tax.
A Non-Resident Holder of Shares can be eligible for a partial orcomplete exemption or refund of all or a portion of the above
withholding tax under a tax convention that is in effectbetween the Netherlands and the Non-Resident Holder’scountry of residence. The Netherlands has concluded such
conventions with the U.S., Canada, Switzerland, Japan, almost
all European Union member states and other countries.

Withholding Tax on Sale or Other Dispositionsof Shares
Payments on the sale or other dispositions of Shares will not be
subject to Netherlands withholding tax, unless the sale or otherdisposition is, or is deemed to be, made to the Company or adirect or indirect subsidiary of the Company. A redemption orsale to the Company or a direct or indirect subsidiary of theCompany will be treated as a dividend and will in principle besubject to the rules set forth in “Withholding Tax on Dividends”
above.

Taxes on Income and Capital Gains
A Non-Resident Holder who receives dividends distributed by
the Company on Shares or who realizes a gain from the sale ordisposition of Shares, will not be subject to Netherlands
taxation on income or capital gains unless:●such income or gain is attributable to an enterprise or part
thereof which is either effectively managed in the
Netherlands or carried on through a permanentestablishment (“vaste inrichting”) or permanent representative(“vaste vertegenwoordiger”) in the Netherlands; or●the Non-Resident Holder is not an individual and the NonResident Holder has, directly or indirectly, a substantial
interest (“aanmerkelijk belang”) or a deemed substantial
interest in the Company and such interest does not form partof the assets of an enterprise, or●

the Non-Resident Holder is an individual and (i) the NonResident Holder has, directly or indirectly, a substantial
interest (“aanmerkelijk belang”) or a deemed substantial
interest in the Company and such interest does not form partof the assets of an enterprise, or (ii) such income or gain
qualifies as income from miscellaneous activities (“belastbaar
resultaat uit verage werkzaamheden”) in the Netherlands as
defined in the Dutch Income Tax Act 2001 (“Wetinkomstenbelasting 2001”).

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Generally, a Non-Resident Holder of Shares will not have asubstantial interest in the Company’s share capital, unless the
Non-Resident Holder, alone or together with certain related
persons holds, jointly or severally and directly or indirectly,
Shares in the Company, or a right to acquire Shares in the
Company representing 5% or more of the Company’s total
issued and outstanding share capital or any class thereof. A
deemed substantial interest exists if all or part of a substantial
interest has been or is deemed to have been disposed of withapplication of a roll-over relief.

Gift or Inheritance Taxes
Netherlands gift or inheritance taxes will not be levied on thetransfer of Shares by way of gift, or upon the death of a NonResident Holder, unless:●the transfer is made by or on behalf of a person who, at thetime of the gift or death, is or is deemed to be resident in
the Netherlands; or●

the Shares are attributable to an enterprise or part thereof
that is either effectively managed in the Netherlands or
carried on through a permanent establishment or apermanent representative in the Netherlands.

Value-Added Tax
No Netherlands value-added tax is imposed on dividends on
the Shares or on the transfer of the Shares.

Other Taxes and Duties
There is no Dutch registration tax, transfer tax, capital tax,
stamp duty or any other similar tax or duty other than court
fees payable in the Netherlands in respect of or in connection
with the execution, delivery and/or enforcement by legal
proceedings (including any foreign judgment in the courts of
the Netherlands) with respect to the dividends relating to the
Shares or on the transfer of the Shares.

Residence
A Non-Resident Holder will not become resident, or bedeemed to be resident, in the Netherlands solely as a result ofholding a Share or of the execution, performance, delivery and/or enforcement of rights in respect of the Shares.

3.5	 Annual Securities Disclosure Report
The list of the following announcements comprises the regulatory disclosures relating to price sensitive information which can beaccessed through the Company’s website at www.eads.com:
Press release First Quarter 2006 Results
Press release –Revised A380 delivery schedule expected not to impact EADS‘ EBIT 2006

16th May 2006
13th June 2006

Press release – EADS Board of Directors appointed Louis Gallois to join Tom Enders as Chief Executive Officer

2nd July 2006

Press release – EADS confirms price determination for BAE Systems‘ stake in Airbus

2nd July 2006

Press release First Half 2006 Results

27th July 2006

Press release – EADS and Airbus finalise A380 review

3rd October 2006

Press release – EADS Board of Directors changes significantly the management structure of EADS

9th October 2006

Press release Third Quarter 2006 Results

8th November 2006

Press release – A350XWB launch EADS gives go ahead for Airbus to launch the A350XWB

1st December 2006

Press release – Airbus 2006 Results

17th January 2007

Press release – 2006 Annual Results

9th March 2007

In addition, EADS publishes announcements made in the ordinary course of business which are also available through its website
at www.eads.com.
This section constitutes the annual securities disclosure report in application Article 10 of the EC Directive 2003/71.
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Entity Responsible
for the Registration
Document

Entity Responsible for the Registration
Document

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Statement of the Entity Responsible
for the Registration Document

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4.3

Information Policy

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Undertakings of the Company regarding
Information

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4.1	 Entity Responsible for the Registration Document
EADS

4.2	 Statement of the Entity Responsible for the Registration Document
The Company declares that, having taken all reasonable care to ensure that such is the case, the information contained in theRegistration Document is, to the best of the Company’s knowledge, in accordance with the facts and contains no omission likely toaffect its import.
EADS represented by:Thomas Enders

Louis Gallois

Chief Executive Officer

Chief Executive Officer

4.3	 Information Policy
Details of the person responsible for information:

EADS
81663 Munich
Germany
Telephone: + 49 89 607 34113
Fax: + 49 89 607 34110
E-mail: ir@eads.com

filed in French with the Autorité des marchés financiers on 19th
April 2005, the Registration Document filed in English with,and approved by, the AFM on 26th April 2006, the consolidated
financial statements (IFRS) and the Company financial
statements of EADS for the year ended 31st December 2004,
the consolidated financial statements (IFRS) and the Company
financial statements of EADS for the year ended 31st December
2005 together with reports of the auditors for the years ended
31st December 2004 and 31st December 2005 may be inspected
at EADS’ registered office at: European Aeronautic Defence andSpace Company EADS N.V., Le Carré, Beechavenue 130-132,1119 PR, Schiphol-Rijk, the Netherlands, Seat (statutaire zetel):Amsterdam, Tel: +31 20 655 48 00.

A website, www.eads.com, provides a wide range of informationon the Company, including the Board of Directors Report.
Additionally, for the life of this Registration Document, copies
of EADS’s Articles of Association, the Document de Référence

Special toll-free hotlines are available to shareholders in France(0 800 01 2001), Germany (00 800 00 02 2002) and Spain(00 800 00 02 2002). An e-mail box is dedicated toshareholders' messages: ir@eads.com.

Mr. Pierre de Bausset
Senior Vice-President Investor Relations
and Financial Communication

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4.4	 Undertakings of the Company regarding Information
Given the fact that the shares of the Company are listed on
the Marché Eurolist of Euronext Paris SA (the “Paris Stock
Exchange”), in amtlicher Markt (in the sub-segment Prime
Standard) on the Frankfurter Wertpapierbörse (the “Frankfurt
Stock Exchange”) and on the Madrid, Bilbao, Barcelona andValencia Stock Exchanges (the “Spanish Stock Exchanges”),
the Company is subject to certain laws and regulations
applicable in France, Germany and Spain in relation to
information, the main ones of which are summarised in“3.1.3 Governing Laws”.

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Designed & Produced by:European Aeronautic Defence
and Space Company EADS N.V.
Le Carré, Beechavenue 130 -1321119 PR Schipol-Rijk
The Netherlands
www.eads.com

EADS.COM
This document is also available
at the following addresses:
European Aeronautic
Defence and Space Company
EADS N.V.
In France
37, boulevard de Montmorency
75781 Paris cedex 16 – France
In Germany
81663 Munich – Germany
In Spain
Avenida de Aragón 404
28022 Madrid – Spain