3
European Aeronautic Defence and Space Company EADS N.V.

www.eads.com

This document
is also available at thefollowing 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

Cover image
Airbus A340-300

EADS Business and Legal Description 2004

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

Business andLegal Description
2004

The complete EADS Annual Report Suite2004 consists of:

EADS Annual Review 2004 (1)EADS Financial Statements andCorporate Governance 2004 (2)EADS Business andLegal Description 2004 (3)(available upon request)
The online version of the EADSAnnual Report Suite 2004 is available
at the Investor Relations section ofwww.eads.com

This Reference Document was filed in French with the Autorité des marchés
financiers on 19th April 2005 pursuant to Articles 211–1 to 211–42 of the General
Regulations of the Autorité des marchés financiers. It may be used in support ofa financial transaction only if it is supplemented by a transaction note approved by
the Autorité des marchés financiers.
Warning
The AMF draws the attention of the public to the fact that:
European Aeronautic Defence and Space Company EADS N.V. (“EADS” or the“Company”) is a Dutch company, which is listed in France, Germany and Spain.
Given this fact, the applicable regulations with respect to public information andprotection of investors, as well as the commitments made by the Company tosecurities and market authorities, are described in this Reference Document.
This document contains information which forms an integral part of EADS’
Reference Document filed with the Autorité des marchés financiers on
19th April 2005. When used as a Reference Document, it must be read in
conjunction with the document entitled Financial Statements and Corporate
Governance – 2004 (Reference Document Part 1), containing, among
other things, the Company’s financial statements and the notes thereto.

Designed by williams and phoa.
Typeset by Bowne.

EADS Annual Report 2004

Part 2 (Business and Legal Description)

This Reference Document was filed in French with the Autorité des marchés financiers on 19th April 2005 pursuant to
Articles 211-1 to 211-42 of the General Regulations of the Autorité des marchés financiers. It may be used in support of afinancial transaction only if it is supplemented by a transaction note approved by the Autorité des marchés financiers.
Warning

The AMF draws the attention of the public to the fact that:
European Aeronautic Defence and Space Company EADS N.V. (‘‘EADS’’ or the ‘‘Company’’) is a Dutch company, which islisted in France, Germany and Spain. Given this fact, the applicable regulations with respect to public information and protectionof investors, as well as the commitments made by the Company to securities and market authorities, are described in thisReference Document.
This document contains information which forms an integral part of EADS’ Reference Document filed with theAutorité des marchés financiers on 19th April 2005. When used as a Reference Document, it must be read in
conjunction with the document entitled Financial Statements and Corporate Governance – 2004 (Reference Document
Part 1), containing, among other things, the Company’s financial statements and the notes thereto.

Business and Legal Description – 2004

Reference Document (Part 2)
Financial year 2004
3

Information on EADS Activities

Chapter 1

67

General Description of the Company
and its Share Capital

Chapter 3

3

Presentation of the Group

1.1

3

Overview

1.1.1

67

General Description of the Company

3.1

8

Airbus1.1.2

67

Corporate Name, Seat and Registered
Office

3.1.1

18

Military Transport Aircraft

1.1.3

67

Legal Form

3.1.2

22

Aeronautics

1.1.4

67

Governing Law – Dutch Regulations

3.1.3

28

Defence and Security Systems

1.1.5

71

3.1.4

38

Space

1.1.6

Date of Incorporation and Duration of theCompany

45

Investment

1.1.7

71

Objects of the Company

3.1.5

46

Recent Developments

1.2

71

Commercial and Companies Registry

3.1.6

47

Corporate Social Responsibility

71

Inspection of Corporate Documents

3.1.7

Chapter 2

71

Financial Year

3.1.8

71

Allocation and Distribution of Income

3.1.9

71

General Meetings

3.1.1073Disclosure of Holdings

3.1.1148

Creating a Common Understanding on
Corporate Social Responsibility

2.1

48

Aims of the 2004 Corporate Social
Responsibility Initiative

2.1.1

48

Methodological Approach

2.1.2

75

Mandatory Tender Offers

3.1.12

49

EADS Code of Ethics

2.2

77

General Description of the Share
Capital3.2

50Corporate Social Responsibility Policies
and Operations

2.3

77

Modification of Share Capital or Rights
Attaching to the Shares

3.2.1

50

Business Ethics

2.3.1

77

Issued Share Capital

3.2.2

53

Sustainable Growth

2.3.2

77

Authorized Share Capital

3.2.3

58

Environmental Care

2.3.3

77

3.2.4

60

Human Resources: Employer – Employee
Relationship

2.3.4

Securities Granting Access to theCompany’s Capital

78

3.2.5

Corporate Citizenship2.3.5

Changes in the Issued Share Capital Since
Incorporation of the Company

65

EADS Business and Legal Description 20041

Reference Document (Part 2) (continued)
Financial year 2004
96

Persons Responsible for the Reference Chapter 5
Document and Persons Responsible for
the Audit of the Financial Statements

96

Persons Responsible for the Reference
Document

5.1

96Statement of the Persons Responsible
for the Reference Document

5.2

96

Persons Responsible for the Audit of
the Financial Statements

5.3

96

Persons Responsible for the Review of
EADS’ Financial Statements

5.3.1

96

Statement of the Auditors

5.3.2

99

Information Policy

5.4

3.5.1

99

Undertakings of the Company
Regarding Information

5.5

Dividend Policy of EADS

3.5.2

100

Reference Document Thematic Index

93

Unclaimed Dividends

3.5.3

93

Taxation

3.5.4

95

Information Concerning Securities
Issued (Not Applicable)

Chapter 4

79

Shareholdings and Voting Rights

3.3

79

Shareholding Structure

3.3.1

81

Relationships with Principal Shareholders

3.3.2

86

Form of Shares

3.3.3

86

Changes in the Shareholding of theCompany Since its Incorporation

3.3.4

88

Persons Exercising Control over theCompany

3.3.5

88

Simplified Group Structure Chart

3.3.6

88

Purchase by the Company of its Own
Shares3.3.7

90

Stock Exchange Information

3.4

93

Dividends

3.5

93

Dividends and Cash Distributions Paid
Since the Incorporation of the Company

93

2

EADS Business and Legal Description 2004

1

Chapter 1: Information on EADS Activities

1.1 Presentation of the Group2
3

1.1.1 Overview

Except where stipulated otherwise, all the data provided below
were prepared on the basis of information from the Company.
With consolidated revenues of 431.8 billion in 2004, 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 2004, it generated approximately 76% of its total
revenues in the civil sector and 24% in the military sector.
2004 Highlights

EADS’ business environment in 2004 was characterized by an
upturn in international air traffic. While the upturn presents apromising perspective for future commercial aircraft sales,
continuing instability in the Middle East, the ongoing global
terror threat and high oil prices impacted airline profitability in
2004. Defence sector sales remained subject to constrained
procurement budgets in EADS’ home markets.
Over the course of the year, EADS continued to position
itself for sustained growth and profitability, in line with its
strategy of being a leading company in the major global
aerospace and defence markets. The record order book of
4184.3 billion at the end of 2004 constitutes a considerable
asset for EADS: representing approximately five years ofpresent level revenues in the commercial aircraft business andmore than six years in the defence business.
For the second year in a row, Airbus delivered more aircraft
and took in more orders than Boeing. Airbus received 370
gross orders in 2004, representing over 57% of gross new
aircraft orders for the year. Airbus delivered 320 aircraft in2004 (305 aircraft in 2003). In 2004, the A380 programme
realized significant commercial and technical achievements,
with a total of 139 firm orders from 13 customers at year-end.
In December 2004, with a view towards complementing thelong-range family of Airbus, the EADS Board of Directors
approved the commercial launch of the A350 aircraft.
Although 2004 was marked by differences between the U.S.
and the EU concerning government financing for commercial
aircraft programmes, negotiations have resumed and EADS
expects that the ultimate solution will lead to a level playing
field on both sides of the Atlantic.

EADS Business and Legal Description 2004

Expanding EADS’ capabilities and business revenues in the
defence sector is a core strategic priority for the EADS Group(the ‘‘Group’’). The defence-related order book grew from446 billion at year-end 2003 to 449 billion at year-end 2004,
while defence-related revenues increased 8% to 48 billion.
Contributing to this growth in 2004 were the Eurofighter
Tranche 2 and M51 (French ballistic missile) contracts, theorder of tanker aircraft by the Australian Armed Forces, theintegrated border security system contract with the RomanianInterior Ministry, and the first non-European orders for the
NH90 from Oman and Australia.
Turnaround at EADS Space was achieved in 2004, reflecting
the results of ongoing restructuring activities at the Division.
EADS Space finished the year with a positive EBIT* of
410 million (as compared to negative 4400 million in 2003).
Strategy
In order to maximise value for its shareholders and to balanceits portfolio, the management of EADS (the ‘‘Management’’)
intends to position EADS as a leading company in major
global aerospace and defence markets. The strategy iscomposed of four key elements:– Further strengthen EADS’ competitive position
EADS has established, and aims to maintain, its role as a
global market leader in respect of commercial aircraft –through Airbus, helicopters – through Eurocopter, missiles
systems – through MBDA and LFK and commercial spacelaunchers – through EADS Space Transportation.
The target of approximately 410 billion in defence andhomeland security-related sales annually by 2006, based on a
year-end 2004 defence backlog of approximately 449 billion,
reflects EADS’ ongoing efforts to gain additional groundagainst its key competitors in the defence and space sectors.
These efforts are supported by EADS’ young and competitive
portfolio, featuring programmes such as the A400M militarytransport aircraft, Eurofighter, Tiger and NH90 helicopters, theMeteor and Aster missile programmes and Skynet 5/Paradigm
secure communications network.
To further strengthen its competitive position in the defence
sector, EADS is expanding the scope of its business to include
homeland security, military transport aircraft, large defence
systems and service solutions, and is actively screening
targeted acquisition opportunities in key markets.
– Become a global industrial group
EADS intends to make use of its established reputation as atechnology leader and its growing credibility as a systems
integrator to support its transition from a European industrial
group with global export sales to a global industrial group
relying on local industrial footholds and technological cooperations in key markets, notably the U.S., Asia and Russia.

345

1.1 Presentation of the Group (continued)
EADS will vigorously pursue opportunities to extend local‘‘roots and branches’’ into these markets, a virtual prerequisite
to entry. Global program partnerships involving local industry
participants and acquisitions in target markets are not only
critical levers in the capturing of international markets, butalso a means of broadening EADS’ technology portfolio andpermitting EADS to benefit from cost advantages andenhanced natural currency hedging opportunities. Furthermore,group-wide efforts in the area of global sourcing support
EADS’ competitiveness and cost efficiency, especially against
the background of favourable budgetary conditions for
U.S. players.
The Group’s experience in Australia exemplifies the successful
implementation of this strategy. In Management’s view, thelocal industrial foothold established through the acquisition ofAustralian Aerospace in 2001, created a competitive advantage
for the Tiger contract and supported the contract signature of
the A330 tanker aircraft and the NH90.
U.S.
In the U.S., EADS aims to be perceived as a valued corporate
citizen in the world’s largest defence and homeland security
market. To this end, it is pursuing a four-pillared strategic
approach: creating a U.S. industrial presence (Eurocopter
Mississippi, Airbus Wichita design centre), developing
transatlantic relationships with the principal actors in the
U.S. aerospace and defence market (EuroHawk˛), acquiring
small and mid-sized defence companies (Racal Instruments) andcooperating with U.S. primes.
By consolidating the different components of its U.S.-based
defence business into EADS North America Defense
Company (operating under a Special Security Agreement with
the U.S. government) in 2004, EADS laid the organisationalfoundation on which it intends to develop the local footprintneeded to successfully attract U.S. military customers.
Capitalizing on EADS’ technologically advanced productportfolio, including in particular its helicopters and transport
and tanker aircraft, EADS North America is pursuing several
key campaigns in the U.S., each within the framework of apartnership with a U.S. defence industry participant. The
projects include the KC-330 tanker, the Utility Helicopter, theFuture Cargo Aircraft and MEADS.

1 Command, Control, Communications, Computers, Intelligence, Surveillance andReconnaissance.

4

EADS Business and Legal Description 2004

Asia
Management sees Asia, and in particular China and India, as apromising market for future growth. The rapid pace ofeconomic growth in these countries drives demand for air
travel and supports increasing governmental budgets. EADS
aims to derive 30% of its revenues from Asia in 2015.
In 2003, EADS took an important step into the Chinese
market through its stake in AviChina, localising Eurocopter
manufacturing in north-eastern China. Airbus has set asourcing target of U.S.$120 million in China by 2010 and has
plans for setting up an engineering center. EADS envisages
further joint programme development partnerships with
Chinese partners, following the model of the recent agreement
for the joint development and production of a new
multipurpose helicopter with AviChina (AVIC II). Overall,
EADS is committed to developing long-term strategic
partnerships with China’s industry and government in order tobecome their global partner of reference.
RussiaManagement views the development of Russia’s economy as apromising opportunity, with the Russian aerospace and defence
industry gaining new strength through restructuring andconsolidation. As an initial foray into the Russian market,
EADS is participating in this restructuring and consolidation
process through a co-operation with IRKUT. Joint new
programme developments, with a particular focus on export
markets and technology partnerships, are at the core of themutual interest shared by EADS and its Russianindustrial partners.
– Deliver systems and service solutions
The transformation of U.S. and European defence forces andpublic safety agencies and the need for a more efficient use ofexisting defence budgets is driving EADS’ customers to
demand complete systems and service solutions. In response,
EADS aims to increase the competitiveness of its current
programme offerings by emphasising its capabilities in leadsystem integration and service solutions.
Specifically, EADS is targeting a clear prime position in new
growth areas of network enabled operations, manifested by its
extended air defence, C4ISR1, unmanned aerial vehicles andmilitary space programmes.

1

1.1 Presentation of the Group (continued)

2
3

The contract for the provision of an integrated bordersurveillance system for Romania, awarded to EADS in 2004,
represents a significant step in this direction. The NATOtransformation contract, pursued together with U.S.-based
SAIC, and the leading role of EADS in the NATO AGS teamserve as further examples of the substantive development of
EADS’ systems and solution business.
In addition to systems, EADS is committed to extending its
programme leadership through the provision of service
solutions, including outsourcing, to defence forces and public
safety agencies, such as the secure communication services of
Paradigm and the in-fleet services provided by the Eurofighter
system support centre.
– Focus on innovation and technology
By combining a wide range of products and expertise intohigh value-added, integrated systems, EADS will seek to enter
new markets, maximise margins and offer strongly
differentiated solutions that are tailored to increasingly
complex customer needs in both the civil and defence sectors.
New businesses such as complete homeland security systems,
Galileo navigation satellites and military derivatives based on
its existing Airbus platforms exemplify EADS’ ability to
combine know-how and products in the development of
incremental businesses.
Continuous innovation has been the basis of EADS’ success inthe past, and Management expects that it will be even more
important going forward. Innovation cycles are shortening andnew competitors are emerging in all fields of EADS’ business.
EADS intends to position itself as a market-leading provider
of innovative solutions covering a broad spectrum oftechnologies including new materials, manufacturing
techniques, disruptive technologies, system integration, andquality control.
In absolute terms and as a percentage of sales, EADS has
consistently devoted more of its own resources to research anddevelopment than its peers. Management firmly believes that
this sustained investment in R&D is paying off in terms ofcompetitive position and is resulting in positive return on
investment. Shareholder value is founded on thislong-term view.

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 2004, Airbus has received
5,252 orders for aircraft from 204 customers worldwide. Its
market share of annual deliveries worldwide has grown from
15% in 1990 to 53% in 2004, surpassing its rival Boeing forthe first time. At 31st December 2004, its backlog of orders(1,500 aircraft) stood at 74% of total EADS worldwide backlog.
After accounting for cancellations, net order intake for 2004
was 366 aircraft. In 2004, the Airbus Division of EADS
earned revenues of 420.2 billion, representing 64% of EADS
total revenues. See ‘‘– 1.1.2 Airbus’’.
Military Transport Aircraft

The Military Transport Aircraft Division (the ‘‘MTA
Division’’) manufactures and sells light and medium militarytransport aircraft and is responsible for the development of theEuropean heavy military transport A400M project. In addition,
the MTA Division produces and sells mission aircraft, which
are derived from existing platforms and dedicated to
specialised military tasks such as maritime surveillance,
antisubmarine warfare and in-flight refuelling capabilities. The
MTA Division also designs and manufactures aerostructureelements. The MTA Division earned consolidated revenues of
41.3 billion accounting for 4% of EADS’ total revenues for2004. The 419.7 billion contract to manufacture and deliver
the A400M was signed in 2003, contributing to significant
future revenue growth for EADS. See ‘‘– 1.1.3 MilitaryTransport Aircraft’’.
Aeronautics
The Aeronautics Division groups together a number of civil
and military aviation-related businesses, including helicopters,
regional and general aviation aircraft and aircraft conversion
and maintenance. The Aeronautics Division is also involved in
the manufacturing of aerostructures for Airbus. Management
views the mix of young and mature civil and military
programmes and services as an effective means of assuringconsistent positive results in markets subject to cyclical or
fluctuating demand. For 2004, the Aeronautics Division earned
consolidated revenues of 43.9 billion representing 12% of
EADS’ total revenues. See ‘‘– 1.1.4 Aeronautics’’.

Organisation of EADS Businesses

EADS businesses fall under five Divisions: (1) Airbus,(2) Military Transport Aircraft, (3) Aeronautics, (4) Defence
and Security Systems and (5) Space. The chart atparagraph 3.3.6 illustrates the allocation of activities among
these five Divisions.

EADS Business and Legal Description 2004

Defence and Security Systems
The Defence and Security Systems Division (the ‘‘DS
Division’’) is active in the field of integrated systems
including missile systems, combat aircraft, defence electronics,
military communications and services. Based on 2004 revenues,
EADS’ subsidiary MBDA has become the largest manufacturer

545

1.1 Presentation of the Group (continued)of tactical missile systems in the world. Its military aircraft
Business Unit, which was transferred from the Aeronautics
Division in 2003, is a leading partner in the Eurofighter
consortium. EADS is the third largest supplier of defence
electronics in Europe and plays a significant role in the secureand encrypted military communications market. On a
consolidated basis, the DS Division earned revenues of
45.4 billion for 2004, representing 17% of EADS’ total
revenues. See ‘‘– 1.1.5 Defence and Security Systems’’.
Space

EADS is the third largest space systems manufacturing
company in the world after Boeing and Lockheed Martin andthe leading European supplier of satellites, orbital
infrastructures and launchers. The Space Division designs,
develops and manufactures satellites, orbital infrastructures andlaunchers largely through its subsidiaries EADS Astrium and
EADS Space Transportation (‘‘EADS ST’’), and provides space
services through its EADS Space Services subsidiary. The
Space Division also provides launch services, through its
shareholdings in Arianespace, Starsem and Eurockot, as well as
services related to telecommunications and earth observation
satellites, through dedicated companies, such as Paradigm. For
2004, the consolidated revenues of the EADS Space Division
amounted to 42.6 billion, or 8% of EADS’ total consolidated
revenues. See ‘‘– 1.1.6 Space’’.
Investment

Among its significant investments, EADS holds a 46.03% stakein Dassault Aviation, a major participant in the world market
for military jet aircraft and business jets. See‘‘– 1.1.7 Investments’’.
Summary Financial and Operating Data

The following tables provide summary financial and operating
data for EADS for the years ended 31st December 2004 and31st December 2003.

6

EADS Business and Legal Description 2004

Consolidated Revenues for the Years Ended
31st December 2004 and 2003 by Division
Year Ended
31st December 2004

AirbusMilitary Transport
AircraftAeronautics
Defence andSecurity Systems
Space
Total Divisional
Revenues
Headquarters/
Eliminations**
Total Consolidated
Revenues

Year Ended
31st December 2003

Amount in
1 bn

InPercentage*

Amount in
1 bn

InPercentage*

20.2

60

19.0

61

1.3
3.9

4
12

0.9
3.8

3
12

5.4
2.6

16
8

5.2
2.4

16
8

33.4

100

31.3

100

(1.6)

(1.2)

31.8

30.1

* Percentage of total divisional revenues before headquarters/eliminations.
** Includes inter alia intercompany eliminations and headquarters sales.

Consolidated Revenues by Geographical Area for the Years
Ended 31st December 2004 and 2003
Year Ended
31st December 2004

EuropeNorth America
Asia/PacificRest of the World
Total

Year Ended
31st December 2003

Amount in
1 bn

InPercentage*

Amount in
1 bn

InPercentage*

14.6
8.7
7.2
1.3
31.8

46
27
23
4
100

14.0
8.1
6.9
1.1
30.1

46
27
23
4
100

* Percentage of total revenues after eliminations.

1

1.1 Presentation of the Group (continued)

2
3

Consolidated Orders Booked for the Years Ended
31st December 2004 and 2003
Year Ended
31st December 2004

Orders booked:*
Airbus**Military Transport
AircraftAeronautics
Defence andSecurity Systems
Space
Total Divisional
OrdersHeadquarters/
Eliminations**
Total

Relationship Between EADS N.V. and the GroupYear Ended
31st December 2003

Amount in
1 bn

In Percentage***Amount in
1 bn

In Percentage***

25.8

57

39.9

52

1.2
4.3

2
9

20.3
3.7

27
5

8.5
5.7

19
13

6.3
6.1

8
8

45.5

100

76.3

100

(1.4)
44.1

(15.1)
61.2

To the best knowledge of Management, there are no pledges
over any of the assets of EADS N.V.

Consolidated Backlog for the Years Ended
31st December 2004 and 2003****

Backlog:*
Airbus**Military Transport
AircraftAeronautics
Defence & Security
Systems***Space
Total Divisional
Backlog
Headquarters/
Eliminations
Total

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 (‘‘Business Unit’’), and subsidiary is vested withfull entrepreneurial responsibility.

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

Year Ended
31st December 2004

EADS N.V. itself does not engage in the core aerospace,defense or 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
the Group. In particular, finance activities pursued by EADS
N.V. are in support of the business activities and strategy of
the Group. 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
cost plus basis.

Year Ended
31st December 2003

Amount in
1 bn

In Percentage***Amount in
1 bn

In Percentage***

136.0

70

141.8

73

19.9
10.2

10
5

20.0
9.8

11
5

17.3
11.3

9
6

14.3
7.9

7
4

194.7

100

193.8

100

(10.4)
184.3(14.5)
179.3* Without options.
** Based on catalogue prices.
*** Before headquarters/eliminations.
**** For a discussion on the calculation of backlog, see ‘‘Part 1/1.1.4 Measurementof Management’s Performance – Order Backlog’’.

EADS Business and Legal Description 2004

7

4
5

1.1 Presentation of the Group (continued)

1.1.2 Airbus
Introduction and Overview

Airbus is the leading supplier of commercial aircraft withmore than 100 seats. Its market share of annual deliveries
worldwide has grown from 15% in 1990 to 53% in 2004. At
31st December 2004, its backlog of orders (1,500 aircraft)stood at 74% of total EADS worldwide backlog. Afteraccounting for cancellations, net order intake for 2004 was
366 aircraft. In 2004, the Airbus Division of EADS earned
revenues of 420.2 billion, representing 64% of EADS
total revenues.
Based on deliveries in 2004, Airbus was the largest supplier ofcommercial aircraft in the world, surpassing its rival Boeing forthe second year in a row. Since it was founded in 1970 up to
the end of 31st December 2004, Airbus has received orders
for 5,252 aircraft from approximately 204 customers aroundthe world.
Several factors have contributed to the success of Airbus: its
portfolio of modern aircraft, its consistent technologicalinnovation, its stable pool of highly skilled employees and its
concept of aircraft ‘‘families’’ that offer customers cost savingsin crew training, maintenance and supply for their fleets ofdifferent sized Airbus aircraft. In addition, Management
believes that the international composition of Airbus
represents a competitive advantage in the global marketplace.
The Airbus Group is jointly owned by EADS (80%) andBAE SYSTEMS (20%).
Strategy

The paramount strategic goal of Airbus is to deliver first-rate
economic returns in a sustainable manner by continuing todevelop a superior family of products and commanding half of
the world commercial aircraft market over the long term. To
achieve this end, Airbus is actively:– Completing the most comprehensive line of products
targeted to customer needs
This entails (i) a major effort to develop, test, manufactureand deliver the A380 by early 2006, (ii) the gradualextension of relevant freighter applications across the rangeof Airbus aircraft, and (iii) the continuous maintenance ofexisting models’ competitive edge in theirrespective markets.
– Focusing on key geographic markets
Airbus is seeking to penetrate certain key markets such as
China and Russia, and to consolidate its position in the
difficult U.S. airline market.

8

EADS Business and Legal Description 2004

– Expanding its offering of services to customers
Expansion of its offering of customer services will enableAirbus to remain at the forefront of its industry by(i) designing answers to customers’ evolving needs, and(ii) ensuring optimal Airbus placement along the industry’svalue chain.
– Perfecting its industrial operations
Management is focused on capturing the benefits ofintegration, to enhance its response to changes in volume
and mix, and to carry out A380 related investments with astrong focus on flexibility and efficiency.
MarketCyclicality and Market Drivers

The main factors affecting demand in the aircraft market
include passenger demand for air travel, national andinternational regulation (and deregulation), and the rate of
replacement and obsolescence of existing fleets. The
performance, competitive posture and strategy of airlines, cargo
operators and leasing companies, wars, political unrest andextraordinary events may act as a catalyst, precipitate changes
in demand and lead to short term market imbalances.
2004 Airline Market Highlights. The market downturn,which started in 2001, driven by weakening world economies
and exacerbated by the terrorist attacks on 11th September
2001, the subsequent war in Iraq and the outbreak of SARS
in Asia was the focus of the industry. But in 2004, a market
recovery occurred in all regions with a particularly positive
trend in the Middle East and Asia, partially due to the postSARS recovery. In Europe, Latin America and the U.S., traffic
has returned and now exceeds pre-11th September levels.
Nevertheless, higher costs due to elevated fuel prices had anegative impact on airlines’ financials and yields remain
depressed in the U.S.
The no-frills/low-cost carriers continue to emerge as asignificant sector within domestic markets. They havedeveloped in the U.S. and Europe by following a businessmodel that leverages the benefits of minimising costs while
stimulating demand by offering low fares to and from shortand medium range, often under-served, destinations. Thisbusiness model, which proved to be particularly successful in
the U.S. following market deregulation, is now being adopted
by a growing number of airlines in Europe and Asia, resulting
in increased demand and increasing market share for low-costcarriers. Airbus’ family of modern single aisle aircraft based on
the A320 is well positioned to provide the operating cost baseand flexibility demanded by this segment of the market.
Airbus already has a strong presence in the U.S. no-frills/low-

1

1.1 Presentation of the Group (continued)

2
3

cost market with JetBlue, America West and Frontier, and has
also been successful in penetrating airlines in the growing low
cost sector in Asia, with sales and commitments from Cebu
Pacific, Air Deccan, Kingfisher and Air Asia, for example.
Overall Growth. The market for passenger jetliners depends
primarily on the demand for air travel, which is itself
primarily driven by economic or GDP growth, fare levels anddemographic 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 averageannual growth rate of 7.9% for the period. In 2004, Airbus
projected that air travel would grow at 5.3% per annum during
the period 2004-2023.
Cyclicality. Although those in the industry feel 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 typically experienced decreases in aircraft orders andlower deliveries followed by a period of sustained order anddelivery activity. After the last downturn at the time of the
Gulf War in 1991, this period of reduced orders anddeliveries was followed by six years of strong activity,
including the year 2000, which saw an industry record for
new passenger jet aircraft orders. Despite the current businesscycle, deliveries have been stable or have grown since 1994
due to Airbus’ increasing customer base, market share andexpanding product portfolio.
Management believes that it has been and will continue to beable to mitigate the impact of the market downturns byeffective management, including outsourcing decisions. See‘‘– Production – Adaptability to Changes in Demand’’. In
previous downturns, despite the decline in the aggregate
market for aircraft, Airbus was able to capture a larger shareof the reduced market, thereby cushioning the impact on its
operations. Furthermore, a decrease in orders and backlog need
not imply a reduction in immediate deliveries of thesame magnitude.
Regulation/Deregulation. National and international
regulation (and deregulation) of international air services andmajor domestic air travel markets affect demand for passenger
jetliners. In 1978, the United States undertook the
deregulation of its domestic air transportation system. Other
regions have followed this model, notably Europe since 1985.

EADS Business and Legal Description 2004

The Federal Aviation Authority (‘‘FAA’’) Stage 3 anti-noise
regulations requiring operators to replace many older aircraftby the end of 1999 also had an impact on demand, resulting
in a significant increase in North American orders in the years
leading up to and following implementation of the regulations.
Airline Network Development: Hubs. As a consequence of
deregulation policies, major airlines are constantly adapting
their fleet, network and commercial strategies. This adaptationis possible because of the availability of new aircraft capable ofmeeting customer requirements in terms of cost andperformance. In response to the price demands of passengers
and competition of new no frills/low cost carriers, major
airlines have organised their operations around strategicallylocated ‘‘hub’’ airports enabling them to link more cities atlower fares. This affects demand as hubs permit fleet
standardisation around both smaller aircraft types for the
short, thin and high frequency routes feeding the hubs
(between hubs and spokes) and larger aircraft for longer andhigher density routes between hubs (hub-to-hub). As a result,worldwide deregulation has contributed to the diversificationof airline strategies, which in itself has resulted in airlines
requiring a wider range of aircraft to implement
such strategies.
Fragmentation. The term ‘‘fragmentation’’ describes markets
in which point-to-point services replace or take a share of
traditional hub and spoke/connection traffic. Fragmentation ofthis type has primarily occurred on short and medium range
domestic U.S. routes, in response to competition and as ameans for airlines to differentiate their services fromone another.
The trend towards fragmentation on long and very long haulroutes, driven by the development of new routes between
secondary cities, will be facilitated by the availability of more
modern, efficient aircraft. In the trans-atlantic market, thedevelopment of new non-stop services between secondary
cities is expected to drive demand for intermediate wide bodyaircraft such as the A330.
Airbus recognised and responded to the airlines’ evolving
demand for aircraft with ever greater range and capacity
through the development of the very long range
A340-500/600 aircraft launched eight years ago. These aircraft
provide increased operational profitability not only in markets
where demand for point-to-point service already exists, butalso in markets that were not previously serviceable by older
types of aircraft due to range/cost limitations. Market dynamics
indicate that a combination of new routes (made possible byliberalisation, fragmentation and the need for hubs centred on
dense population centres) and traditional markets will

9

4
5

1.1 Presentation of the Group (continued)
characterise the future. Airbus believes that it is, with its
complete family of products from the 107-seat A318 to the555-seat A380, well-positioned to meet future
market requirements.
Alliances. The development of world airline alliances isreinforcing these strategies. According to data from Airclaims,
a U.K.-based aviation industry consultancy, half of the world’s
jetliner fleet of over 100 seats was operated by 22 airlines asof December 2002. In the 1990s, the major airlines began toenter into alliances that give each alliance member access tothe other alliance members’ hubs and routings, allowing
airlines to concentrate their hub investments while extending
their product offering.
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 for indirect support in relation to the development or
production of large civil aircraft (typically the Department of
Defense and NASA mechanisms used in the U.S.). Thisbilateral agreement had provided a level playing field forgovernment support, reflecting the needs of both Europe andthe U.S.
Following its unilateral withdrawal from the 1992 E.U.-U.S.
Agreement on Trade in Large Civil Aircraft, on 6th October
2004, the U.S. government lodged a request to initiate
settlement proceedings before the World Trade Organization(‘‘WTO’’) against the E.U. over support for Airbus. The E.U.
commenced a case against the U.S. over support for Boeing thenext day. On 11th January 2005, the parties agreed to attempt
to resolve their differences over industry support during athree-month negotiation period outside of the WTO
framework, with the goal of concluding a new agreement
establishing fair market competition for development andproduction of large civil aircraft in the U.S. and the E.U.
However, as of 11th April 2005, the parties had not been able
to reach a satisfactory agreement. Consequently, there is a riskthat the legal proceedings before the WTO may recommence.
Market Structure and Competition

Market Segments. Currently, Airbus competes in each of thethree principal market segments. ‘‘Single aisle’’ aircraft, such as
the A320 Family, have 100-210 seats in two rows divided by
one aisle and are used principally for short-range and mediumrange routes. ‘‘Twin aisle’’ or ‘‘wide body’’ aircraft, such as the

10

EADS Business and Legal Description 2004

A300/A310 and A330/A340 Families, have a wider fuselage
with more than 210 seats in three rows divided by two aisles.
Both the A300/A310 and A330/A340 Families are used on
short-range and medium-range routes, with the A330/A340
Family being capable of ultra-long range operations. ‘‘Verylarge aircraft’’, such as the A380 Family, are designed to carry
more than 400 passengers non-stop over very long-range
routes with superior comfort standards and with significant
cost-per-seat benefits to airlines. Freight aircraft, which form afourth, related segment, are often converted ex-passenger
aircraft. See ‘‘1.1.4 Aeronautics – Aircraft Conversion andTechnical Services.’’ In addition, the A300-600F has been a
successful all-new freight aircraft with increasing popularity
among major express courier providers and airlines, such as
Federal Express, UPS and Air Hong Kong. Airbus also
competes in the corporate, VIP business jet market with the
ACJ an A319-based Corporate Jetliner, which has proved
popular as a corporate shuttle and in government/VIP roles.
According to a study conducted by Airbus, a total of
10,800 aircraft with more than 100 seats were in service
during December 2004.
The high proportion of single aisle aircraft 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 following
deregulation. In comparison with North America and Europe,
the Asia-Pacific region uses a greater proportion of twin aisle
aircraft, as populations tend to be more concentrated in fewer
large urban centres than in the U.S. This distinction iscompounded by the fact that many of the region’s major
airports limit the number of flights either due toenvironmental concerns or to infrastructure constraints
limiting the ability to further increase flight frequency. These
constraints necessitate higher average aircraft seating capacity
per flight.
According to manufacturers’ published figures, a total of
605 new aircraft with more than 100 seats were delivered in
2004. Of these aircraft, 76% were single aisle, while 24% were
twin aisle aircraft.
Sales to leasing companies constitute a separate market sector
accounting for approximately 28% of aircraft deliveries in
2004, since leased aircraft are frequently operated in adifferent region from that of the leasing company’s
home jurisdiction.

1

1.1 Presentation of the Group (continued)

2
3Competition. 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 2004 Airbus and Boeing,respectively, accounted for 53% and 47% of total deliveries,
57% and 43% of total gross orders, and 58% and 42% of thetotal year-end backlog.

EADS has an 80% interest in Airbus S.A.S., and has effective
management control over its operations, while BAE
SYSTEMS, holding the remaining 20%, enjoys specificminority rights. Certain strategic decisions, such as acquisitions
and divestitures valued at more than U.S.$500 million,
approval of the three-year Business Plan (but not the annual
budgets or the launch of new programmes) as well as certain
actions which would dilute the ownership interest of BAE
SYSTEMS in Airbus S.A.S., require unanimous agreement.

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 ofthe established suppliers in the foreseeable future.

BAE SYSTEMS has been granted an option to sell its Airbus
S.A.S. shares at market value to EADS, either for cash
consideration or in exchange for EADS shares, as determined
by EADS. However, BAE SYSTEMS may elect to receive cash
where the issue of EADS shares would require priorburdensome regulatory authorisations impacting significantly
the allocation of the EADS shares. During the initial threeyear period, this put option can only be exercised in the eventthat BAE SYSTEMS disagrees with certain strategic decisions;
thereafter, it is exercisable without cause. EADS benefits froma call option at market value on the Airbus S.A.S. shares incase of a change of control of BAE SYSTEMS in certain
circumstances. Likewise, under certain circumstances, BAE
SYSTEMS can require EADS to purchase its Airbus S.A.S.
shares at market value in the event of a change in control of
BAE SYSTEMS or EADS.

Customers

As of 31st December 2004, Airbus had approximately
204 customers, 3,752 Airbus aircraft had been delivered tooperators worldwide since the creation of Airbus, and 1,500
aircraft were on order. The table below shows Airbus’ mostsignificant gross firm orders, by number of aircraft, for theyear 2004.
Customer

Air Berlin
Etihad Airways
Turk Hava Yollari
Jet Blue
China Southern Airlines
China Eastern Airlines
American West Airlines

Firm
Orders*

60
24
36
30
21
20
17

* Options are not included in orders booked or year-end backlog.
Source: Airbus

Organisation of Airbus
Integration of the Airbus Activities

On 11th July 2001, EADS and BAE SYSTEMS placed their
Airbus-related design, engineering, manufacturing andproduction activities located in France, Germany, Spain and the
U.K., and all their membership rights in GIE Airbus Industrieunder the common control of Airbus S.A.S., and under the
day-to-day control of a single management team. Airbus’
management team is also responsible for marketing andcustomer support. The rationale was that the Airbus business,having outgrown the consortium groupement d’intérêtéconomique (‘‘GIE’’) structure – which was well adapted topooling skills and resources in order to gain market position –needed a new corporate organisation that would centralisemanagement control over every aspect of the business.

EADS Business and Legal Description 2004

Beginning with the 2003 financial year, BAE SYSTEMS
became entitled to receive enhanced dividends, subject todeliveries of A340-500/600 aircraft exceeding an agreed target
rate. The enhanced dividends, which are indexed to Airbus’
future growth, could represent a non-indexed value from zero
up to a cap of 4237.5 million (based on current economic
conditions) over the following ten years.
Shareholder and strategic matters relating to Airbus S.A.S. aredecided by a shareholders’ committee, to which EADS has
appointed five members and BAE SYSTEMS two members.
Mr. Rainer Hertrich, Chief Executive Officer of EADS, is thechairman of the Shareholders’ Committee. Mr. Noël Forgeard,
as President and Chief Executive Officer of Airbus S.A.S., isresponsible for the operational management of the Airbus
business, together with the executive committee, consisting of
himself and up to nine other members, two of whom aremembers proposed by BAE SYSTEMS, all of whom are agreed
upon by the President and Chief Executive Officer of Airbus
S.A.S. and appointed by the Shareholders’ Committee.
As a consequence of its majority interest in Airbus S.A.S. andof the control provided by the shareholders’ agreement related
to Airbus S.A.S., EADS consolidates 100% of the integrated
Group in its financial statements as from 1st January 2001.

11

4
5

1.1 Presentation of the Group (continued)

Products and Services
Technological Breakthroughs

Technological innovation has been at the core of Airbus’
strategy since its creation. Many of the innovations thatprovided a distinct competitive advantage have subsequently
become standard in the aircraft industry.
– A300 – The A300 was the world’s first twin-engine twin
aisle commercial aircraft. This feature gave it a distinctive
advantage in terms of fuel burn and maintenance costs overits three-engine and four-engine competitors for the shortand medium range. The A300 B4, a derivative of theoriginal A300, was the first twin aisle commercial aircraft
certified for a two-member flight crew, resulting in lower
operational costs as compared to three-member crew
operated aircraft which was the industry standard at
the time.
– A310 – The A310, brought to the market in 1983, featured
the first digitally imaged cockpit displays, using cathode ray
tubes as opposed to the traditional mechanical display. This
made it possible to provide the pilot with improved flightand navigation displays and unique centralised, easy accessaircraft monitoring. The implementation of automatedsystems and the integration of Digital Flight Guidance both
helped to further improve safety levels.
New efficient aerodynamic concepts were also introduced,
such as a supercritical airfoil and the high aspect-ratio
transonic wing, which brought a significant improvement infuel burn. Carbon fibre reinforced composite materials wereintroduced for major structures such as the vertical fin andrudder, with significant weight savings as compared toaluminium, resulting in increased payload capability. The
installation of a trim tank in the horizontal stabiliser
increased operators’ savings significantly by optimising
aircraft conditions in flight.
– A320 – Airbus was the first to introduce digital fly-by-wire
controls with the A320 in 1988, introducing pilot
commands through a side stick controller instead of the
traditional control column. Flight-control computers translatethese commands into electrical signals for the moving
surface actuators and, at the same time, can prevent theaircraft going beyond the prescribed safe flight envelope.
Compared to the traditional mechanical flight controls, thisbrought increased manoeuvrability, simplified operations
through digital link-up with the autopilot system andweight reduction. The fly-by-wire concept is now featured
on all A320 Family aircraft as well as the A330/A340
Family. Airbus’ U.S. competitors did not introduce
fly-by-wire controls for civil aircraft until later. Composite
materials are also used extensively in the A320, in particular
for the horizontal tail plane.

12

EADS Business and Legal Description 2004

– A330/A340 – Four models of this twin aisle family featurewing commonality for two and four-engine variants of anotherwise similar airframe – a unique concept that permits
each model to be optimised around different market
requirements. The ultra-long-range A340-500/-600 feature alarger wing and introduce further breakthroughs in the useof weight saving composite materials for a large primarystructure (the 15m-long keel beam and rear cabinpressure bulkhead).
– A350 – The A350 is conceived as a ‘‘sistership’’ to theA330, bearing full commonality with the rest of the Airbus
aircraft family, while taking advantage of some of thetechnologies developed for the A380. With two versions(245 and 285 seats), the A350 is intended to offer moreseats, longer range, a lower fuel burn per seat and a lower
cash operating cost-per-seat than competing aircraft. Airbus
received ‘‘Authorisation to Offer’’ (ATO) the A350 in
December of 2004, and the aircraft is due to enter service
in the first half of 2010.
– A380 – The very large aircraft will bring further
development of advanced technologies and allow for theirbroader application. Approximately 25% of the aircraft
structure is to be manufactured using carbon composites andadvanced metallic hybrid materials, while innovative
manufacturing techniques such as laser beam welding will
eliminate fasteners, reduce weight and provide enhanced
fatigue tolerance.
The Family Concept – Commonality across the Fleet
Airbus’ four 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 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.

This commonality philosophy to reduce development costs also
permits aircraft operators to realise significant cost savings increw training, spare parts, maintenance and aircraft scheduling.

1

1.1 Presentation of the Group (continued)

2
3

The extent of cockpit commonality within and across families of aircraft is a unique feature of Airbus that, in Management’s
opinion, constitutes a sustainable competitive advantage.

4

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 and A321
derivatives, as well as the A319-based Airbus Corporate Jetliner, a business jet derivative, which Airbus launched in June 1997.
At 3.96 metres, 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 and a more capacious underfloor cargo volume than its competitors. The A320
Family incorporates digital fly-by-wire controls, an ergonomic cockpit and a lightweight carbon fibre composite horizontal
stabiliser, derived from the A310-300. The A320 Family’s competitors are the Boeing 737, 757 and 717 aircraft.
The A318. The A318 aircraft is a shortened version of the A319, designed to satisfy demand for aircraft in the 100 to
120-seat range.
Single Aisle Technical Features
Model

Entry into
service

Passenger
capacity*

Maximumrange (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.
Source : Airbus 2003

In 2004, Airbus received 279 orders for A318, A319, A320 and A321 aircraft and delivered 233 A320 Family aircraft.
Short- and medium-range twin aisle aircraft: the A300/A310. The A300/A310 aircraft were the initial models of the
Airbus product line and are designed for short-and-medium range routes. The A300, which entered into service in 1974, wasthe world’s first twin aisle, twin-engine aircraft. Its current version A300-600 is also available in freighter and convertible
passenger-freighter configurations, in service with both Federal Express and UPS.
In 1988, Airbus introduced the extended-range A300-600R, which incorporated the lightweight carbon fibre composite
horizontal stabiliser developed for the A310. The A310, which was based on the A300, entered into service in 1983, andintroduced the first electronic cockpit in civil aviation history.
A300/A310 Technical Features
Model*

Entry into
service

Passenger
Capacity**

Maximumrange (km)Length(meters)

Wingspan(meters)

A300
A310

1974
1983

266
220

7,500
9,600

54.1
46.7

44.8
43.9

* All versions of A300/A310 including freighters.
** Two-class layout.
Source: Airbus

In 2004, Airbus received two orders for A300 and A310 aircraft and delivered 12 A300 and A310 aircraft.

EADS Business and Legal Description 2004

13

5

1.1 Presentation of the Group (continued)
Medium to ultra- long-range twin aisle aircraft: the A330/A340 Family. Airbus developed the twin-engine A330 andlong-range four-engine A340 as a joint programme, using the same wing design for both aircraft and retaining the fuselage crosssection of the existing A300/A310 to offer comprehensive and economic medium to ultra-long-range route coverage.
In 1997, Airbus began development of the ultra-long-range A340-500 and the high capacity A340-600 derivatives. The
A340-500 is intended to offer more point-to-point routings over extremely long ranges. It is designed to allow non-stop flights
such as Los Angeles – Singapore or Chicago – Auckland. The A340-600 made its first flight in April 2001 and deliveries began
in July 2002.
The competitors of this family are the Boeing 767, 777 and 747 aircraft.
A330/A340 Technical Features
Model*

A330-200
A330-300
A340-200
A340-300
A340-500
A340-600

Entry into
service

Passenger
capacity*

Maximumrange (km)Length(meters)

Wingspan(meters)

1998
1994
1993
1992
2002
2002

253
295
240
295
313
380

12,50010,50014,80013,70016,70014,600

59.0
63.7
59.4
63.7
67.8
75.3

60.3
60.3
60.3
60.3
63.6
63.6

* Three-class layout.
Source: Airbus

In 2004, Airbus received 79 orders for A330 and A340 aircraft and delivered 75 A330 and A340 aircraft.
Very large aircraft: the A380 Family. In 2004, Airbus estimated worldwide passenger traffic would grow at a sustained
average annual rate of 5% during the 2004-2022 period, leading to two concurrent trends: rising fragmentation of a portion of
the marketplace, characterised by the development of new markets, higher frequency on thinner routes and hub by-passing; andconsolidation of the rest of the market, resulting in the concentration of the hub-to-hub traffic and hub-dominated traffic,
typical of alliance networks. See ‘‘– Market’’. Following five years of intensive pre-development with airlines, airports andregulatory authorities throughout the world, Airbus has defined a very large aircraft, the A380, to best serve the needs of theconsolidated hub-dominated market.
2004 was a significant year from an industrial and programme point of view with final assembly of the first airframe starting inMay. Four A380s, destined for use as test aircraft, are now assembled and production of major components for additional
aircraft at Airbus’ sites around Europe is progressing as planned.
The first A380 to fly has completed many of the required ground and systems tests and will soon be handed over to the
Airbus Flight Test Department for in-flight testing.
Three more aircraft have passed through the final assembly station at the purpose-built facility in Toulouse where major
components such as wings, vertical and horizontal tailplanes and fuselage sections are joined.
Systems installation and testing are being completed on the second and third aircraft.

14

EADS Business and Legal Description 2004

1

1.1 Presentation of the Group (continued)

2
3

In late January 2005, a set of wings and the horizontal
tailplane for the fifth A380 (which will be one of the first
A380s to enter service, in 2006) arrived at the final assemblyline in Toulouse. The arrival of the three fuselage sections of
the fifth aircraft in Toulouse in February marked the first timea ‘‘complete’’ A380 aircraft was delivered to the final assemblyline by convoy.
The A380 final assembly line is currently geared to produce
four A380s per month, with the capacity to produce moreaircraft if required.
At year-end 2004, Airbus had received a total of 139 firm
orders for the A380 from leading world airlines. The purchaseagreements with Lufthansa, Emirates, Federal Express, Malaysia
Airlines, Korean Air, Qatar Airways, Etihad and Thai
Airways, totalling 91 orders, were signed post-11 September
2001, confirming the strong and robust demand for thisaircraft from both passenger and freight operators.
The cost of developing the A380 programme, initiallyprojected at U.S.$10.7 billion, covers both R&D expenses andtooling for various versions of the A380. This estimate does
not include certain infrastructure elements or general andadministrative expenses.
Management presently intends to finance the programme by:– Maximising contributions from risk-sharing partners, whohave been found for up to U.S.$3.1 billion of non-recurringcosts, subject to the outcome of negotiations; to date, someten manufacturers have agreed in principle to participate in
the development and production of the A380 as risk-sharing
partners; and– Applying reimbursable launch investments fromgovernments in compliance with the 1992 U.S.-Europe
bilateral agreement and all other applicable regulations,estimated by Management at about U.S.$2.5 billion undercurrent assumptions; France, Great Britain and Spain havealready committed, and Germany has agreed in principle, tosuch investments. See ‘‘– Market – Cyclicality and Market
Drivers – Governmental Funding’’.
When deciding to launch the programme, Management set
itself a 20% pre-tax internal rate of return target, together witha project break-even point of approximately 250 aircraft. It issatisfied that the terms and conditions presently agreed with
its customers corroborate the business case.
Final assembly of the A380 takes place in Toulouse, whileinterior furnishing and customisation will be performed in
Hamburg. The fuselage sections are being produced at thesame sites in France and Germany as current Airbus aircraft.
The wings are being produced at facilities in the U.K., while
the horizontal stabiliser and other parts are being producedin Spain.

EADS Business and Legal Description 2004

New Product Development: A400M.

Airbus’ Military Programme Directorate, headed by
Mr. Francisco Fernandez, who is also the Executive Vice
President in charge of the MTA Division, performs researchand development related to the A400M project as an
outsource provider to Airbus Military S.L. The MilitaryTransport Aircraft A400M is described under ‘‘1.1.3 MilitaryTransport Aircraft – Products – Heavy Military Transport
Aircraft – Airbus A400M’’.
Asset Management

The Airbus Asset Management Division was set up 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 afleet 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
attached to such aircraft. At the end of 2004 the Airbus AssetManagement portfolio contained 47 aircraft, a net reduction of
six aircraft compared to the end of 2003. The AssetManagement Division also provides a full range of support
services, including assistance with entry into service, interior
reconfiguration and maintenance checks.
Sales Finance
Airbus favors cash sales, and does not envisage sales financing
as an area of business development; however, it recognizes theneed for manufacturers to assist customers in arranging
financing of new aircraft purchases, and in certain cases toparticipate in such financing itself. Extension of credit orassumption of exposure is subject to corporate oversight andmonitoring, and follows stringent standards of discipline andcaution. Airbus’ dedicated Sales Finance team has accumulated
decades of expertise in aircraft finance. When Airbus financesa customer, the financed aircraft generally serve as collateral,with the engine manufacture participating in the financing.
These elements assist in reducing the risk borne by Airbus.
Airbus’ sales financing transactions are designed to facilitate
subsequent sell-down of the exposure to the financial markets
third party lenders or lessors. Management believes, in light of
its experience, that the level of protection from default costs is
adequate and consistent with standards and practice in theaircraft financing industry. See ‘‘Part 1/1.1.6 Liquidity andCapital Resources – Sales Financing’’.

15

4
5

1.1 Presentation of the Group (continued)

Customer Service

Airbus is dedicated to assisting customers with the operationof their Airbus fleets as efficiently as possible. With respect toaircraft operation, the Airbus Customer Services directorate
Heads an engineering and technical support group, a technicaldocumentation organisation, a network of training centres,
spare parts stores and teams based at customer airlines.
Through this single interface, Airbus aims to satisfy all of its
customers’ pre-delivery and in-service support requirements,
including (1) engineering and technical support, (2) training
and flight operations support and (3) material 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
CAE has enlarged this network by 13 additional training
locations world-wide. As part of its training services, Airbus
offers Cross Crew Qualification programmes enabling pilots totake advantage of the high degree of commonality between
Airbus aircraft families, representing considerable savingsto airlines.
Airbus’ spares support centres stock over 120,000 different
part numbers, serving a worldwide distribution network from
Hamburg, Frankfurt, Washington, D.C., Singapore and China.
The 24-hour aircraft-on-ground service usually dispatches instock items within two hours of receipt of an order. A rangeof modular spares services is offered to the airlines to help
them reduce costs by identifying and eliminating deficiencies
in the supply chain.
Production
Workshare

Airbus aircraft are produced using an efficient and flexible
system that has optimised the specialised skills developed
during the last three decades. Each task in the building of the
Airbus aircraft (from design, definition and production to
product or operational support) is allocated to industrial sites

16

EADS Business and Legal Description 2004

according to their specialised expertise. The nurturing anddevelopment of centres of excellence, although a legacy of thepast, constitutes an original and competitive feature of
Airbus manufacturing.
Engineering
Airbus engineers work on specific and non-specific aircraft
designs to create solutions that ensure the company remains amarket leader. Using an innovative working practice, known as
Airbus Concurrent Engineering (‘‘ACE’’), teams are able towork together effectively in real time, regardless ofgeographical location.

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 trans-nationallywith engineers from each CoC present at all Airbus sites.
Drawing on the expertise of the CoCs, Engineering Integration
Centres (‘‘EICs’’) provide operational leadership for Airbus
design teams that are based around sections of the aircraft.
Located in France, Germany, Spain and the U.K., the design
teams combine the most appropriate people with the best
range of skills and expertise to meet the needs of the
manufacturing plants and help deliver specific
Airbus programmes.
Airbus engineers have also developed ‘‘Colleges of Experts’’ –teams of the most experienced specialists in each disciplinethat provide guidance and advice at senior levels. Thisapproach not only delivers design solutions to meet thehighest standards of technical quality and performance, butalso ensures that both individual and collective knowledge isnurtured 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. and in Moscow, Russia, enabling it
to tap into a large pool of experienced aerospace engineers
available in these two areas. 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, was inaugurated at the end of 2002.

1

1.1 Presentation of the Group (continued)

2
3

Manufacturing Facilities and Production Flow

Airbus has established highly specialised centres of excellence(CoE) based on the core competencies of each site within its
field of expertise. The CoEs are responsible for the design,
procurement and manufacturing of fully equipped and tested
deliverables, ranging from specific parts to major
aircraft components.
The eight CoEs are (1) CoE Nose and Centre Fuselage atToulouse, St. Nazaire, Nantes and Meaulte (France); (2) CoE
Forward and Aft Fuselage at Hamburg, Nordenham, Bremen
and Varel (Germany); (3) CoE Pylon and Nacelle at St. Eloi
(France); (4) CoE Vertical Tailplane (VTP) at Stade (Germany);(5) CoE Cabin and Cargo Customisation at Hamburg, Bremen,
Buxtehude and Laupheim (Germany) and Toulouse (France);(6) CoE Horizontal Tailplane and Belly Fairing (and certain
sections of the A380) in Getafe, Illescas and Puerto Real
(Spain); (7) CoE Electrics in Filton (U.K.), Hamburg (Germany)
and Toulouse (France); and (8) CoE Wing in Broughton andFilton (U.K.), with a satellite design office in Wichita,
Kansas (U.S.).
The CoEs deliver their specific components to one of the two
Airbus final assembly lines. Toulouse is responsible for the
final assembly of the A300/A310 Family, A320, A330/A340
Family and A380 Family, while Hamburg is responsible forthe final assembly of the A318, A319 and A321, as well as
major component assembly and cabin furnishing for the A380.

support the A380 production flow, Airbus has integrated road,river and sea transport, including the specially commissioned‘‘Ville de Bordeaux’’ barge. Typical production lead times for
single-aisle aircraft are 8-9 months, and 12-15 months forlong-range twin-aisle aircraft.
Adaptability to Changes in Demand

Airbus delivered 320 aircraft in 2004 (compared to 305 in2003) and expects to deliver approximately 355 aircraft in
2005. Any major market disruption or economic downturn
could lead to revision of these figures.
To meet its 2005 delivery target, Airbus has set various
elements of its adaptable manufacturing process in motion;these include enhanced integrated intelligence of customer andmarket situation to provide early warning, repatriation of anarray 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. This allows Airbus to increase adaptability
without paring the experienced and trained workforce which
Management considers a most valuable Airbus asset to sustain
long-term growth.
Airbus’ unique manufacturing flexibility is imbedded within
the organisation, implementing lessons learned fromprevious downturn.

Aircraft components are transferred between the network of
CoE sites and the final assembly lines using Airbus’ fivecustom built A300-600 ‘‘Beluga’’ Super Transporters. To

EADS Business and Legal Description 2004

17

4
5

1.1 Presentation of the Group (continued)

1.1.3 Military Transport Aircraft
Introduction and Overview

The Military Transport Aircraft Division (the ‘‘MTA
Division’’) produces and sells military derivatives aircraft,which are derived from existing transport aircraft platforms
and are dedicated to specialised military tasks such as maritime
surveillance, antisubmarine warfare and in-flight refuellingcapabilities. Additionally, the MTA Division develops,
manufactures and sells light and medium military transport
aircraft and is responsible for the European heavy militarytransport A400M project. The MTA Division also designs andmanufactures aerostructure elements.
The MTA Division earned consolidated revenues of
41.3 billion, accounting for 4% of EADS’ total consolidated
revenues for 2004.
Strategy

The MTA Division’s strategic goals are to develop its corebusinesses, to leverage the EADS pool of technologies to gain
share within its markets and to enhance profitability. To
achieve these goals, the MTA Division has implemented afocused, two-pronged strategy to:– Consolidate its leadership position and address thegrowing demand for modern and dependable tacticalmilitary transport aircraft.
EADS is the global leader in the market segments for lightand medium-sized military transport aircraft. Through theaddition of the A400M heavy transport aircraft, EADS
expects to broaden its range of tactical military transport
aircraft and to capture a market with high replacement
potential which Lockheed Martin formerly dominated.
– Optimise EADS’ capabilities to become a major supplierof military derivatives.
The MTA Division relies on its own specialised
technologies as well as those of the Defence and Security
Systems Division, and on EADS’ wide range of platforms
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 14 tons; and (3) heavy transport aircraft with a payload of
15 tons or more. According to a study by the Teal Group, an

18

EADS Business and Legal Description 2004

independent aerospace and defence industry consulting firm,
the market for military transport aircraft between 2004 and2013 will amount to an estimated U.S. $ 42.2 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 anaverage market share of 15% over the last ten years. The
C-212’s main competitors are manufactured by LET of the
Czech Republic and Raytheon of the U.S.
Medium Military Transport – Management believes that
this market will continue to experience moderate growth.
EADS models are prominent in this market segment, with theCN-235 and C-295 models having an average market share of
45% over the last ten years, followed by their competitors, the
C-27J produced by LMATTS, a joint venture of Alenia andLockheed, and the An-32 produced by Antonov.
Heavy Military Transport – This market segment hashistorically been driven by U.S. policy and budget decisions
and hence has been dominated by U.S. manufacturers and inparticular, Lockheed Martin’s C-130 Hercules. While the U.S.
is reducing and upgrading its existing fleet, European transport
fleet replacement and growth needs represent an opportunity
for the new A400M aircraft to effectively compete inthis market.
EADS has chosen thus far not to compete in the separate
market segment for super-heavy, strategic airlift aircraft, towhich the Boeing C-17 belongs.
Military Derivatives

Military Derivatives are transport aircraft derived from existing
platforms and adapted to particular missions, generally for
military customers. According to a study by Forecast
International, the market for military derivatives between 2004
and 2013 will amount to an estimated U.S.$42.4 billion. It is amarket of advanced technology and high added value solutions
where customers are increasingly demanding comprehensive
systems tailored to their respective operational requirements.
Modern defence and warfare increasingly require independent
access to complex forms of information in various theatres ofoperations. This development and Europe’s unsatisfied defence
needs are expected to boost demand for European-produced
mission aircraft in the near term. The MTA Division is wellpositioned in this market, as it has access, through Airbus, toefficient platforms that are already well-established in the civil
market. However, the market is currently dominated by
U.S. companies.

1

1.1 Presentation of the Group (continued)

2
3

Because of the limited size of any single European market andthe significant associated development costs, mission aircraft
programmes in the Europe tend to be funded and developedon a multi-national basis, with an emphasis on proventechnologies. EADS believes its strong position in Europe willallow it to exploit opportunities on a worldwide basis.
Products
Military Transport Aircraft – Medium and Light andOther Derivatives

C-212 – Light Military Transport. The C-212 was conceived asa simple and reliable unpressurised aircraft able to operatefrom makeshift airstrips and 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 aerialdelivery 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, enteredinto 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 pallet; 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.
C-295 – Medium Military Transport. Certified in 1999, theC-295 has the basic configuration of the CN-235, with astretched cabin to airlift a 50% heavier payload at greater speed
over similar distances. The C-295 is equipped with integrated
avionics incorporating digital cockpit displays and flight
management system, enabling tactical navigation, planning andthe integration of signals from several sensors. Both theCN-235 and C-295 have been designed as complements to or
replacements for ageing C-130 Hercules, accomplishing mostof their missions at a lower operating cost; specialising the

EADS Business and Legal Description 2004

C-130 for heavier cargo transport only extends its service life.
The MTA Division has commenced the work necessary todeliver during 2005 the six C-295s ordered by Algeria for4130 million.
Pending government approval, a contract with the Brazilian
Air Force for 12 Transport C-295 aircraft worth 4230 million
is expected to come into force in 2005.
As of 31st December 2004, 758 medium and light militarytransport aircraft had been ordered by 120 operators in
54 countries.
Maritime Patrol Aircraft
The MTA Division provides different solutions ranging from
Maritime Surveillance to Anti-Submarine Warfare throughaircraft based on the C-212, CN-235, C-295 or P-3 Orion
platforms, for which EADS has already developed a newgeneration, open architecture mission system called FITS (Fully
Integrated Tactical System). The first flight of the modernised
version of the Spanish P-3 Orion occurred in 2003.
In February 2004, in connection with the Deepwater Program
for the U.S. Coast Guard, EADS signed a contract with
Lockheed Martin for the sale of two CN-235 maritime patrolaircraft (including development), worth U.S.$87.4 million. The
contract also included options for spare parts and integrated
logistic support as well as options for six additional aircraft.
The value of the contract with all the options is approximately
U.S.$300 million. On 30th November 2004, one of the six
options was exercised.
The MTA Division was selected by the Brazilian Air Force in2003 to modernize their fleet of eight P-3 Orion aircraft. The
contract, worth 4325 million, is expected to enter into force
during the first half of 2005.
In 2004, the Spanish Government Maritime Surveillance andRescue Agency (SASEMAR) agreed to purchase three CN-235
maritime patrol aircraft, worth 482.5 million for sea rescue andanti-pollution missions.
Heavy Military Transport Aircraft
Airbus A400M. The A400M is designed to meet the Future
Large Aircraft requirements set out by seven European nations
to replace their ageing C-130 Hercules and C-160 Transall
fleets. In addition to fast and flexible intercontinental force
projection, the new aircraft is intended to respond to changing
geopolitical requirements (including increased humanitarian andpeacekeeping missions).

19

4
5

1.1 Presentation of the Group (continued)
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.
Airbus Military is a Spanish sociedad limitada dedicated to thedevelopment, manufacture and delivery of the A400M aircraft.
Shares in Airbus Military are currently held 69.44% by Airbus
S.A.S, 20.56% by EADS CASA, 5.56% by Tusas Aerospace
Industries Incorporated of Turkey and 4.44% by Flabel
Corporation NVSA of Belgium. 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.
In May 2003, the Organisation Conjointe en Matièred’Armement (‘‘OCCAR’’) signed a contract with Airbus
Military to order 180 A400M aircraft, mandated by sevennations: Belgium committed to eight aircraft (including one on
behalf of Luxembourg), France to 50, Germany to 60, Spain to
27, Turkey to ten, and the U.K. to 25.
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.
All planned contractual and internal milestones for 2004 wereachieved, including the first metal cut, the completion of
structural and system specifications, cockpit digital mock-up
and launch of the engine development process. The overall
programme’s development remains on schedule. The
construction of the final assembly line for the A400M in
Seville has begun, with completion scheduled for
December 2006.
The MTA Division has begun to focus on the export market
for the A400M, which it estimates at more than 200 aircraft
over the next 20 years.
The signature of a declaration of intent with the South
African government on 15th December 2004, represents thefirst concrete step taken by a country outside the existing

20

EADS Business and Legal Description 2004

group of seven launch nations to purchase the A400M. The
agreement declares the intent of the South African
government to participate in the A400M programme and toorder eight aircraft, representing a minimum contract value of
4720 million. Participation in the programme is subject to theallocation of work packages to South African industryreflective of the final number of aircraft purchased.
Military Derivatives on Airbus Platforms
Military Derivatives are transport aircraft derived from existing
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
for overall systems integration into such aircraft are extensive
and the number of participants on the world market isvery limited.

Strategic Tanker Aircraft. EADS seeks to provide a competitive
alternative to the near-monopoly currently enjoyed by Boeing
products in the market for strategic tanker aircraft. This should
help to ensure Europe’s ability to set up projects
independently. In light of the estimated worldwide market of
approximately 550 tanker aircraft, Management believes thatstrategic tanker aircraft offer an attractive opportunity
for EADS.
The MTA Division is leading a technological programme todevelop a new ‘‘air-to-air’’ refuelling boom system (‘‘ARBS’’)
based on the A330 derivative, a low-risk and cost-effective
platform that offers a greater supply capacity than othercompeting solutions.
ARBS is designed to ensure a refuelling performance two tofour times faster than that of the competition – a considerable
advantage as aircraft are very vulnerable during the refuelling
procedure. After a development period of nearly three years,
the refuelling boom was installed on the test rig in
November 2004.
– A330 MRTT (Royal Australian Air Force) – On
20th December 2004, the Royal Australian Air Force signed
a 4728 million contract with EADS to acquire five A330
multi-role tanker transports (‘‘MRTT’’) equipped with
ARBS to replace its existing Boeing 707 fleet. The MTA
Division is the prime contractor to provide the fullyequipped aircraft. The first MRTT will be produced inEurope, with the remaining four aircraft to be converted
into tankers by Qantas in Australia. Delivery of the first
A330 MRTT to Australia is scheduled for 2008, with entry
into service planned for 2009.

1

1.1 Presentation of the Group (continued)

2
3– A330 Future Strategic Tanker Aircraft (FTSA) (United
Kingdom Royal Air Force) – EADS, Rolls Royce,
Cobham, VT and Thales are cooperating through the
AirTanker consortium as the single bidder for the U.K.
MoD’s Future Strategic Tanker Aircraft (‘‘FSTA’’)programme. Likely to be structured as a Private FinanceInitiative, this programme would replace ageing VC10 and
Tristar tankers, currently operated by the Royal Air Force,with a system based on the long-range family of Airbus
aircraft. The programme will provide for the delivery of 17
aircraft to render the air refuelling service for 27 years.
MTAD’s participation in the programme will amount to42.2 billion.
Additionally, Management views the KC-X programme forthe replacement of the ageing U.S. fleet of strategic tanker
aircraft as a market opportunity. A capture team has been
established to act on the U.S. tanker campaign.
– A310 MRTT (German Air Force/Canadian Air Force) –Two A310 MRTT were delivered in September 2004, one
to the German and one to the Canadian Air Force. The
second aircraft for the German Air Force is expected to befinished early in 2005. In its entirety, the programme
involves four aircraft for the German Air Force and two
aircraft for the Canadian Air Force.
Customised and Converted Platforms. In this category, EADS isable to offer logistics transport aircraft such as Airbus cargovariants and aircraft offering protection to government
executives such as the A310 VIP.

Airborne Early Warning and Sky Surveillance (‘‘AEW’’). EADS
is currently studying the commercial feasibility of developing
an AEW aircraft with advanced active module radar. This
project would allow EADS to provide a new generation ofhigh-performance AEWs that are more cost-effective tooperate than the current generation. EADS expects that such
AEW systems could be offered in the future on several
different platforms.
Airborne Ground Surveillance (‘‘AGS’’). Within the frameworkof NATO, France, Germany, Italy and The Netherlands haveexpressed interest in the development of an AGS System. The
MTA Division could provide solutions based on the Airbus
A321 platform, integrating systems provided by the
DS Division.
Aerostructures
EADS-CASA has inherited CASA’s longstanding tradition ofexpertise in the utilisation of composite materials foraerostructure manufacturing and advanced automation
processes. This expertise is now applied throughout EADS.

Based on its expertise, the Aerostructures Business Unit isactively involved in the design, manufacture and certificationof complex aeronautical structures. During 2004, the Business
Unit delivered the first fan cowls for the Trent900 and
GP7200 engines and the belly-fairing for the A380, and thefirst phase of assembly tooling for the Dassault Falcon FNX
was completed at the Tablada plant.
Production

The C-212, CN-235 and the C-295 are manufactured in thefactory located within the San Pablo Airport in Seville.
Aerostructures are produced in Puerto Real (Cadiz) and at the
Tablada plant in Seville. The final assembly of the A400M
will take place at the San Pablo Airport facility.

EADS Business and Legal Description 2004

21

4
5

1.1 Presentation of the Group (continued)

1.1.4 Aeronautics
Introduction and Overview

Eurocopter
Overview

The Aeronautics Division groups together a number of civil
and military aviation related businesses, including helicopters,
regional and general aviation aircraft, and aircraft conversion
and maintenance. The Aeronautics Division also participates in
the manufacturing of aerostructures for Airbus. Management
views the mix of young and mature civil and military
programmes and services as an effective means of assuringconsistent positive results in markets subject to cyclical or
fluctuating demand. For 2004, the Aeronautics Division earned
consolidated revenues of 43.9 billion representing 12% of
EADS’ total revenues.

Eurocopter is one of the world’s largest manufacturers ofhelicopters, producing a very wide range of civil and militaryhelicopters. In 2004, Eurocopter captured 52% of theworldwide market for civil helicopters and 18% of the export
market for military helicopters. Through its helicopter
manufacturing and servicing operations and its contribution to
the aerostructure business, Eurocopter generated 72% of total
revenues of the Aeronautics Division in 2004.

Through Eurocopter, EADS is one of the world’s leading
producers of helicopters and the leader in the European civil
and military helicopter market. Management expects
Eurocopter sales in the military market to increase substantially
due to the commencement of delivery of the Tiger attack
helicopter, the strong backlog of the NH90 military transport
helicopter with a number of European governments and theincreasing demand in military and para-military export markets.
In addition to Eurocopter, the Aeronautics Division has
significant businesses in the areas of regional aircraft (ATR),
light aircraft (EADS Socata), aircraft conversion and technicalservices (EFW and EADS Sogerma Services) and aerostructures.
Strategy

The Aeronautics Division aims to further develop thosebusinesses which Management views as having potential forcontinued and future growth:– Maintain leadership in the market for civil helicopters.
The Aeronautics Division has renewed its comprehensive
product line of modern civil helicopters and will improveits civil helicopter operations, in particular through the
exploitation of synergies with its military helicopter
activities. Because customer services are an important sourceof revenues and a key component of value for clients, theAeronautics Division will continue to strengthen its
network of marketing, distribution and support systems,
which services approximately 9,320 Eurocopter aircraft with
2,400 operators worldwide.
– Leverage EADS’ role as an original equipment
manufacturer (‘‘OEM’’) to benefit from the steadily
growing conversion and customer service markets.
Exploiting EADS’ exceptional knowledge of Airbus aircraft
and relationships with Airbus customers, the Aeronautics
Division continues to expand its Airbus conversion andmaintenance business. EFW offers the only OEM solution
for converting existing Airbus passenger aircraft to freighter
aircraft. Additionally, the Aeronautics Division capitalises on
its strong position in industrial maintenance for Air Forcesand diversifies its services to include training and expand
the logistics support value chain for its
governmental customers.

22

EADS Business and Legal Description 2004

MarketIn 2002, the value of helicopters delivered worldwide wasestimated at over 47 billion; a figure Management expects willgrow to 410 billion by 2010. 5,300 civil and 5,100 militaryhelicopters are expected to be built globally from 2005 to
2014. This forecast, particularly with respect to the military
segment, depends to a large extent on the future of 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 ofhelicopters equipped with integrated technology systems andthe ongoing introduction of combat helicopters into manynational armed forces will contribute to increased militaryhelicopter procurement over the next several years. Recent
large-scale military programmes, such as those conducted byAustralia, Brazil, Indonesia, Spain, and the Nordics Standard
Helicopter Project have confirmed this trend. Demand fromthe 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 47% of the total value of deliveries in 2004. In 2004
outside France, Germany and Spain, helicopter orders for theexport market reached 70%.
The military segment is highly competitive and is characterisedby competitive restrictions on foreign manufacturers’ access tothe domestic defence bidding process, sometimes to the virtual
exclusion of imports. Consequently, Eurocopter’s past share of
the global market for military helicopters has been relatively
small. However, EADS aims to increase this share in the
future with the introduction of the Tiger and NH90.

1

1.1 Presentation of the Group (continued)

2
3

In the military segment, Eurocopter’s principal competitors are
the four major helicopter manufacturers operating worldwide,
including Agusta-Westland in Europe and Bell Helicopter,
Boeing and Sikorsky in the U.S. Additionally, a number ofdomestic manufacturers compete in these four manufacturers’
respective national markets.

on a series of new-generation platforms that are designed toadapt to both military and civil applications. The table below
illustrates Eurocopter’s existing product line:

The helicopters sold in the civil sector provide transport forcorporate executives, offshore oil drillers, diverse commercial
applications and state agencies, including coast guard, police,
medical and fire-fighting services. Management believes thatthe value of global civil deliveries will grow at an average rateof 3% in the next ten years. Market data indicates that in2004, worldwide deliveries of civil turbine helicopters stood at
493 units.

EC120

Eurocopter’s principal civil competitor globally is Bell
Helicopter, a division of Textron Inc. of the U.S. The civil
helicopter segment is relatively concentrated, with Eurocopter
and Bell Helicopter together accounting for approximately 75%
of total civil helicopter sales in 2004 (i.e., roughly as follows:
EC 52%; Bell 22%; Agusta 10%; Siko; 10%).
Products and Services

Existing Products. Management believes that Eurocopter
currently offers the most complete and modern helicopter
product range, covering more than 85% of the overall civil andmilitary market spectrum. The Eurocopter product range
includes light single-engine, light twin-engine, medium andmedium-heavy helicopters. Eurocopter’s product line is based

Helicopter Type

Typical Uses

Entry into
Service

Light Single Engine

Corporate/Private

1998

Utility, Law Enforcement,
Corporate/Private
Shuttle, Tourism, Offshore,
Corporate/Private

1975

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

1988

Single Engine

AS350
EC130

2001

Light Twin Engine

AS355N
EC135
EC635
EC145

Emergency Medical,
Parapublic*, Shuttle

1996
2003
2002

MediumDauphin
EC155

Offshore, Parapublic*
Corporate/Private, Offshore,
Parapublic*, Shuttle

1977
1999

Offshore, Shuttle

1980

Offshore, Shuttle

1993

Medium Heavy

Super Puma/
Cougar
MK II* Parapublic includes law enforcement, fire fighting, border patrol, coast guard andpublic agency emergency medical services.

– The Tiger. In 1987, the French and German governments
launched the Tiger combat attack helicopter programme.
Development is nearing completion, with two variants basedon the same airframe; an antitank variant and a support andprotection variant. Initially, the antitank variants are to bebuilt for both the French and German armies, while theFrench army alone has expressed requirements for the
support and protection variant. Total requirements of
215 aircraft for France and 182 for Germany wereconfirmed. In 2004, the first two Tiger attack helicopters,out of a total of 22, were delivered under a contract signedwith the Australian MoD in 2002. In 2003, Spain signed amemorandum of understanding for the purchase of
24 aircraft.

EADS Business and Legal Description 2004

23

4
5

1.1 Presentation of the Group (continued)
In recent years Eurocopter has invested in the renewal of its
civil product line, enhancing its competitive position in thecivil segment so that its share of the world market currently
stands above 50%. Eurocopter has successfully introduced into
the international markets such newly developed products as
the light, single-engine EC120 and the light, twin-engine
EC135, and such major product upgrades as the EC155, thelatest evolution of the medium class Dauphin, and the EC145
light helicopter, a derivative of the BK117. Deliveries of theEC130, the latest single engine member of the Ecureuil family
started in 2001.
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, (2) the Tiger attack
helicopter and (3) the EC725, the latest member of the
Cougar family.
– The NH90. The NH90 was developed as a multi-role
helicopter for both tactical transport and naval applications.
The project, principally financed by the governments ofFrance, Germany, Italy and the Netherlands, was jointly
developed by Eurocopter, Agusta of Italy and Fokker
Services of the Netherlands as joint partners in NatoHelicopter Industries (‘‘NHI’’) in direct proportion to theircountries’ expressed procurement commitments. Eurocopter’sshare of NHI is 62.5%. Confirmed requirements for the
NH90 are for 325 helicopters and 85 options. Production of
the first lot of 243 helicopters and 55 optional helicopters
to be delivered to the four partner countries started in
2000, with first deliveries expected at the end of 2005. In
2001, Portugal booked ten NH90 helicopters; Finland,
Sweden and Norway also jointly chose the NH90, with
52 firm units plus 17 options. Of these firm orders, 38
were booked in 2001, while 14 were booked in 2002.
Greece ordered 20 aircraft in 2003, plus 14 options.
Following these successes, in 2004 Oman ordered 20 NH90
TTH’s and Australia ordered 12 NH90’s (AIR 9000). Theseorders confirm the NH90’s significant export potential as amilitary platform with possible civil applications in
the future.
Development activities represent 11% of Eurocopter’s total
revenues for 2004. These sales derive principally fromexternally funded development of the Tiger andNH90 programmes.
Customer Support. As of 31st December 2004, Eurocopter
products constituted the world’s second largest manufacturer
fleet, with approximately more than 9,320 helicopters inservice worldwide. Consequently, customer support activities

24

EADS Business and Legal Description 2004

represented 34% of Eurocopter’s revenues for 2004.
Eurocopter’s customer support activities consist principally of
training, maintenance, repairs and spare part supply. To
provide efficient worldwide service, Eurocopter has established
an international service network of subsidiaries, authorised
distributors and service centres. Additionally, to extend therange of services offered to customers, Eurocopter and Thales
have together established HELISIM, a helicopter training
centre, which opened in 2002. A consortium consisting ofEurocopter, CAE, Rheinmetall Defence Electronics, and Thales
was awarded the contract for the Helicopter Flight Training
Services (HFTS), a first Private Finance Initiative (PFI) project
to design, build and operate three NH90 training centres
in Germany.
Customers and Marketing
Eurocopter’s principal military clients have been thegovernments of European countries, followed by clients in
Asia and the Middle East. Eurocopter’s penetration of the civil
and parapublic market is globally well distributed, and its
penetration of the civil and parapublic market in Europe, theU.S. and Canada places it first among manufacturers inthese markets.

Eurocopter’s global strategy is reflected in its development of alarge international network. Eurocopter’s network currently
comprises 15 foreign subsidiaries, complemented by a networkof authorised distributors and service centres geared to thelargest number of potential clients.
Additionally, Eurocopter has developed expertise in production
licensing, joint production and subcontracting agreements andhas been developing links with industrial partners andsuppliers in more than 35 different countries.
Approximately 2,400 operators worldwide currently operate
Eurocopter helicopters, forming a broad established base forEurocopter’s customer support activities. 85% of Eurocopter’scustomers have fleets of between one and four helicopters.
The versatility and reliability of Eurocopter products havemade them the preferred choice of the most prominentcustomers. The U.S. Coast Guard operates 95 Dolphin(Dauphin) helicopters and the world’s largest offshore
operators (Norwegian Helicopter Services and PHI) 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 Rocky Mountain Helicopter in the U.S. and
ADAC in Germany. Agencies with high serviceability
requirements, including police and armed forces, rely on
Eurocopter products.

1

1.1 Presentation of the Group (continued)

2
3Production

Eurocopter’s manufacturing development activities are carriedout primarily in four locations, two in France and two in
Germany. The French sites are located at Marignane, insouthern France, and La Courneuve, near Paris. The Germansites are located at Donauwörth and Ottobrunn, near Munich.
The opening of an AS350 final assembly line plant in
Mississippi (targeting the parapublic sector in the U.S.) and a
Tiger final assembly plant in Australia (relating to specific
Australian version development under the AIR 87 program)reflect Eurocopter’s commercial strategy to increase its presencein these key countries.
Regional Aircraft – ATR
Overview

ATR is a world leader in the market for regional turboprop
aircraft of 40 to 70 seats. ATR Integrated is a consortium
composed of EADS and Alenia, in which they each hold a
50% stake. EADS’ 50% share of ATR Integrated generated
5.3% of the Aeronautics Division’s total revenues in 2004.
Market

The regional aircraft industry has experienced concentration inrecent years. During the 1990s, a number of manufacturers
merged, closed or ceased production of regional aircraft,
leading to the withdrawal from the market of BAE Jetstream,
Beechcraft, Fokker, Saab and Shorts. As of 31st December
2004, the worldwide market for turboprop aircraft of
40-70 seats in production was dominated by two
manufacturers: ATR (with 39% of total market deliveries) andBombardier. In 2004, ATR registered orders for 12 newaircraft, and it delivered 13 new aircraft and sold 19 usedaircraft. From 2003 to 2004, the market increased by 38%.
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, inorder to respond to operators’ increasing demands for comfort
and performance, ATR launched a new generation of aircraft
designated the ATR 72-500 and ATR 42-500. Like Airbus,
the ATR range is based on the family concept, which provides
for savings in training, maintenance operations, spare parts
supply and CCQ.

EADS Business and Legal Description 2004

Customer Service. ATR has established a worldwide customer
support organisation committed to supporting the aircraft overits service life. Service centres and spare parts stocks arelocated at Toulouse, in the vicinity of Washington D.C. andin Singapore. An e-market place designed to enhance support
services developed with Embraer was made available tocustomers in 2004.
ATR Asset Management. Consistent with industry practice, asignificant portion of orders received by ATR is conditional on
its assistance in financing the purchase either through leasing
or loan guarantee arrangements. The ATR Asset Management
manages the resulting risk and responds to the growing market
for second-hand aircraft. By assisting in the placement andfinancing of used and end-of-lease aircraft, ATR AssetManagement has helped broaden ATR’s customer base,notably in emerging markets, by providing quality
reconditioned aircraft at attractive prices and has helped
maintain residual values of used aircraft. In the past, clientsfor such used aircraft have subsequently purchased new
aircraft as they have gained experience in the operation of
ATR turboprops. Returned aircraft generally remain out ofservice for approximately five months awaiting reconditioning
and resale or leasing, subject to market conditions. ATR has
been successful in implementing its strategy of consistent
reduction of sales financing exposure.
Production

The ATR production facilities are located near Naples, Italy
and at 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 boththe private civil aircraft market and governmental fleet, and isalso engaged in aerostructure subcontracting, and producing
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, theTB family, and the monoturboprop pressurised TBM 700.
Continuous development and use of innovative technologies
keep these products well-positioned on their market. These
new-generation aircraft compete with products based onmodels that date back to the 1950s. Many aircraft in thegeneral aviation market are nearing the end of their service
life. To improve its penetration of the U.S. market, which
represents 60% of its general aviation sales, EADS Socata isdeveloping an U.S. distributor network.

25

4
5

1.1 Presentation of the Group (continued)
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, A380ѧ), 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 programs. 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 metal-composite combination technology andforming of large-dimension metal panels. Additionally,
EADS Socata carries out design work for a number ofEuropean aviation programmes, including Airbus, Eurocopter,
Mirage and Falcon aircraft.

for large aircraft VIP completion. EADS Sogerma designs andmanufactures high-end cabin interior components and first andbusiness class passenger seats. Aircraft customisation also
includes military transport and mission aircraft(e.g., C-130 life extension).

Global Support Solutions
EADS Sogerma

In the fields of aircraft conversion and technical services,
EADS combines the operations of EADS Sogerma Services
and Elbe Flugzeugwerke GmbH (‘‘EFW’’). Management
believes that the concentration of expertise in a stable pool ofhighly skilled workers enables EADS’ aircraft conversion andtechnical services group to perform services on a wide range ofaircraft, including all of the aircraft produced by EADS.
Additionally, the exchange of skilled workers in response tocyclical variations in the market occurs increasingly within theaircraft conversion and technical services group, generatingsynergies. Moreover, EADS can use knowledge gained throughmaintaining Airbus aircraft to improve initial product quality
and reduce maintenance costs.

With 25% of its employees located outside of Europe, and11 locations worldwide, EADS Sogerma is internationallypresent. It focuses primarily on two business lines: (1) global
support and maintenance, and (2) aircraft and cabincustomisation and aerostructures, primarily for Airbus.
Revenues from EADS Sogerma Services in 2004 represented
15.8% of the Aeronautics Division’s total revenues.
Global Support and Maintenance. EADS Sogerma provides
global support solutions such as engineering, fleet management
and airframe and components maintenance services. These
services are carried out in facilities in Bordeaux, France; Lake
Charles, U.S.; and Monastir, Tunisia. EADS Sogerma also
provides maintenance services for military transport aircraft,including C-130 checks in Casablanca, Morocco.
EADS Sogerma also specialises in small engines (SECA in Le
Bourget, France), landing gear, APU (in Rouen, France) andavionics MRO (Bordeaux, France; Miami, Florida;and Hong Kong).
Aircraft & Cabin Customisation and Aerostructures. EADS
Sogerma is an approved outfitter for Airbus’ corporate jets,with services currently performed in Toulouse and in
Bordeaux. Additionally, Bordeaux has dedicated hangar bays

26

EADS Business and Legal Description 2004

In the aerostructures field, EADS Sogerma is involved in thedesign and manufacture of fuselage panels and sections for
Airbus aircraft and in composite components for aeronauticaland general industrial applications. Metal work is conducted in
Rochefort, France, while composites activities are conducted in
France and Canada.
Aircraft Conversion and Floor Panels
Overview

EADS is a major provider of aircraft conversion and technicalservices for airlines.

In the field of commercial aircraft technical services,knowledge exchange within EADS will benefit maintenance ofearly-generation Airbus aircraft and facilitate maintenanceactivities for newer aircraft such as the A320 or A330/A340.
Management believes that integrated packages, designed tomeet customers’ full range of service requirements, will be
particularly attractive to small and medium-sized airlines.
Management believes that joint marketing of maintenance andconversion work has been beneficial, since EADS has beenretained to perform maintenance for a large number ofconverted aircraft.

1

1.1 Presentation of the Group (continued)

2
3

Commercial Aircraft Conversion – EFW

Conversion of passenger aircraft into freighter aircraft(‘‘P to F’’), which generally requires 30,000 to 40,000 working
hours and requires highly-skilled workers to modify theaircraft structure as well as passenger related systems, such as
air conditioning, heating and lighting, is the modification most
proposed to commercial aircraft owners. Conversion kitscomprise original parts, known as Original Equipment
Manufacturer or ‘‘OEM’’ parts from the corresponding Airbus
serial freighter versions, and result in a converted aircraft thatis very similar to a freighter from the series production.
Market. The market for civil aircraft freighter conversion
encompasses freight service airlines such as UPS or Federal
Express, airlines with small aircraft fleets and finance groups.
Two considerations drive the aircraft operators’ decision toconvert existing passenger aircraft to freighters: first,
conversion is the most efficient way to obtain a relatively
modern freighter; second, it maintains residual values of theaircraft at relatively high levels by extending revenuegenerating service life.

EADS Business and Legal Description 2004

According to Airbus estimates, airfreight is expected to growfaster than passenger traffic in the next 20 years. Given theretirement of older aircraft, an estimated 2,850 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. WithBAE 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
to cargo usage. EADS is building on this specialisation byadding versions such as, in 2001, the A310-300, and in 2002,
the A300-600, 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.

27

4
5

1.1 Presentation of the Group (continued)

1.1.5 Defence and Security Systems
Introduction and Overview

The Defence and Security Systems Division (‘‘DS’’ or the‘‘DS Division’’) was created in 2003 to serve as the main poleof EADS’ defence and security activities. By combining
Missile Systems (MBDA and EADS/LFK), Defence andCommunications Systems (DCS), Defence Electronics (DE),
Military Aircraft (MA) – including EADS’ shares in theEurofighter programme – and Services activities within one
Division, EADS has equipped its defence business to better
meet the needs of customers requiring integrated defence andsecurity solutions.
In its first full year of operation, the DS Division succeededin significantly expanding its order book, while making
considerable progress in its integration and transformation,
both streamlining its businesses and building its capabilities in
Large Systems Integration (LSI). Its portfolio of innovative
products and integrated solutions – covering electronics,
missiles, platforms, systems and services – is designed to meetgrowing and changing requirements for all military forces andhomeland security needs. DS intends to continue the processof strengthening its LSI role in EADS’ Systems and Solutions
provider concept by increasing the focus on core businesses
and fostering further efficiencies and adaptations. On a
consolidated basis, the DS Division generated revenues of
45.4 billion for 2004, representing 17% of EADS’
total revenues.
2004 Highlights for the Division

Several factors contributed to the progress in 2004: major
highlights include the Eurofighter Tranche 2 contract award,
border surveillance system contracts, deliveries of the Storm
Shadow/Scalp long-range cruise missile to the U.K. and Franceand Acropol communications network deployment for the
French police. The German-Spanish government-to-government
agreement to procure Taurus was also achieved at the end of
2004. DS also made significant progress in its UAV strategy
with the received Request for Proposal (RfP) for the
procurement of EuroHawk˛ in September, industrial
participation on the Dassault-led UCAV project NEURON
and appointment as prime contractor for the EuroMALE drone
demonstrator programme. DS is also joint-lead member in the
TIPS consortium, which NATO downselected in April 2004
to develop the Alliance Ground Surveillance System (AGS). In
the MEADS (Medium Extended Air Defense System)
programme, a clear example of a dynamic and successfultransatlantic cooperation, a letter contract was signed for thelaunch of the design and development phase in September.

28

EADS Business and Legal Description 2004

Strategy

DS has recognised that its customers increasingly require LSI,
requesting full-service packages and integrated solutions fromindustry for all branches of the armed forces and Homeland
Security. Another focus for the DS Division to sustain
profitable growth is to gain further ground with its defence
strategy in its home markets U.K., France, and Spain. A longterm goal remains to increase market share in these countries
to the level in Germany, where DS currently enjoys a 30%
market share. Further consolidation of the missiles business isalso planned for 2005.
– Actively supporting the defence and security
transformation process
Through already existing programmes with the NATO
Supreme Allied Command Transformation, French Defence
Ministry, U.K.’s NITEworks and Germany’s national
integrated test bed (NITB), DS is actively supporting
NATO’s forces in the transformation process. DS also
participates in the Network Centric Operations Industry
Consortium (NCOIC), an industry-based collaborative
forum, formed to recommend an architectural approach thatsystems and platforms developers may follow to enable eachto participate in a global network environment. The focus
for the future will be to continue to work closely withindustry and customer working groups to help define,influence and most importantly deliver system solutions
geared towards an intensified transformation process.
– Streamlining and focusing the Division
In the DS Division’s first year of operation, special focus
was put on increasing efficiency and adapting capacity to
defence budget constraints, withdrawing from business areasthat were either non-core or insufficiently profitable, anddeveloping core businesses. Several shared services were
established to increase DS’ efficiency.
– Profitable growth in the U.K., France and Spain
DS is also focusing on its customer orientation in the U.K.,
France and Spain. Within these respective markets, further
efforts in the area of naval and land systems, technology
demonstrators, UAVs, combat aircraft and training, andTest & Services will continue to be one of EADS’ strategic
goals towards profitable growth in defence. In particular,
EADS seeks to raise its visibility in the U.K. defence
market and extend its industry technology programme’s
scope in France and Spain:–

Among European nations, the U.K. has the largest andfastest-growing defence procurement budget. To
capitalise on the opportunities that the U.K. market
provides, the DS Division aims to become a market
leader through projects such as ground based air defence(GBAD) emphasising LSI solutions.

1

1.1 Presentation of the Group (continued)

2
3

–

–

Further inroads have been made in France in the area of
UAV technology partnerships and commandcontrol systems.
As an important partner in the Eurofighter consortium
through EADS CASA, Spain continues to be asignificant market for profitable growth for the
DS Division. Involvement in the NEURON
demonstrator is also coordinated through Spain.

– Profitable Growth in the U.S.
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 missiles, defence
electronics, telecommunications, and test and services. The
creation of EADS North America Defense Company(NA DefCo) is part of an overall U.S. strategy to increasebusiness with the U.S. Department of Defense and the
U.S. industrial primes. NA DefCo is a legal entity managed
by U.S. citizens and is acting in the same scope of businessas DS. EADS actively supports the development of DefCoin close cooperation with the DS Business Units tomaximise transatlantic synergies and initiate a smoothdevelopment of both businesses. NA DefCo is, however, alegal entity and remains outside of the DS organisation. The
acquisition in October 2004 of Racal Instruments, a leader
in the development, production, and integration of systems
and instruments to test electronics, aerospace, and defence
systems, marked the initiation of a core strategic element ofgrowth for NA DefCo. Other methods for expanding into
the U.S. include:–

Pursuing specific market segments where the
DS Division can offer superior products andtechnologies, such as the Hellas obstacle avoidancesystem for helicopters and the TRS-3D radar for the
U.S. Coastguard;–

Building on its strong transatlantic industrial
partnerships with U.S. prime contractors, including
Northrop Grumman (NATO AGS, Ballistic Missile
Defence, EuroHawk˛ Lockheed Martin (MEADS,
Deepwater, Littoral Combat Ship, COBRA, Ballistic
Missile Defence) and Raytheon (Ballistic Missile
Defence) to explore new opportunities driven bymilitary transformation; and–Seeking acquisitions and new partnerships to enhance
the DS Division’s U.S. operational footprint acrossseveral market sectors including platform systems,
operational support, and defence electronics.

EADS Business and Legal Description 2004

Defence and Communications Systems (DCS)

DCS is the EADS ‘‘Systems House’’, and offers its customers
comprehensive and tailored solutions, combining the knowhow to design, develop and implement LSI to link the widest
possible range of individual platforms and subsystems into asingle effective network. System integration is also increasingly
important for non military customers in areas such as
homeland security. Information and secured communication
system solutions in these fields as well as systems enabling
effective border control and coastal surveillance constituteanother major focus for DCS.
The DCS vocation is to create complete systems solutions ofcommunication and information including platforms and means
to implement them. To make these technological changes
tangible and demonstrate the strengths of this paradigm,
EADS has created simulation tools such as NETCOS (Network
Centric Operations Simulation). With its competencies insystem solutions, DCS fulfils all requirements of thecustomers in the area of air and naval defence, intelligence,
surveillance and reconnaissance, as well as advanced command,
control and communication (C3I) systems, professional mobile
radio and homeland security.
In 2004, the DCS business generated 22% of DS’s total
external revenues.
Markets
In this market, EADS faces competition from large U.S. andEuropean companies such as Raytheon, Lockheed Martin,
Thales, BAE SYSTEMS, Motorola and SAIC, which also
specialise in homeland security solutions and LSI. MoDs,
interior ministries, fire brigades, health services and civil
protection organisations primarily in France, Germany and the
U.K. are key customers for DCS’ business.
Products
Air and Naval Defence (AND). AND unifies all capabilities ofa turn-key systems supplier of Tactical Air Defence, Air
Operations, Naval Combat, Electronic Warfare and Coastal
Surveillance. Based on advanced Command & Control
capabilities, AND provides integrated networks from sensor toeffector. Air forces, ground forces and navies as well as
shipyards, coast guards and services worldwide rely on AND’ssolutions for powerful action within complex andmultinational scenarios.

The GBAD programme for the U.K. is a key example of
DCS’ success in this area. An EADS/MBDA team, comprising
DCS and MBDA, has been selected by the U.K. MoD todevelop a new integrated air defence command and control

29

4
5

1.1 Presentation of the Group (continued)
system. At the culmination of the two-year assessment phase,
EADS will be required to submit a proposal for demonstrationand manufacture. The assessment phase (Phase 1) is split into
two parts: a competitive part between EADS and Lockheed
Martin from January 2005 until May 2006 and a noncompetitive part with just one prime contractor until April
2007. Under a second phase (Phase 2), the missile systems will
be systematically updated or replaced.
Intelligence, Surveillance and Reconnaissance Systems (ISR). ISR
focuses on the development of complete air-based systems
with integrated sensors for strategic, operational and tacticalmissions primarily for information procurement, i.e. thesurveillance and reconnaissance process. The ISR productportfolio comprises the complete spectrum of manned mission
aircrafts and Unmanned Air Vehicles (UAVs).
In June 2004, the French MoD launched an initiative to close
the gap in European defence capacity in the area of MALE
drones with a system designed and manufactured by European
industry. The French Minister of Defence subsequently
appointed EADS as the prime contractor for the EuroMALE
drone demonstrator programme. EADS’ main French partners
in the project will be Dassault and Thales.
The transatlantic EuroHawk˛ project was initiated by EADS
and Northrop Grumman in July 2000. The two companies
signed an agreement to develop an unmanned aerial wide-areasurveillance and reconnaissance system by bringing together
their respective expertise and company-funded developments in
UAV and mission system ISR technology. This cooperation
initiated a bilateral project agreement between the U.S. Air
Force and the German MoD signed in October 2001. The firstphase of the project includes the proof of operation of thehigh altitude long endurance (HALE) UAV concept, theintegration of the Defence Electronics (DE) signal intelligence(SIGINT) sensor and a flight demonstration programme inGermany successfully concluded in 2003 to the customer’s
continuing satisfaction. Further milestones include the request
for proposal from the German Procurement Agency (deliveredin September 2004) and the expected Design and Development
Contract award in 2005.
The Transatlantic Industry Proposed Solution (TIPS)
Consortium, made up of EADS, Galileo Avionica, General
Dynamics Canada, Indra, Northrop Grumman, and Thales, wasdown-selected by NATO in April 2004 to provide a
NATO-owned common ground picture for battlefield planningwith a mixed fleet of manned wide body jets (A321) and highaltitude long endurance UAVs (Global Hawk). The radar,which will be used to equip both the manned and unmanned
platforms, is the Transatlantic Cooperative AGS radar (TCAR).

30

EADS Business and Legal Description 2004

The TCAR consortium under the lead of DE is composed of
Dutch Space, EADS, Galileo Avionica – FIAR, Indra,
Northrop Grumman, Raytheon and Thales. The TCAR
programme will be integrated into the NATO AGS bid, acting
as a subcontractor within TIPS. The Design and Development
Contract award from NATO is expected in 2005.
Command, Control, Communication and Information (C3I)
Systems. C3I encompasses command system business andspecific defence market telecommunications business. C3I
provides complete solutions offering continual command chain
capability from staff down to the forces on the ground. The
portfolio of EADS in the area of C3I systems encompasses:
battlespace management solutions for military customers for all
levels (strategic, operative, and tactical) and militarycommunication networks. EADS is a major designer andsupplier of C3I systems to the armed forces in France andGermany, and the Joint Staffs in France, Germany andNATO. DCS signed a contract worth 460 million with the
French armaments procurement agency (DGA) in March tosupply additional SIR (regimental information system)
command and communication systems. In 2004, the FAUST
command and control information system for the German
Army thoroughly demonstrated its suitability for
mission-critical multinational operations in the Balkans andmore recently in Afghanistan.
Homeland Security (HS). The HS line of business provides
fully integrated solutions and services to mitigate risk exposurein the areas of: border security, crisis management, large event
protection and critical infrastructure. Taking into account theincreased interconnection between different areas of threat andparticularly in view of the growing interdependencies ofinternal and external security, seamless collaboration of thedifferent security organisations involved is imperative for thesake of freedom and liberty of citizens and nations. EADS
proposes maximised efficiency through optimal use of data andinformation together and across the relevant
security organisations.
The contract between Romania and EADS, signed in August
2004, provides for the delivery of an integrated system forsurveillance and securing of the Romanian border. This will
enable Romania to meet the increased security requirements
after its planned EU entry. The first phase of the project canbe launched with completion due for the end of 2006, shortly
before Romania officially joins the EU. Completion of theoverall project is planned for December 2009.
Professional Mobile Radio (PMR). PMR provides integrated
security solutions for public safety and civil defence entities,
including TETRAPOL standard secure communication

1

1.1 Presentation of the Group (continued)

2
3

networks, and systems for use in border security and crisis
management. Thanks to its large installed base of TETRAPOL
networks, PMR is a world leader in providing high levelcommunications systems for law enforcement and civil safety
organisations. Today, 80 networks in 34 countries – including
15 European countries – have selected TETRAPOL as theirsecure communication network. At completion of deploymentof current contracts, these networks will cover four million
km, for one million users.
Defence Electronics (DE)As the Sensors and Avionics House of EADS, DE provides
mission-critical elements for data gathering, data processing anddistribution, and self-defence. Its dominant business is basedon sensors and subsystems as a second-tier supplier andaddresses the market for surveillance and reconnaissance,
military mission management, platform self-protection,
network-enabled capabilities and forces support.
In 2004, the DE business generated 10% of DS’s total
external 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.
Growth in Electronic Warfare (EW) is a key strategic measure
for DE. MoDs, interior ministries, military services, security
forces, the in-house EADS systems suppliers and other LSIs
worldwide are DE’s key customers. Through various joint
ventures, participations and cooperation, EADS has access to
the MoDs of all NATO countries, particularly in Germany,
France, the U.K., Spain and Italy. Export markets, especially in
the Middle East and the Asia-Pacific region, also offer
growth opportunities.
Products

Sensors. DE is a principal partner for airborne multi-mode
radars such as the Captor radar in the Eurofighter programme,
and also conducts significant activities in systems logistics,
maintenance and upgrades. DE is also heavily involved in thetechnology development and application of next generation
active phased array radars for air, naval and groundapplications, such as Eurofighter, the Tactical Radar for
Ground Surveillance (TRGS) and MEADS. In the area of air
defence, EADS produces mid-range radars on ships (TRS-3D)
and on land (TRML-3D). As subcontractor for the K-130
corvettes of the German Navy and the Finnish Squadron-2000
programme, EADS is responsible for major shipboard sensor

EADS Business and Legal Description 2004

subsystems. A success in the U.S. market was a bilateralagreement for a long-term partnership with Lockheed Martin
to evaluate opportunities for joint development, marketing andproduction of the TRS-3D in other shipbuilding programmes
worldwide. The implementation of this agreement began withthe signing of two radar contracts.
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 MiniSAR, the European stand-off
SAR sensor for wide-area surveillance (SOSTAR-X) as well as
in the TCAR AGS Radar for the NATO AGS programme.
DE’s radar competence is underscored by the Microwave
Factory, a highly automated assembly line for the
manufacturing of high frequency components forming an
integral part of radar sensors and electronic warfare
applications. EADS holds a 50% stake in United Monolithic
Semiconductors (UMS), a joint venture with Thales. UMS
provides EADS with the success-critical access to gallium
arsenide technology for the SAR.
Electronic Warfare and Self Defence. DE supplies passive
electronic warfare units like laser warning, missile warning,
and active electronic countermeasure units, such as directed
infrared countermeasures, self-protection jammers and towed
decoys. EADS also delivers core components to the‘‘EuroDASS’’ defensive aids subsystem on Germany’s 180
Eurofighters and supplies further avionics components to thewider Eurofighter programme. For military mission aircraft
helicopters (NH90, Tiger) and commercial airliners, EADS isdeveloping solutions to counter threats from infrared-guided
missiles. To date, DE has sold to more than 4,000 units of its
missile warning sensor (MILDS) deployed on a variety ofhelicopters and transport aircraft. Based on MILDS, DE hasdeveloped a version MILDS F designed to meet specificrequirements for the Royal Danish Navy’s fighter aircraft.
EADS also offers self-defence equipment for ships andarmoured vehicles.
Mission Systems. As a major partner in the field of military
mission avionics for the A400M, DE assumes the sub-system
responsibility for mission management and the defensive aids
sub-system. The EADS portfolio also comprises avionics
equipment, such as digital map units (EuroGrid), flight data
recording units and obstacle warning systems for helicopters.
Additionally, EADS is developing multi-sensor integration anddata fusion technology, which is a key future technology for
network-enabled capabilities. For example, EADS is in charge

31

4
5

1.1 Presentation of the Group (continued)of sensor fusion software on the NATO AWACS E3A
programme and was awarded a contract in 2004 to develop a
Multi-Sensor Tracking system for the Finnish Air force.
Additional products offered by EADS in the field ofcommunication and identification include wide-band modular
data links and MIDS (multi-function information distribution
system), both core elements of network-centric operations.
For infantry, DE is developing soldier system modernisation
programmes for dismounted infantry sections. In this field,
DE assumes system responsibility for the German Infanteristder Zukunft (IdZ ) programme, which increases decisively theprotection of dismounted troops and makes the single soldierpart of a defence network. In December 2004, a 460 million
series order from Germany was awarded for 196 IdZ Future
Soldier basic systems. These are envisaged for around2,000 soldiers of all services, including the NATO Response
Force and the German ISAF contingent in Afghanistan. 15 IdZ
systems were delivered in 2004 to the German ISAF troops
in Afghanistan.
Military Aircraft

The DS Division’s Military Aircraft business focuses ondevelopment and manufacturing of the Eurofighter combat
aircraft, maintenance, repair & overhaul (MRO), logistic
support, upgrade of existing combat air systems, provision oftraining services as well as construction and manufacturing of
Airbus aerostructures. Additionally, Military Aircraft designs
light combat/training aircraft and unmanned combat
aircraft (UCAV).
In 2004, the Military Aircraft business generated 29% of DS’s
total external revenues.

Markets

The platforms presently in contention for fighter procurementby the majority of the world’s MoDs are:
Manufacturer

U.S.
Boeing (McDonnell
Douglas)Lockheed Martin
Boeing (McDonnell
Douglas)BoeingMitsubishi/Lockheed
MartinBoeing/Lockheed Martin
Lockheed Martin
EuropeDassault Aviation
Saab
Dassault Aviation
Eurofighter Consortium
RussiaVPK/MAPO
Sukhoi

Aircraft Type

Date ofFirst Delivery

F-15 (Eagle)

1973

F-16
F/A-18C/D (Hornet)

1976
1980

F/A-18E/F (Super
Hornet)F-2

1997

F-22 (Raptor)
F-35 (Joint Strike Fighter)

2003
2009

Mirage 2000
GripenRafaleEurofighter (Typhoon)

1983
1993
2000
2003

MiG-29Su-27 Series

1983
1986

2000

According to the Teal Group, ‘‘fly away’’ prices for fighters,
depending on model and specification, range from U.S.$30 to
U.S.$100 million, of which each of the major constituent partsof a fighter platform (i.e., the airframe, the engine and theaircraft systems/equipment), typically represents approximately
one-third of the total per unit cost. The Teal Group estimates
the worldwide fighter market to be U.S.$142 billion between
2003 and 2012, and assigns a 17% share to Eurofighter. Two
major U.S. suppliers (Lockheed Martin, Boeing), along withseveral smaller European and Russian competitors, serve theglobal market for combat aircraft. Eurofighter has already sold18 aircraft to Austria and has been selected in Greece. Further
export opportunities are believed to exist in Europe, theMiddle East and the Far East.
Products and Services

Eurofighter. Eurofighter, known as ‘‘Typhoon’’ for export
outside of Europe, is a high-performance multi-role combat
aircraft optimised for air superiority in complex air combat
scenarios. It is fully compatible with state-of-the-art NATOweapon systems. Known as Europe’s largest collaborative

32

EADS Business and Legal Description 2004

1

1.1 Presentation of the Group (continued)

2
3

programme, Eurofighter is designed to enhance fleet efficiency
through a single platform responsible for supersonic beyond
visual range combat, subsonic close combat, air interdiction,
close air support, air defence suppression and maritime attackroles. The tactical requirements of the aircraft include allweather capability, short take-off and landing capability, highsurvival capability, and operational rates. The Eurofighter was
designed to adapt and improve over the long-term, as avionics
and weapons systems evolve, providing for an extended service
life potential.
The Eurofighter programme is organized through the NATOEurofighter and TORNADO Management Agency(NETMA) via the participating nations. NETMA contracts
with Eurofighter Jagdflugzeug GmbH (Eurofighter GmbH), theprogramme management company for the Eurofighter
programme. The Eurofighter GmbH shareholders andsubcontractors are EADS (46% share), BAE Systems(33% share) and Alenia Aerospazio, a division of Finmeccanica(21%). 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 of aircraft ordered by each country’s programmeparticipant. EADS is responsible for the centre fuselage, theflight control systems, the manufacturing of the right wing
and leading edge slats, and the final assembly of the 180
aircraft destined for the German Air Force plus 87 aircraft
ordered by the Spanish Air Force. The final assembly of theEurofighter takes place in the relevant contracting country:
Manching in Germany, Getafe in Spain, Warton in the U.K.
and Torino in Italy.
In January 1998, NETMA signed the umbrella Eurofighter
contract for 620 aircraft: U.K. 232 (with 65 options); Germany
180; Italy 121 (with nine options); 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.
Eurofighter’s first tranche of 148 aircraft is being delivered
between 2003 and 2005. The production is expected tocontinue until 2015. 37 Tranche 1 aircraft have already beendelivered as of the end of 2004 with 49 additional aircraft in
final assembly. The first German flight of a single-seater
aircraft was completed in October 2004. Introduction into
service occurred on 30th April 2004 in Germany and in Spain
on 27th May 2004. The contract for Tranche 2, comprised of
236 aircraft with enhanced operational capabilities, primarily

EADS Business and Legal Description 2004

for air-to-surface roles and with state-of-the-art precisionguided stand-off missile systems, was signed in December
2004 with a total share of 44.3 billion for the DS Division.

4

Unmanned Combat Aerial Vehicles (UCAV). The success of thenext generation European combat air system programme
requires that it be jointly developed with EADS’ European
competitors. Through the six-nation European Technology
Acquisition Programme (ETAP), the principal European
defence contractors are working on multi-use technologies,
with the aim of developing the fifth-generation Combat Air
System, with entry into service forecast to be between 2018and 2020.
Training and Light Combat Aircraft. For training and lightcombat aircraft, the competition is intense, with offerings fromBAE SYSTEMS (Hawk 128), KAI/Lockheed Martin (T-50),
Aermacchi (AM-346) and others. The Mako High Energy
Aircraft Trainer (HEAT) is the focus of training activities at
EADS with the vision of becoming a genuine European
programme to cover not only European requirements but alsoworldwide requirements. Mako HEAT will close the growing
gap between the demands made on pilots by modern fighter
aircraft and the training opportunities provided by aging inservice trainers while providing expanded training capabilities
and achieving cost savings in the training of fighter pilots.
Management believes that there is a requirement to train
300 pilots per year, supporting a demand for approximately
150 trainer aircraft. This is one key figure of the Advanced
European Jet Pilot Training (AEJPT) business concept which
will provide military jet pilot training in Europe through a
Private Finance Initiative (PFI) solution.
Military Aircraft Upgrades and Support Services. In addition toproviding a profitable after-market service to existingcustomers, aircraft modernisation operations provide access to
new export markets for future sales of all types of aircraft,
both military and commercial. The upgrading of military
airframes is particularly attractive for countries with limited
national defence budgets, such as those in the former ‘‘Eastern
Bloc’’, Latin America, North Africa and some Asian regions.
For these nations, the purchase of new multi-role aircraft iseither politically or economically impractical, making upgrading
the most cost-effective alternative.
EADS has developed expertise in the field of military aircraft
upgrades through programmes for such aircraft as 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
and Breguet Atlantic 1. These capabilities will be particularly
valuable in capturing new markets, such as further upgrades ofcentral European air force aircraft and future support contracts
for Eurofighter.

33

5

1.1 Presentation of the Group (continued)

Missile Systems

Markets

The Missile Systems group within the DS Division(consolidating 50% of MBDA and 100% of EADS/LFK) offers
outstanding and unique capacities in missile systems andcovers the whole range of solutions for air superiority, land
control and sea power missions, while also providing the most
evolved technological solutions in strike weapons and missile
defence for all three services. The further development ofexport market access and consolidation of the business willremain main goals for 2005. Negotiations are progressing in
the planned integration of EADS/LFK into MBDA. Enhancing
the missile technology and product portfolio, including the
low-price segment, will help MBDA continue to offer an
unrivalled range of products and services. In 2004, theMissiles Systems business generated 37% of DS’s total
external revenues.

Missile Systems have a geographically diverse customer
portfolio. Together and through a multinational network of
subsidiaries, this business has direct access to the major
European domestic markets in France, Germany, Italy, Spainand the U.K. It also has a stable foothold in growing export
markets such as Asia and the Gulf region, and benefits fromtransatlantic cooperation on programmes such as MEADS
and Patriot.
Four principal defence contractors are active in the worldwide
market for tactical missiles and missile systems. As measured
by revenues in U.S. $, MBDA ranks first in 2004 sales
figures, for the first time, together with Raytheon, and aheadof Lockheed Martin and Boeing missile activities.
The current worldwide market for missile systems is estimatedto exceed 410 billion. This market is expected to increase
due to:– the development of new products (such as ground based
air defence systems and precision stand-off guided
missile systems);– new missile carrying platforms entering into service (Mirage
20005/9, Rafale, Eurofighter/Typhoon, Gripen, Tiger
helicopter, new frigates and aircraft carriers); and– different requirements for future weapon systems derived
from new operational tasks and lessons learned from themost recent conflicts.

34

EADS Business and Legal Description 2004

1

1.1 Presentation of the Group (continued)

2
3Products

The EADS Missile Systems group, with its broad range of MBDA and LFK products, is active in all of the 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 EADS 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
Medium range
Long range
Stand-off guided
Long range
Short range
Stand-off with sub-munitions
Stand-off unitary warhead
Prestrategic stand-off
Anti-radar
Tactical air defence

ASRAAM
MICA
MeteorTaurus KEPD 350, AFDS, DWS (for fighter aircraft)
LR TRIGAT (for TIGER helicopter)
Diamond Back – Bang
ApacheScalp EG/Storm Shadow – Taurus
ASMP – ASMP A/VESTA
ALARMStinger, LFK NG, Roland, Gepard, Patriot/PAC 3,
MEADS
Mistral – Stinger (under license)
VL Mica – Roland – Rapier – Spada
Aster SAMP/T – MEADS – Patriot/PAC 3
Milan/Milan ADT, HOT
Warheads (TDW)
Propulsion Systems (Bayern Chemie) e.g.,
Meteor/ramjet
MistralVL Mica – VL Seawolf
Albatros – RAM
Aster/PAAMS – Aster/SAAM – ESSM
Sea Skua – AS 15 TT – NSM – Marte
Exocet family – TESEO
Milas
Eryx
Milan
HOT – LR Trigat – Brimstone
G-MLRS
Scalp Naval

Air-to-Ground
Air to Surface

Ground-to-Air
Ground to Air/ATBM

Ground-to-Ground
Subsystems

Surface to Air/Naval

Anti-ship

Anti-tank

Surface to Surface, Deep Attack

Very short range
Short range
Medium range
Medium range

Very short range
Short range
Medium range
Light
Heavy
Anti-submarine
Short range
Medium range
Long range
Ground-to-groundSea-to-land

5

The most significant programmes under development and production are currently Aster, Storm Shadow/Scalp EG, Taurus, andMeteor with the bulk of deliveries scheduled between 2003 and 2007.
Aster Family. The FSAF Phase 3 contract signed with OCCAR (Organisation Conjointe de Coopération en Matière d’Armement) in
November 2003 is worth 43 billion (thereof 42.3 billion MBDA). This contract covers the series production of approximately
1400 Aster missiles and associated missile systems and represents Europe’s first advanced naval and ground-based air defence
missile system using Anti Tactical Ballistic Missiles (ATBM).

EADS Business and Legal Description 2004

435

1.1 Presentation of the Group (continued)
Storm Shadow/Scalp EG. 2004 was a highly successful year forthis cruise missile, which proved itself in combat when theRoyal Air Force used it in Iraq in March 2003. Alreadyselected by the U.K., France, Italy and the UAE, the Storm
Shadow/Scalp EG was also selected by Greece in January 2004.
The Hellenic Air Force has ordered a total of 34 Storm
Shadow/Scalp EG (SS/EG) missile systems. Having reached fullproduction during the year, the SS/EG has now been delivered
to the U.K. and France, and will be delivered to Italy, Greece
and the UAE in 2005.
Taurus KEPD 350. EADS/LFK and SAAB Bofors are working
together under the roof of Taurus Systems GmbH to createand deliver this precision stand-off guided missile system for
Tornado, Griphen and Eurofighter aircraft. Taurus KEPD 350
is starting series production for the German Air Force and firstdeliveries to the German customer are under preparation. Spain
has also declared its intention to procure Taurus KEPD 350
for its F/A-18 and Eurofighter.
METEOR. In April 2004 in Linköping, Sweden, MBDA and
its Meteor (Beyond Visual Range Air to Air Missile(BVRAAM)) partner SAAB, undertook the first trial fit of ageometrically representative Meteor missile with the JAS 39
Gripen combat aircraft. The trial fit was a complete successwith all objectives fully met. Work is also underway for thefitting of Meteor under the other scheduled platforms, Rafaleand Eurofighter.
MEADS. The MEADS Medium Extended Air Defence
System, a ground-based tactical air defence system, provides agood example of a dynamic and successful transatlantic
cooperation. MEADS will protect troops during out-of-area
missions and objects within the scope of homeland defence.
The financial share of the programme is U.S. 58%, Germany
25% and Italy 17%. The technical workshare of the companies
involved – EADS/LFK (Germany), MBDA-IT (Italy) and
Lockheed Martin (U.S.) – is in line with the percentages of therespective contributions to the costs. The European companies
control their activities through the joint venture company
euroMeads GmbH which, like Lockheed Martin, has a 50%
share in MEADS International Inc. The MEADS International
industrial consortium signed a letter contract for the launch of
design and development for a future air defence system fromthe NATO agency NAMEADSMA in September 2004. The
overall volume of this development project, which is due torun until 2012, will amount to approximately 43 billion.

36

EADS Business and Legal Description 2004

Ballistic Missile Defence. EADS is the only company in Europe
with the full range of skills and technologies needed todevelop, deploy and support Ballistic Missile Defence(BMD) systems, whether for the protection of armed forces orentire countries and their populations. As part of the U.S.’
efforts to develop a defence against missile attack, NATO has
selected EADS as a member of a transatlantic consortium toconduct a Theatre Missile Defence feasibility study. In
September 2004, EADS and Raytheon signed a co-operative
agreement to begin collaborating on ballistic missile defence
interceptor programmes in Europe, the U.S. and around theworld. EADS has signed further Memoranda ofUnderstandings in the field of BMD with Lockheed Martin
and Northrop Grumman.
Services
The DS Division’s Service activities are organized aroundoutsourced services, test and related services, and systemengineering services. The growing complexity of modern
systems and engineering tools and the requirement forcost-effectiveness has led customers to demand turn-key
solutions instead of stand-alone equipment. Because of its
technical and organisational capabilities, EADS can pool the
resources and products of its various subsidiaries and external
suppliers to offer such solutions.

For armed forces, outsourcing is an effective solution to the
problems of tight public budgets and to the reduction of
military personnel. To maintain its position as prime contractor
with military customers and to generate profitable growth instable defence markets, EADS aims to play a key role in suchoutsourcing of defence activities.
The acquisition of Racal Instruments makes the group’s
Test & Services unit the leader in the market for testing
equipment, solutions and services in Europe. Major challenges
will be to implement and develop synergies between Racal
Instruments and the former Test & Services unit and to
generate new customers in different countries throughpartnerships or industrial presence.
In 2004, Services generated 4% of DS’s total external revenues.

1

1.1 Presentation of the Group (continued)

2
3Products

Outsourced Services. This operating unit provides training
services to the German and French navies and air forces for air
defence, in addition to other services in Europe. Services was
selected by the German MoD for a 5-year flight operations
contract (495 million) from 2004 until 2008 (target towing,
ELOKA training). Altogether, Outsourced Services operates
26 aircraft.
Services, together with other EADS Business Units andpartners in the U.K., is also participating in the operating
activity of the Air Tanker consortium. The FSTA project
represents the largest Private Financing Initiative (PFI) projectin Europe. Services also participates in various outsourcing
projects for the French, German, Spanish and U.K. militarycustomers in the field of logistics, training, telecommunications
and flight operations.
In a 50/50 consortium with Serco, Services was also shortlisted by the U.K.’s MoD to participate in the tender for
CATS, a U.K. MoD tri-service (Army, Navy, Air Force) ten
year project to provide an aerial target service. Services will
also participate in the Atlas consortium, which was shortlisted
against one competitor in the DII (Defence Information
Initiative in military telecommunications) project.

EADS Business and Legal Description 2004

Test Solutions and Related Services. The increasingly complex
electronics used both in civil and military aircraft and weapon
systems require continuous equipment maintenancetesting solutions.
Services, through its Test & Services unit, confirmed its
leading position worldwide in terms of market share for multipurpose civil aviation test systems and related services as wellas its leading position in Europe as supplier of multi-purpose
defence test equipment. In 2004, Test & Services sustained its
level of orders from airlines worldwide. This is consistent
with Test & Services’ strategy to develop a scalable technicalstandard providing airlines with continuous solutions.
System Engineering Services. In 2004, Services became theFrench leader in risk management on advanced technology
projects. This operating unit offers different types of services(consulting, studies, training, software, audit) along all phasesof a project life-cycle and with various technical approaches:
reliability, availability, maintainability and safety studies;human factor analysis; industrial, environmental and nuclear
risk assessment, software and system quality. Major markets
are aeronautics, defence, the petroleum industry andtransportation systems. Services’ APSYS unit plans to continue
its long-term partnerships with EADS customers (Airbus,
Eurocopter and Space Launchers), representing the majority of
its revenues, with plans to diversify and enhance businesswith its other customers.

37

4
5

1.1 Presentation of the Group (continued)

1.1.6 Space
Introduction and Overview

EADS 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 2004, theSpace Division’s consolidated revenues amounted to42.6 billion, or 8% of EADS’ total revenues.
The Space Division (‘‘EADS Space’’) designs, develops andmanufactures satellites, orbital infrastructures and launcher
systems and provides space services. EADS Space is composedof three main entities – EADS Astrium, EADS SPACE
Transportation (‘‘EADS-ST’’) and EADS SPACE Services.
EADS Space 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 dedicated companies such as Paradigm andInfoterra or joint ventures such as Spot Image.
Following two years of major industrial re-engineering, EADSSpace posted a positive EBIT* of 410 million in 2004,
surpassing its previously announced break-even target. Overthe course of the re-engineering process, key changes were
implemented to increase efficiency and boost the Division’s
profitability in the face of the challenging competitiveenvironment in which it operates. Notably, (1) the activities of
EADS Space were organized under EADS Astrium, EADS S-T
and EADS SPACE Services; (2) EADS acquired control of
100% of Astrium; (3) the workforce was streamlined and (4) atrans-national competence centre organisational structure
was implemented.
Strategy

As part of EADS, with an established presence in the four
European space powers (France, Germany, Spain and the U.K.),
EADS Space is the only European company to benefit fromthe full range of competencies in all fields of the spaceindustry (satellites, launchers and orbital infrastructure,services). EADS Space’s strategy is to build on these key
strategic assets and to strengthen its position in the market,
while remaining focused on stabilisation of the neworganisation of the Division described above.
– Secure EADS’ position in the commercial launchservices market.
As the main industrial shareholder and prime supplier ofArianespace, and with the backing of European governments(illustrated by the implementation of the European
Guaranteed Access to Space (EGAS) initiative), EADS38

EADS Business and Legal Description 2004

intends to lead the restructuring of the European spacetransportation industry in response to an increased
competition in the launch vehicle field and a weakcommercial telecommunications satellite launch market. To
assure long-term competitiveness of the Ariane programme,
the Space Division has positioned itself as the prime
contractor for Ariane development and production, and is in
the process of overhauling the current manufacturingorganisation, in order to reduce costs and to increaselauncher performance and reliability. The contract fordelivery of 30 Ariane 5 to Arianespace, signed in May
2004, and the successful launch of the Ariane ECA in
February 2005, illustrate the fruits of these efforts.
Reinforced links with the Russian (Starsem joint venture)and Italian (proposed New Generation Launcher company
with Finmeccanica) space industries, further buttress EADS’
position in the commercial launch services market.
– Extend EADS’ leadership in European military
space programmes.
Management views national and European space
programmes, such as the Paradigm programme, as animportant future growth segment for the Company. Taking
full control of Paradigm (as a result of the acquisition of
BAE SYSTEMS’ 25% stake in Astrium) allows EADS to
expand its services offerings via military telecommunications
satellites, highlighted by the contracts concluded in 2004
with Portugal, NATO and other governments for theirsecure satellite communications requirements. EADS Spaceis also well positioned in military reconnaissance systems(Helios II and Pleiades) and other military-specificcapabilities (Spirale, Lola and Essaim). Management believes
that European governments realise the increasing importanceof space systems following the Iraq, Afghan and Kosovo
military campaigns and can be expected to commit greater
resources to independent use of space based systems,
triggering potential export opportunities for EADS.
– Become the European leader in navigation systems
and services.
Management believes that the Galileo satellite-basednavigation system offers numerous development
opportunities to EADS, in the civilian (e.g., air traffic
control) and security (e.g., precision positioning) markets.
EADS SPACE is the largest member of Galileo Industries,
the hardware provider for the Galileo project, and ispositioned, as a stakeholder of the iNavSat consortium, tooperate the concession, expected to be awarded by the Joint
Undertaking (ESA and the European Commission) in 2005.

1

1.1 Presentation of the Group (continued)

2
3Satellites – EADS Astrium
Overview

EADS Astrium is the leading European company in the design
and manufacture of satellite systems, spanning all major
segments of the satellite market (platforms, payloads,
equipment). It provides (1) telecommunications satellites toleading telecommunications service providers, (2) earth
observation, navigation and science satellites systems to major
national and international agencies and (3) military applications
satellite systems to European MoDs. EADS Astrium also
designs and manufactures payload equipment and subsystems
for the global space industry market.
EADS Astrium’s 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 gathering 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.
Scientific satellites are tailor-made products adapted to thespecific requirements of the mission assigned to them. They
have applications such as astronomical observation of thesources of radiation of the universe, planetary exploration andearth sciences.
Navigation satellite systems deliver signals that enable users todetermine their geographic position with high accuracy, andare increasingly significant in many sectors of commercial
activity – 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.
EADS’ main competitors worldwide are Boeing, Lockheed
Martin and Loral of the United States and Alcatel SpaceAleniaSpazio (France-Italy). EADS Astrium has an
approximately 15-20% share of this market. Management
expects that the telecommunications satellite segment,
presently depressed due to the consolidation of satellite
operators, could progressively and gradually recover due tosuch factors as: (1) increased telecommunications demand,
including Internet, multimedia and military needs, and (2) agreater demand to replace aging fleets. EADS intends toremain a significant player in this field to participate in the
anticipated market recovery.

EADS Business and Legal Description 2004

EADS benefits from its long term, close relationships withinstitutional customers in France, Germany, Spain and the
U.K. with access to their respective national budgets.

4

In Europe, the market for observation, scientific and navigation
satellites is organised either on a national or on a multilateral(European Space Agency (‘‘ESA’’), Eumetsat) basis and inaccordance with the fair return policy under which contracts
are awarded to domestic suppliers in proportion to therespective contributions of the suppliers’ countries.
There is emerging export demand for earth observation
systems, for which EADS Space is currently the solesignificant European provider. Furthermore, civil state agencies,
including the ESA, are likely to display increased needs forearth observation satellites in the framework of European
environmental programmes, identified as a key focus of the
EU/ESA framework agreement on European Space Policy in2003. EADS expects the scientific satellite market to remain
stable over the medium term.
The agreements reached in 2003 at the E.U. 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 which will have the task of
coordinating ESA and E.U. involvement in Galileo). The
Galileo programme comprises 30 navigation satellites and apotential equipment contract valued at more than 43 billion.
Full deployment of the system is expected around 2008. For
the space industry and its customers, the Galileo programme’s
economic, industrial and strategic importance is paramount.
This programme is likely to be a driver of innovative userand customer-oriented solutions, creating new markets fornavigation-related services.
In the market for military satellites, EADS expects increased
demand for telecommunications and observation satellites. In
recent conflicts, the shortcomings of European militarycapabilities in that field have become increasingly visible, while
the need for preparedness in the face of elusive threats has
promoted such means to a higher level of priority. The Skynet
5 contract in the U.K., the Helios 2, Spirale, Lola and Essaim
contracts in France and the on-going negotiations for theGerman MilSatcom confirm the growth trend in this market.

395

1.1 Presentation of the Group (continued)

Products

EADS Astrium manufactures satellite systems, platforms,
payloads, major sub-systems and a wide range of equipment.
EADS Astrium Spain, a wholly-owned subsidiary of EADS
Astrium, supplies platforms, space-borne antennas, deployment
mechanisms and harness sub-systems for telecommunication
satellites. Tesat, another wholly-owned subsidiary of EADS
Astrium, is in charge of telecommunication electric equipment
and sub-systems. EADS Astrium Spain and EADS Sodern also
contribute to EADS’ work on earth observation satellites.
EADS is thus able to offer turnkey satellite systems
to its customers.
Telecommunications Satellites. EADS Astrium 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 (38 ordered to date), the latest version ofwhich is EUROSTAR 3000. Three commercial service
satellites based on the new E3000 platform were placed into
orbit in 2004: Eutelsat W3A, Intelsat 10-02 andHispasat-Amazonas.
In 2004, EADS Astrium signed a contract for the Anik F3
Telecommunication satellite for the Canadian company Telesat.
In the field of military telecommunications satellites,
EADS Astrium is responsible for the new-generation Skynet 5
system as part of the Paradigm project awarded to EADSSpace Services in 2003. Following a system review in 2004,
definition of the specifications for the ground and spacesegments of the Paradigm programme was finalised.
Observation Satellites. EADS is the leading European supplierof earth observation satellite systems, for both civil andmilitary applications. In this field, EADS derives significant
benefits from the common elements of its civil andmilitary programmes.
EADS Astrium 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. EADS Astrium 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(the latest generation, Spot 5, with enhanced coveragecapability was launched in May 2002); (2) Envisat, a European
environmental monitoring satellite launched in March 2002;(3) Metop, a next-generation polar-orbiting meteorologicalsatellite system to be operational in 2005; and (4) Pleiades, twosmall and highly agile earth observation satellites for civil andmilitary applications, expected to be launched in 2008
and 2009.

40

EADS Business and Legal Description 2004

2004 witnessed the launch of Helios 2, part of the sole
European optical military observation satellite system inoperation and of the Essaim micro satellites, for militaryobservation of electromagnetic activity. EADS Astrium
designed and built both systems.
In the export market, Rocsat, an earth observation satellite
built by EADS Astrium for the Republic of China (Taiwan)
was successfully launched in 2004. EADS Astrium also signed
a contract with the Thai authorities to provide the earth
observation satellite Theos, together with the associatedground segment.
Science Satellites. EADS Astrium is the prime contractor forthe spacecraft in ESA major scientific programmes including
the four Cluster II spacecraft, the vast XMM-Newton spacetelescope, Mars Express, (the first European mission to Mars),
the comet explorer Rosetta, and Venus Express.
In February 2004, ESA Mars Express, designed and built by
EADS Astrium, reached final orbit around Mars, providing
important new scientific data on the planet’s environment, andgarnering a high level of public interest.
In March 2004, ESA’s interplanetary probe Rosetta, built by
EADS Astrium, was successfully launched by Ariane 5. Thismission marked two firsts: Rosetta is the first spacecraft which
will accompany a comet as it travels, and it was the first timethat an Ariane 5 upper stage reached the escape speed required
to boost a satellite into deep space.
EADS Astrium signed two important contracts with the ESA
in 2004: Lisa Pathfinder, a scientific mission for measuring
gravitational waves, and NIRSPEC, part of the James Webb
Space telescope, the successor of the Hubble telescope, due tobe launched in 2011.
Navigation Satellites. EADS Astrium, together with Alcatel
Space, Alenia Spazio and GSS has established a dedicatedcompany to build and implement the European navigation
system Galileo. EADS Astrium hold a 38% stake in Galileo
Industries S.A. (‘‘Galileo Industries’’), which was awarded acontract for the first of two test satellites for the European
navigation system in July 2003. The system’s launch date isscheduled for end 2005. At the end of 2004, EADS Astrium
was also awarded a pre-contract for the construction of four
satellites needed for the validation phase. EADS Astrium
Germany will supply the avionics system and parts ofGalileo’s test satellites’ solar arrays, while EADS Astrium U.K.
is responsible for payload development and groundsegment lead.

1

1.1 Presentation of the Group (continued)

2
3

Military Satellites. In addition to the military earth observation
activity, EADS Astrium has been awarded a contract for anairborne laser optical links demonstrator (LOLA) and, together
with Alcatel Space, a contract for the early warning satellite
demonstrator Spirale. These systems demonstrate EADS’
leading role in complex systems offers, reflecting the efficientuse of synergies between EADS’ space and defence activities.
Essaim, a set of micro-satellites demonstrators for theobservation of electromagnetic activity, was successfullylaunched on the same Ariane flight as Helios 2.
Orbital Infrastructure/Launchers and Launch Services – EADS-ST

EADS-ST is the European space infrastructure and spacetransportation specialist. It designs, develops and produces
Ariane launchers, the Columbus laboratory and the ATV cargo
carrier for the International Space Station, ballistic missiles forFrance’s deterrent force, propulsion systems andspace equipment.
Orbital Infrastructure

In the field of orbital infrastructures, EADS-ST is prime
contractor under an ESA contract relating to two key elementsof the International Space Station (ISS): the Columbus Orbital
Facility laboratory (COF) and the Automated Transfer
Vehicle (ATV).
The orbital infrastructure segment in which EADS-ST operates
comprises manned and unmanned space systems. The ISS,
together with related vehicle and equipment development
programmes and services, constitutes the predominant field ofactivity in this segment. The Columbia shuttle accident in2002 led to the postponement of the launch of the European
Columbus module for two years that is now planned for late
2006/early 2007.
Market
The demand for orbital infrastructure systems originates solely
from publicly funded space agencies, and in particular from
ESA, NASA, Roscosmos (Russia) and NASDA (Japan). Suchsystems are usually built in cooperation among international
partners. In addition to the COF and ATV projects, the ESA
is also responsible for additional ISS components for thestation’s construction and operational phases. Additionally,national space agencies, such as DLR and CNES, are involvedin the field of experiment facilities to be used on board
the ISS.

EADS Business and Legal Description 2004

Products
EADS-ST is the prime contractor for the development andintegration of the Columbus Orbital Facility. Columbus is apressurised module with an independent life-support system.
It will provide a full-scale research environment inmicrogravity conditions (material science, medicine, humanphysiology, biology, earth observation, fluid physics,
astronomy) and serve as a test-bed for new technologies.
In addition to the Columbus laboratory module, including all
facilities required for energy supply, communications, andinterfaces to other station elements, EADS-ST is responsible
for the Columbus on-board Data Management System. It also
participates in the construction of the ISS robotic system
European Robotic Arm to be used by astronauts in theassembly and maintenance of exterior station elements during
the construction and operational phases.
EADS-ST is also the prime contractor for the development
and manufacture of the ATV (Automated Transfer Vehicle),designed to carry fuel and supplies to the ISS and to provide
reboost capability and a waste disposal solution. The ATV willbe the first European vehicle to carry out a rendezvous inspace and dock automatically with an orbital station. The first
ATV, called Jules Verne, will be launched by Ariane 5 in2005, with six additional ATV missions scheduled
through 2013.
Under contract with ESA and DLR, EADS-ST supplies
experiment facilities to be used in various station modules forresearch in 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 for experiments 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 to place them into orbit; the launcher isconsumed during the launch process. EADS-ST is active in
two distinct businesses: (1) designing and manufacturing
launchers for both civil and military purposes; and(2) providing launch services through its interests in
Arianespace, Starsem and Eurockot.

EADS-ST is the sole prime contractor for the Ariane 5
system, with responsibility for the delivery to Arianespace ofa complete and fully tested vehicle. EADS also supplies all
Ariane 5 stages, the equipment bay, the flight software, as
well as numerous sub-assemblies. Additionally, EADS-ST is
the prime contractor for ballistic missile systems to the French
State. It is responsible for the development and manufacturingof the M45 and M51 submarine-launched missiles as well as
their operating systems.

41

4
5

1.1 Presentation of the Group (continued)
MarketManagement estimates that the average open commercial
market for launch services will likely remain low, atapproximately 20 payloads per year, mostly made up ofgeostationary telecommunications satellites. However, due tovarious factors (e.g., technology advances, consolidation ofcustomers), this figure is highly volatile. This market does notinclude institutional launch services for the American, Russian
and Chinese military and governmental agencies.
The advent of an increasingly large, profit-driven private
customer base for satellites has in recent years encouraged thedevelopment of launch services companies that are willing tocompete on price and quality of service. Among them, certain
ventures have been organised, combining access to low-cost
military rockets from former Soviet Union companies with themarketing capabilities of western manufacturers. The presenceof such ventures creates strong competition on the commercial
launches market.
In defence, France follows an independent policy to have its
own deterrent force which is currently based on submarine
launched ballistic missile systems. In 1998, the French Statedecided to develop a new generation of ballistic missiles. In
addition to production and state-financed development work,
the ballistic missile segment entails substantial maintenancework to ensure system readiness over the life span of theequipment, which may stretch over several decades. EADSSpace’ ballistic missile segment activities are conducted through
EADS-ST, which is the exclusive supplier of ballistic missiles
to the French State, its sole customer in this area.
Products and Services
Launch Services. EADS-ST is active in the field of launchservices through its shareholdings in Arianespace for heavy-liftlaunchers, Starsem for medium-lift launchers and Eurockot forsmall-lift launchers.
– Arianespace – EADS-ST, with a 28.70% stake in Arianespace(direct and indirect), is Arianespace’s second largest
shareholder (after CNES) and its largest industrial
shareholder. Arianespace is the world’s largest commercial
launch service provider in terms of total order book. At theend of 2004, Ariane had launched 221 satellites. EADS-ST
markets and sells European launchers worldwide and carries
out launches from the Kourou space centre in
French Guyana.

In 2004 Arianespace won seven new commercial contracts,
representing 40% of the accessible market. It also won
five governmental launch contracts in 2004. Three Ariane 5
launches (one commercial and two institutional) were carriedout in 2004.
The currently in-service version of Ariane 5 is able tolaunch one or more payloads with a total mass of up to
6.9 tons into geostationary transfer orbit. Since 1999, when
the first Ariane 5 commercial launch occurred, 15 Ariane 5
have been successfully launched.
In May 2004, a contract valued at 43 billion was signed
between Arianespace and EADS-ST for the delivery of
30 increased lift versions of Ariane 5, capable of carrying
up to a ten-ton payload. Additionally, Europe’s commitment
to support a European launcher has been demonstrated withthe signature between ESA and Arianespace of the‘‘European Guaranteed Access to Space’’ (EGAS) in
March 2004.
– Starsem – EADS-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%). ThroughArianespace, Starsem markets launch services by Soyuz
launchers for medium-weight spacecrafts into low or sunsynchronous orbits as well as for interplanetary missions.
Following the ESA Ministerial Conference in May 2003
which approved the offering of Soyuz launches from
Kourou, work has begun on the launch pad and one of the
two Soyuz versions due to be used has been successfully
qualified. The first launch is scheduled for the end of 2007
and will be operated by Arianespace. In 2004, two launch
contracts were signed.
– Eurockot – EADS-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 2004,
Eurockot won the SMOS launch contract from ESA.
Commercial Launchers. EADS-ST manufactures launchers andperforms research and development for the Ariane
programmes. Member-states, through ESA, fund thedevelopment cost for Ariane launchers and associatedtechnology. Once ESA certifies the launcher, Arianespacemarkets and sells launch services worldwide.
In 2004, efforts were focused on preparation for the return toflight of the ten-ton version of Ariane and implementation of
the organisation of Ariane production under a single prime
contract, EADS-ST, in accordance with the decisions of the
ESA ministerial conferences in November 2001 andMay 2003.

42

EADS Business and Legal Description 2004

1

1.1 Presentation of the Group (continued)

2
3

As regards the return to flight, major qualification work wascompleted in 2004, leading to the successful qualificationflight in February 2005. As regards the streamlining andrationalisation of the Ariane production, EADS-ST and
Arianespace signed a 43 billion contract in May 2004 pursuant
to which EADS-ST is the prime contractor to Arianespace ofthe next batch of 30 Ariane (PA batch). The signature of thiscontract underscores EADS-ST’s leading position in theEuropean launcher industry.
Management remains committed to reducing production costs,
and to optimising EADS’ launcher activities to be able to takefull responsibility for prime contracting of Ariane’s
development and production.
Ballistic Missiles. EADS-ST is the only company in Europethat designs, manufactures, tests and maintains ballistic
missiles. Under its contracts with the French State, EADS-ST
has produced the sub-marine 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
nuclear-powered ballistic missile submarine. The Company
manages the operational maintenance of the M45 missile
system, assisting the French armed forces during test firing
and with missile integration until the end of its operational
service. EADS-ST is under contract to develop the M51, a
new submarine-based strategic missile system with increased
technical and operational capabilities. At the end of 2004, theFrench MoD awarded EADS-ST a contract for the M51
production phase and test range facilities with a frame-contract
in excess of 43 billion.
Management believes that the development and production of
the M51 will provide EADS with high quality work over thelong term. In addition, the relative predictability of thedemand provides some stability to the otherwise volatile
launcher market.

EADS Business and Legal Description 2004

Space Services – EADS SPACE Services
Overview

EADS SPACE Services is a dedicated entity of EADS Spacefor the development and promotion of satellite services, with afocus on telecommunication and navigation services. EADSSPACE Services includes wholly-owned subsidiaries Paradigm
Secure Communications and Paradigm Services (‘‘Paradigm’’).
The first commercial provider of secure militarycommunications services with the Skynet 5 programme for the
U.K. MoD, Paradigm currently owns and operates theSkynet 4 system. Paradigm enlarged its customer base in 2004
through contracts with NATO, Portugal and several othergovernments. In the navigation sector, EADS SPACE Services,
together with Inmarsat and Thales has established the Inavsat
consortium, one of two candidates for the operation of theGalileo system under a concession contract with the Galileo
Joint Undertaking (ESA and European Commission). The
Galileo Joint Undertaking is expected to select a preferredbidder in 2005.
EADS SPACE Services also manages holdings in satellite
telecommunication service and operation companies: Nahuelsat
in Argentina, Globalstar in Brazil and Hispasat and Hisdesatin Spain.
Products and Services
Military Communications. The U.K. MoD selected Paradigm in2003 to deliver a 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 ground-breaking contract, under which Paradigm now
owns and operates the U.K. military communication satellite
infrastructure, allows the U.K. MoD to place orders and 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,from a single voice channel to a complete turn-key system
incorporating terminals and network management. Paradigm
also provides welfare services, ensuring that deployed troops
can call home and use the Internet. The introduction of two
new Skynet 5 satellites and upgraded ground infrastructure isscheduled to occur prior to 2010.

43

4
5

1.1 Presentation of the Group (continued)
In 2004, the German Bundeswehr issued a request for proposal
for secure satellite communication capacity, comprising acomplete military satellite communication infrastructure
including a fleet of satellites and a number of tactical andstrategic ground stations as well as a network control system.
The system is expected to be fully operational in 2008. In
response to this request for proposal, EADS SPACE Services
has set-up a consortium, together with Astrium as satellite
provider and ND SatCom as a communication network
specialist. Management believes that EADS SPACE Services iswell-positioned in the competition, and expects the winner tobe announced in the first half of 2005.
Navigation. EADS SPACE Services has formed the Inavsat
consortium, together with Inmarsat and Thales, and iscompeting against Eurely (Alcatel, Finmeccanica and Vinci) forthe concession phase of the Galileo navigation project.
Following an international competition, Inavsat is short-listed

44

EADS Business and Legal Description 2004

for the role of Galileo operating company, the entity which
will deploy and operate the satellite system 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
for satellite navigation services and derivative products is
growing at approximately 25% a year.
Production and Suppliers

EADS Space currently operates production facilities that arelocated in France (Vélizy, Les Mureaux, Bordeaux, Toulouse),
Germany (Backnang, Bremen, Friedrichshafen,
Lampoldshausen, Ottobrunn, Rostock, Trauen), Spain (Madrid),
the United Kingdom (Portsmouth, Stevenage) and French
Guyana (Kourou).

1

1.1 Presentation of the Group (continued)

2
3

1.1.7 Investment
Dassault Aviation

EADS holds a 46.03% stake in Dassault Aviation – listed on
the Marché Eurolist of Euronext Paris – along with Groupe
Industriel Marcel Dassault (‘‘GIMD’’) (50.22%) and free
float (3.75%).
Dassault Aviation is a major participant 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 73 countries.
On the basis of its experience as designer and industrial
architect of complex systems, Dassault Aviation designs,
develops and produces a range of military aircraft andbusiness 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 Strategy
Coordination, whereas the Eurofighter program is managed by
EADS’ Aeronautics Division.
Military Aircraft. Dassault Aviation offers two multi-rolecombat aircraft, the Rafale and the Mirage 2000 family.
– Rafale. The Rafale program includes three versions of atwin-engine, multi-role combat aircraft designed for both
Air Force and Navy applications. According to government
budgetary documents, France is considering the acquisitionof 294 Rafale, 234 for the Air Force and 60 for the Navy,for a total program cost of 432.3 billion, including
49.5 billion for development. 61 aircraft have already beenordered; of these, 36 are destined to the Air Force, and 25
to the Navy. In 2001, the first operational group of Navy
Rafale was commissioned on the Charles De Gaulle aircraft
carrier. 12 Rafale were delivered by the end of 2002.

More than 600 Mirage 2000 aircraft have already beenordered, nearly half of them by foreign countries.

4

Business Aircraft. Dassault Aviation offers a wide range of
products at the top end of the business jet sector. Over1,400 Falcon business jets have been delivered since the first
Falcon 20 delivery in 1965. In-service Falcons currently
operate in over 60 countries worldwide, filling corporate, VIP
and government 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, launched in October 2000. The turn of the century
saw Dassault Falcon Jet clearly emerge as the industry leader
in its category. In 2001, the latest project in the Falcon family,
the tri-jet long range Falcon 7X was unveiled to the public at
Dassault’s Teterboro, New Jersey, plant. Flight testing isscheduled to begin at the beginning of the second quarter of2005. Certification and first deliveries are expected before theend of 2006.
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.

– Mirage 2000. The Mirage 2000 family is offered in
two versions:(1)

The Mirage 2000-5, its latest version, is a multi-rolecombat aircraft designed for air to air multiple-target
combat, as well as air to ground missions. The Mirage
2000-5 can be armed with the MBD MICA air to airinterception and combat missile; and(2)

The Mirage 2000-D, an all-weather penetration
aircraft used by the French Air Force is being adapted
to fire the new MBD SCALP EG stand-off air toground missile. The last aircraft ordered by the
French Air Force in 1996 were delivered in 2001.

EADS Business and Legal Description 2004

45

5

1.2 Recent Developments

AirTanker Selected as Preferred Bidder for the
U.K. Future Strategic Tanker Aircraft

ATR Signs Contracts with Indian Low-Cost Airline for
30 New Aircraft

On 28th February 2005, the British Defence Secretaryannounced the selection of the EADS-led AirTanker
consortium as the preferred bidder for the U.K.’s £13 billion
air-to-air refuelling programme. The selection confirms thecompetitiveness of the A330-200 tanker offer, and paves theway for the AirTanker consortium to commence the final stageof contract negotiations on the largest ever defence sector
private financing initiative.

On 11th February 2005, Air Deccan, the first Indian low-costairline, signed a contract with ATR to purchase 30 new
ATR 72-500 aircraft (72-seat configuration). Deliveries will be
spread over a five-year period commencing in May 2005, atthe rate of approximately six to eight aircraft per year.

Successful Launch of Ariane 5 ECA

On 12th February 2005, the new Ariane 5 ECA wassuccessfully launched from the European spaceport in Kourou,
French Guyana. The launch confirmed the improvements thathave been realised since the maiden flight of the Ariane
5 ECA in December 2002, and removed many of theuncertainties associated with the continuation of the Ariane
5 ECA programme. According to the CEO of the Space
Division, as a result of the successful launch, ‘‘Arianespace
now has the reliable high-performance launcher that will allow
it to meet market demands’’.

46

EADS Business and Legal Description 2004

New Customers for the A380
On 28th January 2005, China Southern Airlines entered into
an agreement to purchase five A380s from Airbus. The
agreement represents the first commitment from a Chinese
carrier for the A380 aircraft, marking a significant
breakthrough for EADS in this important and strategic market.

Earlier in January, UPS became the third U.S. based customer
for the A380, with its agreement to purchase ten freighter
versions of the new aircraft, plus an option for ten additional
aircraft. The UPS A380F will carry a freight load of 150 tons
on three decks, with a cargo volume capacity of 1,130 cubic
metres and a range of approximately 10,400 kilometres. UPS
will take delivery of its first A380 F in 2009.

1

Chapter 2: Corporate Social Responsibility

2
3
EADS is a global company offering aerospace and defence
products and services which is driven by the ambition to set
the industry’s standards. Setting the benchmark in the sector
implies long-term value creation and the recognition of theGroup’s corporate social and ethical responsibility. As such,
the Group strategy envisages a sustainable balance between
economic performance, consideration of stakeholders’ interests
and respect of the environment.
EADS’ corporate social responsibility (‘‘CSR’’) approach isbased on the Group’s nature, strategy and activities. For
example, its long-term vision is driven by product specificities,
such as their average lifecycle of over 30 years. Furthermore,
the EADS Group has been created from the integration ofexisting businesses. The Corporate functions are there to
determine guidelines and to give support to the Business Units
that are responsible for the day to day business. They also
ensure dialogue with their direct stakeholders.
As a defence company, EADS Group specifically acknowledges
its responsibility in selling defence products and providing
services to nations that contribute to the security of thosenations 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 and Ottawa agreements, anti-corruption policy).
In 2004, EADS undertook to work towards demonstrating its
corporate social responsibility in the conduct of its day to day
business. In order to achieve this vision, EADS has establisheda CSR policy that identifies areas in which the whole Groupaims to continually improve.

OECD Convention. EADS, as a signatory 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 successin implementing its sustainable development strategy.
The EADS CSR policy embraces its way forward on key CSR
items which are common for the entire Group. These relate as
far as possible to existing best practices, as well as to the
EADS Code of Ethics which is designed to give guidance for
operational managers and employees.
EADS realises that in addition to the implementation of goodpractices regarding CSR within its businesses, reporting onthese practices is becoming more and more important for its
stakeholders. EADS therefore started to report on its activities
in the field of CSR in the Annual Report 2002. In the 2002
and 2003 reports mainly qualitative information was included,
due to the fact that CSR practices are mostly carried out
within the Business Units and their respective sites and up to
this point no centralized reporting procedure had
been implemented.
The 2002 report sets out the existing practices at group level,
whereas the 2003 report already contained a first qualitative
analysis of the existing best practices amongst EADS’Business Units.
In early 2004, EADS’ top management decided to launch an
extensive project in order to gradually provide more detailed
and quantitative reporting on CSR at Group level and toensure that the existing best practices in certain Business Units
are communicated within the Group.

EADS’ vision is in line with internationally recognizedframeworks such as the Universal Declaration of Human
Rights, International Labour Organization’s Declaration and

EADS Business and Legal Description 2004

47

4
5

2.1 Creating a Common Understanding on Corporate Social Responsibility

2.1.1 Aims of the 2004 Corporate Social
Responsibility Initiative

The aim of the CSR initiative in 2004 was to define a CSR
common understanding at a corporate level and to establish
policies and systems that will allow EADS not only to comply
with potential forthcoming legislation, but first and foremostto achieve more transparent and proactive communication in
the future.
With these objectives in mind, the EADS CEOs launched acomprehensive initiative during the second semester of 2004
and the beginning of 2005, which aimed at developing EADS’
CSR policy, based on underlying vision and EADS values, andformulating an implementation plan for such policy. In orderto achieve this, EADS worked with a consultant teamspecialized in the areas of CSR.
The aim of the initiative was to establish policies which areshared by everyone in EADS and are the basis of the common
Group vision on those key issues. This initiative therefore
required the active support of each division, Business Unit andCorporate functions heads.
2.1.2 Methodological Approach

The initiative was conducted in four phases and for every
phase, a ‘‘project core team’’ composed of representatives of
EADS’ corporate functions and major Business Units wasinvolved, in order to ensure a coherent approach and establish
concepts that could be implemented by every unit
and function.
– Phase 1 – Initial Stage
The first phase of the project was the assessment of EADS’environment in terms of existing and new regulations and abenchmarking of the practices in terms of CSR in the
aeronautics and defence sector. Another objective was to
identify the high priority CSR-topics for EADS, to beaddressed as soon as possible internally as well as in termsof reporting to EADS’ stakeholders. A list of priority issues
was required as (i) it was deemed unrealistic to address all
topics at once and (ii) some topics traditionally covered in
CSR reporting are not necessarily of high relevance for
EADS’ sector of activity.
– Phase 2 – Identification of Practices and Corporate
Social Responsibility Policy
The second phase of the project aimed, on the one hand, atestablishing an EADS’ CSR status report based upon theexperiences and practices of the Business Units that are

48

EADS Business and Legal Description 2004

responsible for a certain number of topics that cannot, due
to the diversity of businesses within EADS, be addressed at
the group level. A second objective was to establish EADS’
policies in respect of the high priority items identified in
the first phase.
The work was conducted in an interactive process so thatthe results and identified best practices from the discussions
with the Business Units were integrated into the CSR
policy of EADS.
– Phase 3 – Reporting Agenda
The aim of phase 3 was to establish the next steps in termsof reporting, both internally and externally.
It was agreed that a CSR reporting system should be put inplace. Within the group, a number of functional reporting
networks were identified, which (with the exception ofenvironment) were already established within the Groupand were operating beforehand:
–
–
–
–
–
–
–
–
–

Human Resources (‘‘HR’’)Environment
Sourcing
International Compliance Program
Donations and Sponsoring
Quality and Customer Satisfaction
Research and Development (‘‘R&D’’)
Legal Reporting
Financial Reporting

In parallel, a number of quantitative and qualitative Key
Performance Indicators (‘‘KPI’’), based upon the Global
Reporting Initiative (‘‘GRI’’), the Global Compact principles
and the French Nouvelles Régulations Economiques andtailored to EADS’ business were agreed upon.
These KPIs are not included in full in this 2004 report, as
EADS chose an incremental approach, which envisages
adding KPIs every year to EADS’ publications, as data
becomes available and its quality can be controlled.
– Phase 4 – Approval
After thorough and critical discussion, the CEOs approved
the results of the initiative and the next steps, which
include the present publication.

1

2.2 EADS Code of Ethics

2
3

At the time of the creation of EADS, a code of ethics (the‘‘Code of Ethics’’) was established and communicated to theemployees of the Group. This Code of Ethics aims atemphasizing values that are key success factors for achieving
an efficient integration of different companies into one group.

The enhanced EADS Code of Ethics will set out in one
single, comprehensive document the Group guidelines related
to the ethical standards that the Group adheres to. It will thus
give guidance to all employees about appropriate conduct intheir professional environment.

More than four years after the creation of EADS, in light of
its establishment as a market leader in many of its businesses,
and in light of the evolving legal environment relating tobusiness ethics, EADS is in the process of updating the Codeof Ethics in order to reflect practices recommended by various
codes and laws and to align with best practice.

All employees will be sensitised through a systematic
information campaign, aimed at raising the awareness of theimportance of an ethical business conduct and emphasizing
underlying values.
The text of the enhanced EADS Code of Ethics will beavailable on the Internet under www.eads.com.
In the meantime, the existing Code of Ethics remains in fullforce and effect.

EADS Business and Legal Description 2004

49

4
5

2.3 Corporate Social Responsibility Policies and Operations
EADS policies have been designed to support and implement EADS’ long-term vision and strategy in terms of CSR. They give
guidance for day-to-day business and are in accordance with EADS’ underlying values.
CSR Policies on Domains Identified as Most Relevant for EADS.
CSR Domains

Specific Policy Items

Business Ethics

Proper business practices
Compliance with the laws regulating all EADS’ activities
Corporate Governance standards

Sustainable Growth

Product quality and customer satisfaction
Sustaining and protecting innovation
Fostering a mutually beneficial relationship with EADS’ suppliers

Environmental Care

Minimizing environmental impacts of EADS’ activities
Taking into account environmental impacts of EADS’ products throughout their lifecycle

Employer-Employee
Relationship

Providing a safe workplace for EADS’ employees and subcontractors
Ensuring equal opportunity for all EADS employees
Ensuring efficient management of skills and know-how
Promoting a proactive dialogue with EADS’ employees

Corporate Citizenship

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 below2.
2.3.1 Business Ethics
2.3.1.1 Proper Business Practices

Doing international business requires being especially vigilant so as to ensure that all companies belonging to the Group always
comply with applicable laws and regulations relating to international sales. For the Group, this is fundamental insofar as EADS,
as a global company, recognizes its responsibility to always act in accordance with the standards of business ethics and integrity
worldwide.
To achieve this aim, EADS International has been implementing rules and processes since 2000 aiming at ensuring compliancewith such laws and regulations.
Policy– ‘‘We are 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 in foreign trade is a major challenge for all international companies. In order to meet this challenge,
EADS is fully committed to complying with all relevant national and international legislation, including the OECD Convention ofNovember 1997, as incorporated into the legislation of 35 countries. EADS’ International Compliance Program is a corporate policy,
applicable to all international operations of EADS and its affiliated companies, intended to detect and prevent bribery andunfair dealing.
– EADS is often involved in proposals, bid preparations or contract negotiations with governmental authorities because of the nature of
its products and services. The Group’s policy is to compete fairly and legally for all business opportunities as well as to conduct
negotiations and perform contracts when awarded in compliance with all applicable requirements, specifications andcontractual obligations.’’
EADS has implemented a detailed corporate policy, the ‘‘Foreign Trade Rules’’, which apply to all international operations of theGroup entities, and which is intended to detect and prevent bribery risks in international sales. This policy has been published
in EADS’ Corporate Handbook, which is available to all employees through the company intranet.
2 The following presentation sets forth key aspects of EADS’ ongoing Corporate Social Responsibility efforts and does not purport to be an exhaustive description thereof.

50

EADS Business and Legal Description 2004

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3This 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 Business Units. It also sets out
appropriate guidelines regarding the acceptance of gifts
and hospitality.
Organisation

In 2004, around 20 training sessions took place within eachBusiness Unit, sometimes with the attendance of third parties(prosecutors, representatives of international bodies, lawyers,etc.), in order to communicate the corporate values and policies
to all concerned.
Since October 2002, EADS has set up a network ofInternational Compliance Officers (‘‘ICO’’) representing eachBusiness Unit. ICOs are responsible for ensuring the correct
application of the policies and procedures within the Group.

EADS has developed a set of policies and procedures intended
to ensure that its international business do not infringe any
applicable laws and regulations relating to international trade
and that they comply with the applicable standards of businessethics and integrity.

EADS has also developed relationships with international
bodies such as the OECD, the International Chamber ofCommerce (‘‘ICC’’) and the European Union (‘‘GRECO’’).

The main pillars of these policies and procedures are
the following:

At the same time, EADS International has developed various
relationships with stakeholders:– Transparency in the selection of its business partners. All
business partners engaged by an EADS company haveundergone a strict engagement procedure, based on (i) a due
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 and paymentof bribes;– Signature in 2003 of a convention with the French
Corruption Monitoring Council, also signed by otherFrench companies;– ‘‘Appropriate remuneration for legitimate services’’. EADS isvery keen to ensure that all payments due and payable toany business partner are justified by legitimate services
rendered and do not exceed sound market practices; and– Assessment by external qualified advisors of the EADS
international business ethics policy.

– Monitoring of the contractual relationships with suchbusiness partners (and the related payments) until
satisfaction of all contractual duties.
Those policies and procedures normally apply to all operations
directly or indirectly relating to foreign trade. The Groupbusiness partners must respect these policies and procedures.
Furthermore, EADS conducts regular audits of all relatedagreements within the Business Units to verify that the Group
policies and procedures are properly implemented and theBusiness Units are instructed to report on a yearly basis on
the implementation of such policies and procedures.
In addition, the Group has developed a comprehensive training
policy so as to disseminate an ‘‘awareness’’ culture within all
Business Units. All employees dealing with international
business attend such training sessions.

EADS Business and Legal Description 2004

– Establishment, with certain other companies, of a set ofprinciples regarding anti-corruption practices in the aerospaceand defence sector;– Dialogue with the ICC and the OECD anti-corruption
working groups; andPerformance and Best Practices

EADS conducts regular investigations and audits to detect andpromote the ‘‘best practices’’ in force within the Group
regarding the proper implementation of the Group
international business ethics policy, the objective being todisseminate such ‘‘best practices’’ throughout the rest of
the Group.
The Group issued a leaflet ‘‘EADS International Business Ethic
Policy For Consultant Agreements: Transparency &Substantiation’’ in January 2004, which was given to allprospective international marketing consultants. This leaflet
summarizes the Group policies and procedures regarding
selection of international business partners. Such consultants
are invited to attend specific training sessions when
deemed appropriate.
The Group’s ICOs meet periodically to share concerns andbest practices. An annual ICO Conference has been organizedsince 2003 involving more than 100 people involved inforeign trade business and operations.

51

4
5

2.3 Corporate Social Responsibility Policies and Operations (continued)
EADS also issues on a regular basis Group-wide internalbulletins ‘‘ICO information letters’’ focusing on the evolutionof the regulatory environment of foreign trade andhighlighting information reported by the international media
regarding the fight against corruption worldwide. Thesebulletins are intended to complete and update the information
given to EADS employees during the training sessions.
Key Performance Indicators

Consultant files
auditedNumber of ICO
information letters
issuedNumber of training
sessions held by ICO

GRI Ref.

2004

2003

–

93.10%

Not available

–

3

2

–

20

12

Scope: EADS and consultant agreements under EADS leadership2.3.1.2 Compliance with Law Regarding All EADS’ Activities

Compliance with law is a very vast field for companies which
operate on an international level such as EADS. In addition, as
a company dealing with defence products, EADS has to fulfil
a number of specific requirements imposed by the customers
for such defence products.

– EADS screens new customers and suppliers to ensure that they
do not do business with banned entities as per the
local requirements.’’
Organisation

EADS is subject to a myriad of legal regimes in eachjurisdiction in which it conducts business. The EADS Legal
Affairs directorate, in coordination with the Division andBusiness Unit legal departments, is responsible for
implementing and overseeing the procedures designed toensure that EADS’ activities comply with all applicable laws,
regulations and requirements. It is also responsible foroverseeing all litigation affecting the Group, as well as for thelegal safeguarding of the Group’s assets, including
intellectual property.
The Corporate Secretary and Legal Affairs departments also
play an essential role in the setting up and administration of(i) EADS Corporate Governance procedures and (ii) legal
documentation underlying delegation of powers andresponsibilities and defining the EADS management and theinternal control environment.
As all countries from which EADS exports defence material
have different legislation in terms of arms export control, theorganisation of compliance is de-centralized within EADS.

For international sales, dealings in defence material are subject
to laws and regulations established in the countries fromwhich EADS defence products are to be exported. Those areinter alia for France the ‘‘Décret-loi du 18 avril 1939 ’’ and allits subsequent amendments, for Germany the‘‘Kriegswaffenkontrollgesetz’’ and for Spain the ‘‘Real Decreto
No. 491/1998 de 27 de Marzo de 1998 ’’, as well as theestablished national guidelines for the granting ofexport licenses.

The matters covered by those organisations are:

Policy– Dealing with classified material and data within EADS (incooperation with the security officers and IT
organisation); and– ‘‘EADS is committed to complying with the antitrust and,competition as well as humanitarian law, when applicable, in
all of its activities and throughout the Group.
– EADS is also committed to complying with all applicablelegislation relating to Foreign Trade. EADS Group companies
comply with all export control and import regulations thatgovern the exports and imports of commodities andtechnical data.
– EADS always obtains export licenses and other government
approvals prior to exporting products and technology controlled
by local governments.

52

EADS Business and Legal Description 2004

There are national responsibilities for dealing with defence
goods within the EADS home countries.
– Purchase of classified or export restricted components or
subsystems (in cooperation with thepurchasing organisation);– The application for export licenses in the countries fromwhich material is to be exported.
All those activities are regularly subject to verifications by theInternal Audit department.
Performance and Best Practices
In order to be close to the operational businesses, EADS has
implemented a decentralized process. Export control officers
were appointed and dedicated resources or procedures at
Business Unit and site level were created so as to ensurecompliance with laws relating to arms export activities

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3(Astrium, Space Transportation, Eurocopter, Defence) throughpersons responsible for export involved in the day-to-day
business on the sites.
In respect of other national and international regulations, one
example are the Space Business Units which ensure compliancewith the European Space Agency (‘‘ESA’’) rules by integratingthese rules with customers’ rules by way of long term
strategic plans.
Key Performance Indicators

GRI ref.

2004

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

SO6 None

OrganisationSee ‘‘Part 1/Chapter 2 Corporate Governance’’.

4

2.3.2 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 product and services that perform. Sustaining
this development requires focus on the product quality,
continuous innovation and the best supplier management.
2.3.2.1 Product Quality and Customer Satisfaction

Scope: EADSAs an industry leader in the Aerospace and Defence sector,
EADS is constantly striving to build upon its solid reputationfor excellence in its products, its processes and its 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 business challenges and improves its levels of
Quality and Operational Excellence, internally and throughout
the supply chain.

2.3.1.3 Corporate Governance Standards

PolicyIn 2004, the EADS Board of Directors continued to upholdthe driving principle of maximizing shareholder value andconformity with applicable law and the Corporate Governanceprinciples in the countries relevant for the Company, while
also enhancing its focus on Corporate Governancebest practices.

– ‘‘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.

SO7 i) EADS Code of Ethics
including but not limited to
all relevant provisions ofCode relating tocompliance withcompetition law; andii) Regular legal risk
analysis as issues come up.

The EADS management structure has proved efficient andwell adapted to fulfil its commitment to a sustainable andbalanced relationship with stakeholders. Ensuring developmentof employee and supplier relationships, as well as ensuring
customer satisfaction, remain a foundation of EADS’ success,operations and culture.
Policy– ‘‘EADS is determined to set the standard of excellence in thefield of Corporate Governance. We are 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.’’

EADS Business and Legal Description 2004

– EADS actively seeks key customer feedback through astructured Group wide process of Customer Reviews.’’
Organisation

The Chief Quality Officer (‘‘CQO’’) is in charge ofstimulating, coaching and supporting the Business Units toimplement continual improvements in operational level
OTOQD performance and to maintain and improve customer
confidence in EADS.
The CQO:– Provides a unified EADS methodology, training andassociated implementation support for a company wide
Customer Confidence measurement andimprovement programme.
– Provides state-of-the-art expertise and implementation
support to Business Units on diagnosing and correcting flow
deficiencies in Industrial Supply Chain processes.

535

2.3 Corporate Social Responsibility Policies and Operations (continued)– Provides a unified EADS methodology and tool kit, withassociated training, coaching and deployment support toBusiness Units in developing ‘‘EADS BlackBelt’’improvement experts.
– Provides best practice sharing and implementation support toBusiness Units on deployment of Quality Gates to improvediscipline and robustness of key industrial processes.
– Provides simple EADS high level metrics andimplementation support for consistent reporting of OTOQD
internally and throughout the supply chain.
– Chairs an EADS Quality Council with senior level
representatives of each Business Unit to agree actions andpriorities and to drive OTOQD deployment in all
Business Units.
– Operates in a dynamic and flexible manner through a small
core team, supplemented by high potential managers,
seconded from the Business Units, and bringing in state-ofthe-art external expertise where needed in each action area.
– Animates supports and drives a network of Business Unit
operational level experts to ensure that the Quality andOperational Excellence Programme (‘‘QOEP’’) is tuned
directly to the needs, priorities and maturity of eachBusiness Unit.
– Provides added value directly to the Business Units bybringing in, and initially funding, the external expertise tohelp the Business Units with improvement skills training
and coaching.
– Provides added value directly to the Business Units bybringing in, and initially funding, the external expertise tohelp the Business Units in diagnosing and designingcorrective actions for the Industrial Supply Chain
Process deficiencies.

In June 2004, two strategic workshops (Top Executive Forum
format) were held on the subject of Quality and Operational
Excellence. These provided invaluable input from senior
executives representing all Business Units for the design phaseof a Group wide Quality improvement initiative. Following
these workshops, in the second half of 2004, a major initiative
was launched to deliver enhanced customer confidence andsatisfaction through driving operational improvements in thoseindustrial processes which contribute to achieving OTOQD of
its products and services to end customers. This Quality andOperational Excellence programme has now completed the set
up phase and is moving into operational deployment directly
within the EADS Business Units.
The Quality and Operational Excellence programme acts onfive key areas for improvement:– Measuring Customer Confidence levels and acting on the
results to bring customer driven prioritisation to its
improvement actions;– Rigorously assessing and improving its Supply Chain
Process performance, both internally within EADS andexternally with its suppliers, as compared to Supply Chain
best practices from world class companies in otherindustrial sectors;– Investing significantly in the problem solving skills of its
people, through development of a custom built and worldclass ‘‘EADS Black Belt’’ training and development
programme, to enable effective and continual improvements
to be sustained on a widespread basis at all levels in
the company;– Introducing Quality Gates as key checkpoints in criticalindustrial processes to ensure early anticipation andelimination of potential operational problems in downstream
activities; and– Represents EADS in relevant Quality, Standards andRegulatory bodies at both National and International levelcommensurate with the status of EADS as a global
aerospace and defence company.

– Measuring and reviewing, at top level, OTOQD
performance and Customer Confidence levels from aroundthe EADS Business Units to drive priority on these subjects
from the top of EADS to every level in the Company.

– Represents Environment network in the EADSCSR Programme.

The Quality policy and guidelines are communicated to the
suppliers for the implementation of EADS standards.

Performance and Best Practices

Key Performance Indicators will be available from report on
Financial Year 2005.

The quality network focuses on building Customer Confidence
through improving OTOQD and is driven by the following
motto: ‘‘No matter how good we are today, we will be evenbetter tomorrow’’.

54

EADS Business and Legal Description 2004

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

23

2.3.2.2 Sustaining and Protecting Innovation
Innovation Strategy

Policy– ‘‘Our innovation strategy aims at increasing competitivenessthrough continuously improving quality of services and products
as well as efficiency of processes. The two main pillars of ourstrategy are the EADS Research & Technology (‘‘R&T’’)network and the Corporate Research Centre’’ (‘‘CRC’’).’’In 2004, the R&T network generated approximately
489 million (485 million in 2003) of shared activities, with
127 projects involving more than 1,200 experts of the Group.
In terms of self-financed R&D investment of aerospacecompanies worldwide, EADS was ranked No. 1 on the R&D
Scoreboard 2004 of the Department of Trade and Industry in
the United Kingdom.
Key Performance
Indicators

Organisation
The EADS innovation strategy is both centralised anddecentralised. R&D is under the responsibility of each of theBusiness Units to ensure the development of products andservices that meet customer needs and offer competitive
solutions in line with market expectations. The centralized
efforts are highlighted by both the EADS R&T Network andthe CRC.
The R&T Network coordinates shared research and technology
activities among the Business Units. It facilitates the circulationof information and research results within the Group andpermits the setting up of a common R&T programme,
providing long-term innovation potential. The network isorganized around 18 technology domains of transversal interest
such as Materials and Structures, Electronics, Navigation andControl and Image Processing. It is structured to facilitate
exchanges between technical experts and business management,
to encourage the exchange of best practices and to save costs.
This network also cooperates with external stakeholders,companies, industrial organisations, research laboratories
and universities.
The CRC supports the R&T Network by providing a platform
for the exchange of know-how and by highlighting possiblesynergies throughout the Group. The CRC has two main sites
in Paris and Munich. It maintains research proximity centres inToulouse and Hamburg to serve its largest customer, Airbus.
Other offices have been opened in 2003 (Moscow) and 2004
(Singapore). The CRC employs about 600 people including
doctorates and university interns.
See also ‘‘Part 1/1.1.1 Management’s Discussion and Analysisof Financial Condition and Results of Operations’’.

R&D expenses
Self-financed
R&D
R&T expenses

GRI Ref.

2004

2003

In
1 bn

In percentageof revenues

In
1 bn

In percentageof revenues

–

⬃5.0

15.7

4.8

15.9

–
–

2.1
0.51

6.6
1.6

2.2
0.45

7.3
1.5

Scope: EADSThe Advanced Technology Initiative was launched in 2004
to create a cross-company drive to increase efficiency ininnovation and R&T. It works along two main lines ofactivity: one focuses on benchmarking and forecasting oftechnologies to develop a technological action plan and theother on increasing external partnerships. The benchmarking
and forecasting process is dedicated to the identification of
future technologies trends, on the basis of product evolution
requirements and on the analysis of new emerging
technologies. External expertise will be sought to provide
perspective and vision.
By focusing on external partnerships, the company aims to
make better use of available resources by looking to interact
more with European initiatives and with those in the EADS
home countries. To improve its links to public researchlaboratories and universities, the EADS Company Foundation
for Research (Fondation d’Entreprise) was launched in France.
It aims to promote multidisciplinary research in aerospacetechnologies and establish exchanges between researchers ingovernment, private industry and higher education research
institutes. Other initiatives are contemplated in Germany,
Spain, the U.K. and the U.S. to improve links with publicresearch institutes and universities.
Protecting Innovation: Intellectual Property

Performance and Best Practices
Technological innovation programs are managed in conjunction
with the EADS R&T Network and the EADS CRC as well as
through a strong network of top experts in theBusiness Units.

EADS Business and Legal Description 2004

Policy– ‘‘One of EADS’ most valuable assets is its intellectual property(‘‘IP’’) which includes patents, trade secrets, trademarks,
copyrights and other proprietary information. It is EADS’
policy to establish, protect, maintain and defend its rights in allcommercially significant IP and to use those rights in
responsible ways.

55

4
5

2.3 Corporate Social Responsibility Policies and Operations (continued)– 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.’’
Organisation
IP, such as patents, trademarks and know-how, plays animportant role in the production and protection of EADS
technologies and products. The use of IP rights enables EADS
to remain competitive in the market and to manufacture andsell its products freely.
Each of the subsidiary companies of the Group owns the IP
which is specific to its particular business. IP used throughout
the Group may be owned either directly by the subsidiary
which generated it or under license from EADS where such
IP is of common interest to the Group. 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 andpromotes licensing of common IP between the subsidiaries.
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 and conditions are
currently being strengthened and adapted when dealing withcountries with weaker IP laws. The sourcing strategy is also to
integrate a segmentation of parts of the contract in order tominimize the risk of industrial espionage.
Performance and Best Practices
To increase the added value of the Group, EADS Industrial
Research & Technology promotes the sharing within theGroup of all the knowledge of the Business Units and thesharing of resources, skills and research means and budget todevelop new knowledge.
For example, all the contracts between Business Units of theGroup concerning R&D must have IP provisions allowing forthe flow of knowledge (EADS R&T Network rules). In 2004,
the EADS IP portfolio was comprised of approximately
4,400 inventions, which are covered by over 13,000 patents.

56

EADS Business and Legal Description 2004

Key Performance Indicators

Patents andinventions

GRI Ref.

–2004

In 2004, the EADS Group filed
521 new inventions, some ofwhich were covered by several
patents. At the end of 2004, theoverall EADS portfolio wascomprised of 13,515 patents.

Scope: EADS

2.3.2.3 Supplier Management: Fostering a Mutually Beneficial
Relationship with EADS’ Suppliers
Policy– ‘‘Suppliers represent a high proportion of the value of EADS’
products, and play an important part in the customer
satisfaction. As such, EADS endeavours to fully integrate themin its ethical way of doing business.
– Fostering a mutually beneficial relationship with suppliers,
EADS’ sourcing principles impose 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.’’
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.
Organisation
Each EADS Business Unit has its own Sourcing Function with
the Procurement Director being a member of the Business
Unit Management Team.

The Procurement Directors of all Business Units and membersof the Corporate Sourcing Function form the Procurement
Directors Board. This group, chaired by the EADS Chief
Procurement Officer, meets regularly to discuss and decide on
initiatives to further implement the EADS Sourcing Strategy
and on issues of cross Business Unit interest.
EADS Corporate Sourcing is the strategic architect of Sourcing
functions and provides overall direction for all sourcing
activities groupwide, in particular regarding the key elementsof the Sourcing Strategy, which are Procurement Marketing,
Joint Sourcing, Supplier Evaluation and Risk andOpportunity Sharing.

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3

Procurement Marketing aims to identify the best potential
suppliers worldwide and to evaluate them with regard to theircapabilities and their certifications. Procurement Marketing is
becoming increasingly important as EADS targets new global
supply markets to support EADS Global Industrial Strategy.
Joint Sourcing activities allow the purchasing power to beleveraged across EADS. A group of lead buyers bundles
procurement volumes of selected material groups for common
negotiation. This also encourages all EADS Business Units tohave one contact with a supplier.
EADS Corporate Sourcing identifies best practice inprocurement and communicates common processes andsupporting tools across the Group. In recent years, this teamhas initiated the deployment of e-procurement tools across theGroup. State of the art systems for electronic calls for tender
are the most efficient methods for both EADS and suppliers
and guarantee equal and fair treatment of all suppliers.
Electronic catalogues harmonize, simplify, accelerate andautomate the ordering process for every day commodities forthe benefit of EADS and the supplier.
Corporate Sourcing also facilitates the relationship with major
suppliers which are in business with several Business Units.
The Common supplier approach serves to drive Groupinitiatives and to ensure supplier relationship is discussed at
Top Management level. It also means that all Business Units
receive adequate attention from the supplier in respect of theirindividual issues.
The EADS Supplier Evaluation and Development process
guarantees that suppliers’ performance is regularly evaluated.
Suppliers can expect that the same process and the same
criteria are applied by all Business Units: Commercial,
Logistics, Quality, Technical, and Customer Support.
Evaluations are shared 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 and the complexity of the procured systems,
equipment and structures, 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 development.
Both business risks and opportunities should also be

EADS Business and Legal Description 2004

adequately shared with suppliers. Procurement Policies of
EADS Business Units address all typical business risks andsuggest how they should be dealt with in EADS
contractual agreements.

4

Procurement Policies also set out the principles and guidelines
for conducting business with current and prospective suppliers.
These guidelines describe how partnership relations should be
handled in an equitable manner in the interest of all parties
concerned and how disputes should be dealt withprofessionally and as quickly as possible in accordance withagreed partnership arrangements.
Procurement Policies also reflect the requirements 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 requires its suppliers to adhere tocommon standards in the areas of human rights, environment
and employment.
As most of its suppliers are located in the E.U. and North
America, EADS can expect them to apply laws and regulations
on environmental and social performance. As it is theintention to increase global sourcing activities, EADS is
considering adding specific CSR criteria to the supplierevaluation process.
Performances and Best Practices
With two thirds of its revenues being 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 60 suppliers
already account for 60% of the sourcing volume, the top 250
suppliers account for 75% of the business.

Complex systems and equipment account for 40% of EADS
procurement. Structures, material and product related services
also account for 40%, while indirect material account for 20%.
While EADS likes to see itself as an important customer for
its key suppliers, EADS wants them to be independent and at
the edge 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 rest 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 orless than 440 million turnover.

57

5

2.3 Corporate Social Responsibility Policies and Operations (continued)
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
Global Sourcing opportunities and to support sales.
Key Performance Indicators

Sourcing volume: breakdown by
country for top 10 countries
FranceGermany
U.S.
U.K.
Spain
Italy
Netherlands
Belgium
CanadaSwitzerland

GRI
Ref.

2004

2003

In percentage
of totalsourcing
volumeIn percentage
of totalsourcing
volume

32
22
22
12
4
2
1
1
1
1

31
24
21
12
4
2
2
1
1
1

EC11

Scope: EADSKey Performance Indicators

Importance of sourcing

GRI
Ref.

2004

2003

In percentageof revenues

In percentageof revenues

68

67

EC3

Scope: EADSKey Performance Indicators

Strategic suppliers level ofdependency(average % of EADS
sourcing volume persupplier to supplier’s
revenues for top 25
suppliers)
Strategic suppliers level ofdependency(average relation of EADS
sourcing volume persupplier to supplier’s
revenues)

GRI
Ref.

2004

2003

In percentage

In percentage–

Supplier
data notavailable
at date ofprinting

15–

Supplier
data notavailable
at date ofprinting

10

Scope: EADSKey Performance Indicators

Purchasing breakdownby Geography
EuropeU.S.
Rest of the World*

GRI
Ref.

2004

2003

In percentage
of totalpurchase

In percentage
of totalpurchase

76
22
2

77
22
1

–

Scope: EADS, * including G 1% in non-OECD countries

2.3.3 Environmental CareEADS environmental policy embraces all phases of a productlife cycle, from conception and design, manufacturing andproduct support, including environmental impact of its sites. It
seeks to ensure that each of its Business Units complies withthe laws and regulations of each country in which it operates,
EADS being subject to numerous E.U., national, regional andlocal environmental laws and regulations concerning emissions
into the environment, discharges to surface and subsurface
water and the disposal and treatment of waste materials.
Policy‘‘Minimizing environmental impacts of our 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.

58

EADS Business and Legal Description 2004

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3

Taking into account environmental impacts of products along
their lifecycle– Improving environmental performance of products throughout
their life cycle is of significant importance for EADS andour customers.
– EADS encourages the active consideration of environmental
criteria, through implementation of Eco-Design approaches, inall phases of our products’ life cycles in order to improve theenvironmental performance of our products.’’
Organisation

The management of environmental aspects of the Group
operations is traditionally the responsibility of the Business
Units and sites. Each of EADS’ businesses are strictly
controlled and audited by authorities, in respect ofmanufacturing processes and product certification. Furthermore,customers include environmental criteria in their specifications.
EADS has engaged towards implementing standardized
reporting and compliance levels at all of its sites and isinvesting in research and development projects devoted toenvironmental improvements and processes.
Managing environmental reporting has been placed under the
responsibility of the CQO. Environmental reporting is to bebuilt on networks that already existed in the founding
companies of EADS. There needs to be a periodic follow up
on the Group’s environment performance and the exchangesof best practices and dissemination of relevant European andnational information need to be facilitated.
EADS is participating in environmental working groups of theindustry organisations such as the GIFAS in France, BDLI in
Germany and the SBAC in the U.K.
Performance and Best Practices

In 2003, the Military Aircraft Business Unit received the‘‘Environment Certificate’’ recognising compliance and goodpractice with respect to environmental protection.
Several initiatives to reduce emissions, including the use ofvirtual flight testing simulation techniques (which decreases
the number of test flights), the replacement of fuel-oil bynatural gas for heating (which limits sulphur derivatives, solid
waste, CO (carbon monoxide), and other emissions) and theuse of renewable energy sources (like solar panels for water
heating) were recognised by this award.
In the Military Transport Aircraft Division, besides replacing
fuels with cleaner ones and using renewable energy for water
heating, EADS is controlling energy losses and using

EADS Business and Legal Description 2004

hydrofluorocarbons to replace chlorofluorocarbons in coldchambers and air-conditioning systems. EADS is also
eliminating the use of materials containing asbestos andmaking use of selective waste collection to allow more
efficient subsequent treatment, as well as increasing the use ofrecycled materials.
In Eurocopter, over the past four years, action in relation to
the environment has reduced water consumption by almost 5%
and energy burn by almost 9% despite an increase in turnover. Over the same period, metal pollution in water waste
was virtually halved.
In total, over 430 million is currently being spent by EADS
on R&T projects specifically devoted to environmental
improvements in products and processes.
There is also, for example, a cooperation between Sogerma andAirbus to anticipate future regulatory constraints over the
management of airplanes’ end of lives. In addition,
environment aspects are included in all R&D projects.
Key Performance Indicators

ISO 14001 certification/EMAS
registration – List of sites
covered by a certificate
List of sites covered by EU ETS
Total CO2 emissions
Total CO2 emissions declaredunder EU ETS
Direct energy use segmented
by primary source (Electricity,
Fuel, Gas)
Volatile Organic Compound
Emissions
Total Water use
Total Water Discharge volumes
Total hazardous waste
production
Total non hazardous waste
production

GRI Ref.

2004

–
–
EN8

20
12
S334,000 t

EN8200,000 t

EN3

S2,900,000 MWh

EN10
EN5
EN12*

S3,000 t
S4,700,000 m3
S2,700,000 m3

EN11

S39,000 t

EN11

54,000 t* reference GRI is in kg/year
Scope: covering 85% of EADS staff, 2004 figures generated on available material,
definitions need harmonization between the various countries in which EADS
operates.

For the third time this year, Airbus has published anenvironmental report which is available on its website
www.airbus.com.

59

4
5

2.3 Corporate Social Responsibility Policies and Operations (continued)

2.3.4 Human Resources: Employer – Employee Relationship2.3.4.1 Organisation of Work

As of 31st December 2004, the EADS workforce was composed of 110,662 employees. It has increased by 1.4% as against
2003, mainly at Airbus and in spite of the Space restructuring.
In 2004, 4,952 employees worldwide entered employment with EADS (7,877 in 2003) of which 2,643 were employed by
Airbus. At the same time 4,108 employees left EADS (vs. 5,543 in 2003).
In total, 97% of EADS’ total workforce is located in Europe on more than 80 industrial sites.
The tables below set out the number of EADS employees by business sector and by geographic region. Employees of companies
accounted for by the proportionate method (such as ATR, MBDA and Astrium) are included in the tables on the same
proportionate basis.
Key Performance Indicators

GRI Ref.

EADS Employees by Division
AirbusMilitary Transport Aircraft
Aeronautics
Defence and Security Systems
Space
HQ and Research Centre
Total EADS

31st
December
2004

31st
December
2003

LA1
51,9593,856
18,24424,268
11,053
1,282
110,662

49,5203,428
18,031*
24,844*
11,991**
1,321***
109,135* Military Aircraft Business Unit was moved from Aeronautics to Defence and Security Systems in September 2003.
** In 2003, the consolidation quota for Astrium changed from 75% to 100%, resulting in 2,279 additional employees.
*** Including employees from EADS North America since December 2003.
Key Performance Indicators

EADS Employees by Geographic Region
FranceGermany
Spain
U.K.
Italy
U.S.
Rest of the World*
Total EADS* The ‘‘Rest of the World’’ figure includes employees from 12 other countries.

60

EADS Business and Legal Description 2004

GRI Ref.

31st December 2004

31st December 2003

AmountIn Percentage

AmountIn Percentage

42,80740,3258,435
14,045
734
2,166
2,110
110,662

38.7
36.4
7.6
12.7
0.7
2.0
1.9
100.0

42,858
41,103
8,063
13,125
682
2,554
750
109,135

39.3
37.7
7.4
12.0
0.6
2.3
0.7
100.0

LA1

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3

Key Performance Indicators

GRI Ref.

2004
In percentage

Part time contracts
FranceGermany
Spain
U.K.
U.S.
Rest of the World
Total EADSKey Performance Indicators

Key Performance Indicators

Number of employees per age group
18-25
26-35
36-45
46-55
56-65

3.7
3.2
0.02
0.82
0.0
1.3
2.87
GRI Ref.

2004

LA1
98.1
1.9
GRI Ref.

31st December
2004

LA1
6,812
26,08137,54434,565
10,984

Total EADS

115,986** consolidated companies are counted 100%

Key Performance Indicators

Average age of employees
FranceGermany
Spain
U.K.
U.S.
Rest of the World
Total EADS

Average weekly working time

GRI Ref.

2004–

dependingon country
andhierarchy
level,
35 – 40hours
07.9 bn
0200 mLA1

In percentage
of total
workforce

Breakdown per employee typepermanent employees
temporary employees

Key Performance Indicators

GRI Ref.

31st December
2004

LA1
41.58
42.14
42.9
41.73
42.41
39.47
41.89

Total wage bill*
EADS success sharing

EC5–* including employee and salary cost, success and profit sharing, restructuring cost,
pensions and other costs.

EADS has developed an innovative HR management, defining
a European policy while taking into accountnational legislation.
2.3.4.2 Human Resources Organisation

The key mission of the HR Group is to ensure that EADS, as
an integrated Group, attracts, develops and retains a worldclass workforce. It also facilitates continuous integration andinternationalisation of the Group and builds a common spirit
across the Group’s organisational and operational structures.
The HR department is under the responsibility of Jussi
Itävuori, member of the Executive Committee.
The HR Group operates worldwide as the HR Strategic leader
and works in close cooperation with the divisions and Business
Units which have the operational HR responsibility for mostof the employees, except for the Management which is underthe HR Group’s operational responsibility.
The HR communities work closely together and coordinate
and share best practises at functional level. Regular meetingsof HR heads are organised at both European and national
levels. A global HR database is now available.
At corporate level, four support departments make up the
global EADS HR management: Planning and Policy,
Compensation and Benefits, Corporate Business Academy(‘‘CBA’’) and Management Development. They are
responsible for:– 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-HR, etc.;

EADS Business and Legal Description 2004

61

4
5

2.3 Corporate Social Responsibility Policies and Operations (continued)– 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; andmeasures to actual threats. Access to EADS facilities is subject
to prior authorization and entry into restricted and sensitive
areas is regulated in accordance with national andcompany regulations.

– Improving the sharing of best practises within the EADS
HR community.

Diversity: Commitment to Ensure Equal Opportunity for all
EADS Employees

2.3.4.3 Human Resources Policies
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
the Group.
– EADS is committed to maintaining safe and healthy working
conditions for its employees. It is EADS Business Units’ andsubsidiaries’ role to implement Health and Safety policies basedon evaluation, anticipation and risk management and taking
into account all specificities as well as people’s needs.’’
Organisation
The management of Health and Safety is dealt with at site
level accordingly to applicable national regulations.
Caring for EADS Employees and EADS Know How

Policy– ‘‘Given the specific nature of the facilities of the EADS Group
which are used for many activities relating to national defense
and sensitive civil markets, the conditions governing access toand movements inside the plants and facilities are specified inministerial orders and are based on two main principles:– Access to a plant is subject to prior authorization 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 which reports to the HR
Committee. Security leaders in each country supervise local
security officers at Business Unit and plant level and deal withnational 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

62

EADS Business and Legal Description 2004

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 its personnel.
– 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. More than 15
nationalities work within EADS. For example, Airbus signed
up in 2004 to a ‘‘charter of diversity’’ and has joined forces
with a number of major French companies to fightdiscrimination on cultural, ethnic or social grounds whenhiring employees.
Women at EADSThe percentage of women in 2004 in the Group is about 15%.
It slightly increased in all Divisions but Space from 2003.
Key Performance Indicators

Women at EADS by Division
AirbusMilitary Transport Aircraft
Aeronautics
Defence and Security
SystemsSpace
HQ and Research Centre
Total EADSGRI Ref.

31st
December
2004

31st
December
2003

In Percentage

In Percentage

12.4
12.1
12.1

12.2
11.8
11.5

18.9
19.4
33.2
14.8

18.9
19.6
32.9
14.9

LA11

As aerospace business did not traditionally attract women,
EADS has committed to a long term plan for the promotionof women in aerospace and has set two priorities: (i) at least
20% of its annual recruitment to be women and (ii) active
communication within universities and schools – targeting
more than 50 educational institutions – to make the aerospaceindustry a known and more attractive employer for women.

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3

From 1st January 2004, Business Units have been asked every
quarter to report on their success in recruiting women. The
CBA has also defined training objectives to be consistent withthis recruitment target. In 2004, approximately 19% of theGroup total recruitments were women.
In 2004, EADS signed partnerships with the Frenchengineering school ‘‘Ecole Centrale de Paris’’ and the Berlin
University FEMTEC in Germany. In France, EADS sponsored
the Irene Joliot Curie prize. This prize is awarded by the
French ministry of Research in recognition of projects,
encouraging young women to study science and technology
and promoting the status of women in the field of research.
This gives EADS an opportunity to publicise its activities. In
addition, Philippe Camus signed the ‘‘Wake up call from10 CEOs’’ to promote the status of women in the field of
research (WIR: Women in Industrial Research).
Airbus also agreed on a partnership with the Academy ofToulouse to facilitate contacts between female professionals
and students, to provide information to students, teachers,
career advisors on technological advances and new skills and toparticipate in relevant events.
Other initiatives include, in Germany, the organisation of a‘‘girls’ day’’ which is an open day for girls at German EADS
locations to allow them to find out more about theengineering profession.
On 24th June 2004, EADS signed an agreement in Francewith all unions on equality and professional diversity (‘‘Accord
sur l’égalité et la mixité professionnelle’’) which has two main
objectives: achieving parity and demonstrating that women
have attractive career prospects within EADS. This agreement
includes measures regarding salaries, career development, andparenthood. EADS shall ensure that career development issolely based on objective criteria, related exclusively to theskills and performance required for a particular position.
Furthermore, the agreement includes a number of action
points such as the allocation of a credit system for leave tocare for a sick child, the automatic revision of basic salary at
the end of parental leave as well as the reimbursement ofchild-minding expenses incurred when attending work-related
training courses outside normal working hours. These are but
a few of the measures being implemented to ensure thatparenthood does not hinder career development. The
agreement’s implementation in France will be monitored byeach EADS company with ‘‘equality committees’’ being
established within the works’ councils, and also at Grouplevel, using a defined set of common indicators to evaluate
results and track progress with an action plan covering the

EADS Business and Legal Description 2004

2004/2006 period. This action plan is to be re-negotiated every
3 years. In March 2005, EADS in France received the ‘‘Label
Egalité’’ from the French Ministry of professional equality.
Career Development: Efficient Management of Skills
and Know-How

4
5

Policy– ‘‘EADS ensures that working time, including overtime, isregulated so as to support a healthy balance between employees’
work and their private life.
– 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:– Supporting trainings to enhance performance and highquality of work;– Encouraging cross-border and cross functional teamwork, inthe frame of intra-Group mobility;– Assessing and recognizing 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.’’
Performance and Best Practices
Astrium and Eurocopter have implemented knowledge transfer
programs, which seek to ensure knowledge transfer on
employees’ retirement.
Personnel Development
Personnel development starts at EADS on the first day ofrecruitment. From then on, several formal or informal rendezvous are organized at Business Unit or at corporate level, forexample the Welcome Event. This is held twice a year and
400 newcomers are invited to participate in the event hosted
by the CEOs, at which they discover the diversity of EADS.
EADS’ aim is that its employees understand and fully
experience its global dimension from the moment they arrive.

EADS employees are also offered a wide range of further
development programmes and mobility opportunities. Mobility
at EADS means mobility across functions, Business Units anddivisions in its four home countries, France, Germany, Spainand the U.K., as well as appointments in regions such as the
U.S. or Asia.
EADS also has specific recruitment programs, such as young
professionals in Finance or in Sales & Marketing.

63

2.3 Corporate Social Responsibility Policies and Operations (continued)
In addition, EADS has developed a specific policy forengineering experts, who are key to EADS maintaining its
competitive advantage through R&T developments.

Success Sharing Practices

Personal development also includes training. EADS’ expenses
amount to approximately 4% of its pay roll (over 4150 million)
in training per year. EADS trains 65,000 employees every year
for a total of 1.2 million hours. EADS created the CBA in
2000 as its Corporate University, to develop the current
executives and prepare the next generation of executives, aswell as optimizing the global investment in training within
EADS. CBA was recognised as the most innovative Corporate
University in the world by its peers. In 2004, the EADS CBA
opened its Center for Executive Education in Bordeaux. This
centre is designed to provide facilities to the whole Group for
top management meetings, training sessions andexecutive seminars.
At EADS, training is considered a joint responsibility.
Employees are expected to be proactive in their personal
development, and line managers must identify training needs.
Management of skills and know-how
Key Performance Indicators

GRI Ref.

2004

LA9
–
–
–

1,200,000
11,8
65,000S4%

GRI Ref.

2004

Breakdown of recruitment per typeLA2

18.8% female

Average length of service
AirbusMilitary Transport Aircraft
Aeronautics
Defence and Security Systems
Space
HQ and Research Centre
Total EADS–

Hours of training per year
Average hours of training/employee
Number of trained people
Training expenses in % of wages

Recruitment and retaining of talent
Key Performance Indicators

In years

13.6
21.52
14.39
16.52
14.88
12.26
14.74
In percentage

Breakdown of employees per qualification
University (4 years and more)
University (up to 3 years)
Higher vocational school
Vocational school
General school

64–

EADS Business and Legal Description 2004

23.9
19.1
9.5
41.4
6.1

EADS’ remuneration policy is strongly linked to theachievement of individual and Company objectives, both foreach division and for the overall Group. A stock option plan
has been established for the senior management of the group(see ‘‘Part 1/2.3.3 Options Granted to Employees’’) andemployees were offered shares at favourable conditions at thetime of the public offering and listing of EADS (see‘‘Part 1/2.3.2 Employee Share Offering’’).
EADS in France has profit sharing plans (accords departicipation), set up in accordance with French law, andspecific incentive plans (accords d’intéressement ), which provide
bonuses to employees based on the achievement of
productivity, technical or administrative milestones.
EADS Deutschland GmbH’s remuneration policy is, to a large
extent, flexible and strongly linked to the EBIT (pre-goodwill
and exceptionals) of the company, the increase in value of thecompany and the achievement of individual objectives.
EADS CASA, which does not have a profit sharing policy,
allows technicians and management to receive profit-related
pay, subject to the achievement of the general company
objectives and individual performance.
Employee Relations: A Proactive Dialogue

Policy– ‘‘EADS emphasizes its belief that a continuous and highquality social dialogue is key to the Group. In particular, theEuropean Works Council (‘‘EWC’’) facilitates a pro-active andfluid dialogue with employee representatives.
– EADS ensures that the representation of personnel is conducted
throughout all its Business Units in a constructive atmosphere.
This maintains a proper balance between the interests of
employees and the economic interests of the Group.’’
Performance and Best Practices
On 23rd October 2000, the management and employee
representatives from the unions and works council operating
within EADS in France, Germany, Spain and U.K. signed anagreement for the establishment 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.

1

2.3 Corporate Social Responsibility Policies and Operations (continued)

2
3– European sub-committees have also been set up in various
Business Units such as Airbus, Eurocopter, EADS SPACE,
etc. and replicate the EADS EWC model.
– National committees in France, Germany, Spain, and the
U.K. enable dialogue on national matters, under thesubsidiarity principle.
Overview of collective agreements signed with Unions
since 2000:– EADS Group Agreements were concluded on thefollowing matters:– Establishment of a European Works Council3.
– Linking personnel to the business performance of
the Group4.
– In Germany, Tariff Agreements were concluded inrelation to such matters as holiday pay, Christmas bonus,
sick pay, and early retirement, as well as agreements withwork council on success sharing, insurance package,company pension, early retirement deferred compensation,suggestion scheme, family and work life balance,
disabled people.
– In France, Group Agreements were concluded in relation
to such matters as employment issues, union’s rights andsocial dialogue, end of career, health cost coverage, Frenchnational committee and Unions coordinators, professional
equality and diversity.
– In Spain, a collective bargaining agreement includes
social benefits such as aid to children of employees,
collective transport, retirement, life insurance, loans, prize atretirement, canteens, aids to worker association.
2.3.5 Corporate Citizenship2.3.5.1 Maintaining an Open Dialogue with EADS’ Stakeholders
Policy– ‘‘As one of the largest European companies, we are aware ofour duties and are willing to develop our contribution to thecultural, educational and social background in the countries
where we operate. In particular, EADS aims at reinforcing
project partnerships with universities and research centres,
through, for example, the EADS Research Foundation.

Organisation

EADS’ contributions come in different forms; they include
sponsorships, donations, or partnerships. Wherever it islocated, EADS contributes to a range of activities, conferences
or institutions, which address social, educational, cultural or
sport issues. In most cases, such activities are initiated by
EADS local entities who are also in daily contact with therelevant 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
sponsoring projects while leaving some independence to theBusiness Units.
The guidelines also provide certain thresholds above whichsuch activity has to be reported to the Corporate Secretary or
Corporate Communications as applicable and approved by
the CEOs.
Performance and Best Practices

In 2004, EADS contributed more than 42 million to social,
cultural, sport or educational projects.
This figure does not include either local initiatives or thecontribution to the global relief effort following the
Asian Tsunami.
In 2004, EADS also launched the EADS Corporate Research
Foundation in France which aims at strengthening ties
between public and private research and education, industrial
and technical communities. The Foundation has been allocated424 million over five years to support research by(i) dedicating funds to multidisciplinary research programmesin Aeronautics and Space; (ii) financing educational grants,scientific awards and conferences; and (iii) investing in otherfoundations and associations of public benefit. The priority
issues on which the Foundation will work include aeronauticalsciences with acoustics, aerodynamics and propulsion, sciences
and space, focusing on research in Unmanned Aerial Vehicles(‘‘UAVs’’), navigation, automatism, piloting, nanotechnologies
and the study and control of energies of tomorrow.

– 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.’’

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 23rd October 2000.

EADS Business and Legal Description 2004

4 Group Agreement on implementation of a success sharing scheme within EADSNV Group between Head of EADS NV HR and the EADS NV European
Worker Council dated 29th June 2004.

65

4
5

2.3 Corporate Social Responsibility Policies and Operations (continued)
EADS also contributes to humanitarian activities by donating
and giving material or providing air transportation capacities
when necessary. EADS has a long-term partnership with‘‘Aviation sans Frontières’’ in Spain, France and Germany, ahumanitarian organisation which provides air transport for, inparticular, seriously ill children. For example, ATR has signed
a partnership contract making the baggage hold in new aircraft,
ferried for delivery to a customer, available for freighttransport. EADS also encourages its employees to support andtake part in this initiative, providing a new meaning anddimension to the EADS aerospace family.
EADS also actively participated in the global relief effort
following the Asian Tsunami: an Airbus Beluga
mega-transporter went to the disaster area with relief supplies
and a Puma transport helicopter on board; several Eurocopter
helicopters participated in rescue and recovery operations inThailand, Indonesia and Malaysia. EADS Defence andCommunications Systems supported activities in the region by
setting up radio communication equipment to rebuild brokendown communication infrastructure. EADS DefenceElectronics is supporting the provision of medical care to thecoastal regions of Indonesia with a mobile rescue station. It
has been set up in a camp for homeless people and will
ensure that general medical treatment and emergency care is at
the highest medical and hygienic level. EADS SPACE
provided satellite images for disaster analysis in the region. In
addition, immediately after the tsunami, EADS and its
Business Units donated 41 million in cash to the aidorganisations working in the region. Half of this sum was
donated by Airbus to the Red Cross. EADS gave the otherhalf to ‘‘Wings of Help’’, a joint initiative of the French andGerman organisations ‘‘Aviation sans Frontières’’ and‘‘Luftfahrt ohne Grenzen’’, which aims to finance regularairlifts of aid to the affected regions. In addition, EADS and
its Divisions have called on all employees to make personal
donations and have committed to at least double the sum of
the donations. The total – raised – more than 4350,000 – wastransferred to the accounts of various relief organisations,
including the European initiative ‘‘Wings of Help’’,‘‘Fondation de France’’ and the Red Cross.

2.3.5.2 Encompassing Community Interests in EADS’Global Strategy
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 globalization
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.’’
Organisation

In 2004, the EADS Executive Committee has decided tolaunch a Global Strategy Initiative with a focus on six key
markets for the Group: the U.S., China, Russia, Japan, India
and South Korea. The objective is to assess how to enhance
the commercial and industrial presence of EADS in thosemarkets, which are considered as key for the growth of
the business.
A dedicated project team has been set up to develop thisstrategy, with members from the Divisions and Business Units
most concerned by this initiative as well as from HQfunctions, in particular EADS International andStrategic Coordination.
The project is planned to last nine months and will include
the drawing-up of a dedicated industrial strategy for each key
country as well as a proposal for a body whose role will be tomaintain the momentum of the industrial strategy inthe future.
As part of the development of that strategy, the possible
impacts of business partnerships in certain countries, as well as
the local development, should be taken into account.
Performance and Best Practices

EADS will report on the implementation of the EADS’ Global
Industrial Strategy giving concrete examples.

66

EADS Business and Legal Description 2004

1

Chapter 3 General Description of the Company and its Share Capital

3.1 General Description of the Company

2
3

3.1.1 Corporate Name, Seat and Registered Office

European Aeronautic Defence and Space Company
EADS N.V.
Le Carré, Beechavenue 130-132, 1119 PR, Schiphol-Rijk,
The Netherlands
Seat (statutaire zetel ): Amsterdam
3.1.2 Legal Form

The Company is a public limited liability company (naamloze
vennootschap) organized under the laws of The Netherlands.
3.1.3 Governing Law – Dutch Regulations

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 are not listed in The Netherlands.
The Company is subject to various legal provisions of the
Dutch Securities Market Supervision Act 1995 (Wet toezicht
effectenverkeer 1995) (the ‘‘WTE’’). These aresummarized below.
Above all, the Company is subject to various disclosure
requirements in The Netherlands pursuant to section 5 of the
WTE. These requirements comprise, in particular:(i)Filing of the annual accounts and the statutory auditors’
statement with the Registry of the Chamber ofCommerce of Amsterdam with a copy to theNetherlands Authority for the Financial Markets(Autoriteit Financiële Markten) (the ‘‘AFM’’);(ii)

Filing of the semi-annual financial statements in thesame manner; and(iii)

Publication of all new facts regarding the Company’sbusiness which have not been made public in The
Netherlands and which, if made public, would be likely
to have a significant influence on the price of theshares. Such publication shall be made by way of apress release submitted to the AFM.

Further, pursuant to section 46b of the WTE, the Company
and all ‘‘Insiders’’ (as defined below) must, unless an
exemption or dispensation applies, notify the AFM of alltransactions carried out in respect of securities of the Company
listed for trading on a regulated market (or any financial
instrument or securities the value of which depends on suchsecurities) if, and only if, these transactions are carried out inor from The Netherlands.

EADS Business and Legal Description 2004‘‘Insiders’’ include, in particular, (i) the Board of Directors of
the Company, (ii) members of the board of managing directors
and board of supervisory directors of its subsidiaries andparticipations (deelnemingen) whose consolidated turnover
individually represents more than 10% of the consolidated
turnover of the Company and (iii) all persons holding morethan 25% of the share capital of the Company and, if such
persons are legal entities, the members of such legal entities’
board of managing directors and board of supervisory directors.
In addition, spouses, first degree family members and persons
with whom individual ‘‘Insiders’’ share a common household
are subject to this notification requirement.
Failure to comply with the requirements of the WTE is acriminal offence punishable by criminal and administrative
penalties in The Netherlands.
Finally, pursuant to section 46b of the WTE, the Company
must, unless exemptions apply, notify the AFM of alltransactions to which the Company is a party in (i) listed
securities of the Company or (ii) securities the price of which
depends on the price of these listed securities.
Pursuant to Dutch law, EADS has adopted specific internal
insider trading rules (the ‘‘Insider Trading Rules’’) in orderto ensure the confidentiality of sensitive company information,
the transparency 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 The Netherlands, German, Spanish and Frenchdisclosure requirements applicable to members of the Board of
Directors, see ‘‘– Disclosure Requirements for Members of theBoard of Directors of EADS’’). Pursuant to the Insider Trading
Rules (i) all employees and directors are prohibited fromconducting transactions in EADS shares or stock options if
they have insider information, and (ii) certain persons are only
allowed to trade in EADS shares or stock options within very
limited periods and have specific information obligations to thecompliance officer of the Company and the competent
financial market authorities with respect to certain transactions.
These persons include amongst others (i) Insiders (as defined
above) and (ii) certain employees specified by the complianceofficer. The updated version of the Insider Trading Rules
effective 1st January 2004 is available on the
Company’s website.
EADS’ Chief Financial Officer, Hans Peter Ring, wasappointed Compliance Officer by EADS’ Board of Directors.
The Compliance Officer is essentially responsible for the
implementation of the Insider Trading Rules and for reportingto the AFM.

67

4
5

3.1 General Description of the Company (continued)
In addition, given the fact that its shares are listed on aregulated market in France, Germany and Spain, the Company
is subject to laws and regulations in these three jurisdictions.
A summary of the main regulations applicable to theCompany in relation to information to be made public inthese three jurisdictions is set out below.
3.1.3.1 Ongoing Disclosure Obligations
French Regulations

The Autorité des marchés financiers (the ‘‘AMF’’) issued
general regulations effective as from 24th November 2004 (the‘‘AMF General Regulations’’).
A foreign issuer must take all necessary measures to enable
shareholders to manage their investments, and to exercise theirrights. Pursuant to Articles 211-40 II and 222-9 of the AMF
General Regulations:(i)the Company is required to inform its shareholders of(i) all forthcoming shareholders’ meetings and of thevarious ways for them to exercise their voting rights;(ii) payments of dividends; and (iii) issues of new sharesor subscriptions, allocations, renunciations, orconversions of shares;(ii)

the Company is also required to (i) inform the public ofany modifications in its shareholder structure comparedto the latest published data; (ii) publish any relevant
information concerning its activities and results for the
first half of its financial year within four months of theend of the first half of the financial year, (iii) publish its
annual accounts, and consolidated accounts and the
management report, which report (or the mostsignificant extracts thereof) must be translated into
French, within six months of the end of the financial
year; and (iv) publish as soon as possible all
modifications of the rights attached to each categoryof shares;(iii)

the Company is required to inform the AMF in duetime of any contemplated amendments of its Articles
of Association; and(iv)

furthermore, the Company is required to provide
simultaneously in France the same information as thatgiven abroad.

Like French issuers, the Company may prepare a reference
document, the purpose of which is to provide legal andfinancial information on the issuer (shareholding, activities,
management, recent events, possible evolution and other

68

EADS Business and Legal Description 2004

financial information), but no information concerning aparticular securities issue. In practice, the Annual Report of
the Company may be used as a reference document since it
contains the required information.
The reference document must be filed with the AMF and,once filed, is made available to the public.
German Regulations

Due to the listing of the Company’s shares in the amtlicher
Markt (specifically, in the sub-segment of the amtlicher Markt,
Prime Standard ) on the Frankfurt Stock Exchange, theCompany is subject to the post-listing obligations described
below. In addition to the listing in amtlicher Markt (Prime
Standard ), the Company is included in the selection index
MDAX, the MidCap index of Deutsche Börse AG.
Pursuant to § 65 of the German Stock Exchange Admissions
Regulation (Börsenzulassungs-Verordnung), the Company isrequired to promptly make available its statement of annual
accounts and its management report as soon as these have been
produced, insofar as these are not published nationally. If theCompany produces its own statement of annual accounts inaddition to a consolidated one, both types must be madeavailable. According to § 62 of the Exchange Rules(Börsenordnung) of the Frankfurt Stock Exchange, the listing in
the Prime Standard of the amtlicher Markt results in thefurther obligation of the Company to compile and publish
consolidated annual accounts in accordance with theInternational Financial Reporting Standards (IFRS) or the
U.S.-Generally Accepted Accounting Principles (U.S. GAAP)in the German and English languages.
In addition, the Company is required to publish an interim
report pursuant to § 40 of the German Stock Exchange Act(Börsengesetz). The interim report must be published within aperiod of two months after the end of the first six-month
period of the Company’s current fiscal year, in at least one
German supra-regional mandatory stock exchange newspaper(überregionales Börsenpflichblatt ), the Federal Gazette(Bundesanzeiger ) or as a printed newsletter that is available tothe public free of charge upon request. The report must also
be given to the stock exchange admissions authorities of thoseexchanges where the shares are officially listed.
Pursuant to § 63 of the Exchange Rules of the Frankfurt
Stock Exchange, the Company, being part of the amtlicher
Markt (Prime Standard ), is required to publish quarterly
reports in the German and English language according to thesame international accounting principles as the annual accounts.

1

3.1 General Description of the Company (continued)

2
3

Pursuant to § 63 et seq. of the German Stock Exchange
Admissions Regulation, the Company is required to informthe public and the stock exchange admissions authorities ofcertain developments or changes that affect the Company or
its shares.
The Company is also obliged to inform the stock exchange
admissions authorities about all material events arising from oraffecting its legal situation. For that reason, all announcements
concerning events that may be of interest to shareholders,such as the shareholders’ meeting, announcements concerning
determinations and payments of dividends, the issuance of
new shares and the exercise of conversion, warrant andsubscription rights, must be published in an official stock
exchange newsletter. The Company is, furthermore, required
to publish without delay all changes concerning rights that areconnected with securities.
If the Company provides information to the stock exchanges
in France and Spain and if such information could be relevant
for the assessment of securities of the Company, then the
Company has to publish at least equivalent information at theFrankfurt Stock Exchange in at least one German supraregional mandatory stock exchange newspaper.
In addition, the Company is required as a result of its listingin the amtlicher Markt (Prime Standard ), to prepare acontinuous update of a corporate action timetable at the
beginning of each fiscal year, for at least the respective fiscal
year, in the German and English languages. This timetablemust include details about the most important events of theCompany. 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
Markt of the Frankfurt Stock Exchange, see § 69 of theGerman Stock Exchange Admissions Regulation.
Spanish Regulations

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 situationfor each half year and which is communicated, for each 30th
June and 31st December, no later than the following 1st
September and 1st March respectively. If after thiscommunication the annual accounts are produced by the Boardof Directors and they do not conform with the half-yearly
information, 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 has been obtained fromthe CNMV.

EADS Business and Legal Description 2004

According to the financial law 44/2002, of 25th November
2002, on Measures Reforming the Financial System(Ley 44/2002, de 25 de noviembre, sobre Medidas de Reforma
del Sistema Financiero) (the ‘‘Financial Law’’), together withthe half-yearly information referred to in the above paragraph,
the Company must provide quantified information as to everytransaction carried out with any related party.
3.1.3.2 Disclosure of Specific Information
French Regulations

Pursuant to Article 222-3 I of the AMF General Regulations,
any inside information must be disclosed to the public.
Pursuant to Article 621-1 of the AMF General Regulations,inside information means precise information that has not been
publicly disclosed and that concerns, directly or indirectly, one
or more issuers or financial instruments, and that, if publicly
disclosed, would be susceptible to having a noticeableinfluence on the price of the financial instruments themselves
or on the price of financial instruments linked therewith.
Pursuant to Article 222-11 of the AMF General Regulations,
the AMF may request that the Company or any third party
disclose any information relevant in respect of the investors’
protection and of the functioning of the market. If such
requests are not satisfied, the AMF may itself disclosesuch information.
Pursuant to Articles 222-3 to 222-7 of the AMF General
Regulations, the party responsible for the disclosure of inside
information may decide, under its own responsibility, to defer
its disclosure if (i) it is able to ensure confidentiality of suchinformation; and (ii) it considers that (a) should the party be
the Company, confidentiality is necessary to preserve its
legitimate interests, provided that such deferral does not run
the risk of misleading the public and that the Company
monitors access to such information; or (b) should the party be
the Company or a third party, confidentiality is temporarily
necessary to achieve completion of a transaction.
German Regulations
Pursuant to § 15 of the German Securities Trading Act(Wertpapierhandelsgesetz), the Company is required to publish,
without undue delay, any inside information which directly
concerns the Company, in particular but not limited to
information within the Company’s sphere of activity, andwhich has the potential to materially influence the Company’s
share price (ad-hoc disclosure requirement).

69

4
5

3.1 General Description of the Company (continued)
Prior to publication, the Company must disclose suchinformation to the German Federal Financial Supervisory
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) as
well as to the board of directors of the organised markets on
which the Company’s shares are admitted to trading.
Due to the listing in amtlicher Markt (Prime Standard ), theCompany is also required to publish this information in the
English language (§ 66 of the Exchange Rules (Börsenordnung)of the Frankfurt Stock Exchange).
In accordance with the implementation into German law of
the European Parliament and Council Directive 2003/6/EC
dated 28th January 2003 on insider dealing and market
manipulation (Market Abuse Directive), the Company is obliged
to decide whether it is exempt from the ad-hoc disclosure
requirement in cases where its legitimate interests would
require a postponement of the disclosure.
The Company and any person acting for or on behalf of theCompany are also subject to the ad-hoc disclosure requirement
if they have communicated inside information to anotherperson or allowed another person access to inside information,
unless that other person is subject to a legal dutyof confidentiality.

Pursuant to Spanish Law 26/2003 of 17th July 2003, ontransparency of listed companies (Ley 26/2003 de 17 de Juliode refuerzo de la transparencia de las sociedades anónimas
cotizadas, ‘‘Spanish Transparency Law’’) which amends,
amongst others, the Spanish Securities Act and order3722/2003 of 26th December 2003 of the Ministry of
Economy (the ‘‘Ministerial Order’’) which develops theprovisions of the Spanish Transparency Law, the Company
is required:(i)

To have rules of the Board of Directors which must be
filed with 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 post such description on its website;(iii)

To have a website which must contain as a minimum
the information specified in the Spanish Transparency
Law, the Ministerial Order and the Circular 1/2004 of
17th March 2004 of the CNMV;(iv)

To file a corporate governance report with the CNMV
on an annual basis (the ‘‘Annual Corporate
Governance Report’’) which must contain theinformation specified in the Ministerial Order and the
Circular 1/2004 of 17th March 2004 of the
CNMV; and(v)

In respect of the provisions of the Participation
Agreement which relate to the exercise of voting rights
at shareholders’ meetings or restrictions or conditions on
the free transferability of shares, to (i) file by July 2006
(or earlier in the case of a takeover bid or if a new
agreement is entered into) such provisions with the
CNMV who will then publish the provisions as arelevant event, (ii) post the provisions on the Company’s
website, unless the CNMV exempts the Company fromdoing so, and (iii) set out details of the provisions in the
Annual Corporate Governance Report.

Pursuant to § 15b of the German Securities Trading Act theCompany must establish and maintain a list with all persons
who have access to inside information.
Spanish Regulations

Pursuant to Article 82 of the Spanish Securities Act 24/1988
of 28th July 1988, (Ley 24/1988, de 28 de julio, del Mercado
de Valores, as amended by Ley 37/1998, de 16 noviembre), as
amended by the Financial Law, the Company is required tomake public, as soon as possible, any fact or decision that may
substantially affect the quotation of its shares. Pursuant to the
Financial Law, any such relevant event must be notified to the
CNMV as quickly and as efficiently as possible, always prior
to its 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 sharesin the corresponding trading session. Furthermore, pursuant to
the Financial Law, the Company must post details of any
relevant event on its website. Under certain circumstances, the
CNMV may authorize the issuer not to make public relevant
information, which may affect its legitimate interests.

70

EADS Business and Legal Description 2004

1

3.1 General Description of the Company (continued)

2
3

3.1.4 Date of Incorporation and Duration of the Company

3.1.8 Financial Year

The Company was incorporated on 29th December 1998 foran unlimited duration.

The financial year of the Company starts on 1st January andends on 31st December of each year.

4

3.1.5 Objects of the Company
Pursuant to Article 2 of the Articles of Association, theobjects of 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:

3.1.9 Allocation and Distribution of Income
3.1.9.1 Dividends

5(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 Chamberof 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.

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 paidin shares 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

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 deMontmorency, 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 be filed with the Greffe of the Tribunal deCommerce of Paris and made available at the Head office of
EADS in France.

In the event of the dissolution and liquidation of theCompany, the assets remaining after payment of all debts andliquidation expenses shall be distributed amongst the holdersof the shares in proportion to their shareholdings.

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).

The Board of Directors must give notice of general meetings
in at least one of The Netherlands’ national daily newspapers,
at least one international daily newspaper and at least one
daily newspaper in each of the countries in which theCompany’s shares are listed. Such publication must be made atleast 15 days before the day of the meeting, not counting the
day on which notice was given, and shall state either thematters to be considered at such meeting or that the agenda isopen to inspection by the shareholders at the offices of theCompany and at such other locations as may be specified in
the notice.

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).

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

EADS Business and Legal Description 200471

3.1 General Description of the Company (continued)
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 450 million), to put itemson the agenda for the annual shareholders’ meeting, must be
effected by the Board of Directors, if such requests to theBoard of Directors have been made at least six (6) weeks prior
to the date scheduled for the meeting except if, in the opinionof the Board of Directors, important interests of the Company
prevail over the insertion of such items into the agenda.
3.1.10.2 Right to Attend Meetings

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 tothe meeting.
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 toattend the meeting.

Each holder of one or more shares may attend shareholders’meetings, either in person or by written proxy, to speak andto vote according to the Articles of Association. See‘‘– Conditions of Exercise of Right to Vote’’.

Holders of shares that are registered in the shareholders’register kept in Amsterdam have the option of holding themthrough Euroclear France S.A. In this case the shares areregistered in the name of Euroclear France S.A.

A shareholder or person who has the right to attend ameeting can see to it that he is represented by more than one
proxy holder, provided that only one proxy holder can beappointed for each share.

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 registeredin the name of Euroclear France S.A. may be traded on thestock exchanges.

In relation to holders of registered shares, the Board of
Directors may provide in the convening notice that those
persons are recognized as authorized to exercise the rights toattend, speak and vote at the shareholders’ meetings, who at
the point in time mentioned in the convening notice areauthorized to exercise those rights and as such have beenregistered in the register appointed for the purpose by the
Board of Directors, irrespective of who is authorized toexercise those rights on the day of the meeting.
Any person who is entitled to exercise the rights set out inthe above paragraph (either in person or by means of a writtenproxy) and is attending the meeting from another location (see‘‘– Calling of Meetings’’) in such manner that the person(s)acting as chairman/chairmen of the meeting is/are convincedthat such person is properly participating in the meeting, shallbe deemed to be present or represented at the meeting, shallbe entitled to vote and shall be counted towards aquorum accordingly.

72

EADS Business and Legal Description 2004

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.
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 prescribedby 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 ofpreemption rights in connection with share issues, statutory
mergers or statutory demergers; the passing of such resolutions
requires a majority of two-thirds of the votes cast if 50% of
the share capital with voting rights is not present at themeeting (or otherwise a simple majority). In addition,
resolutions to amend the Articles of Association or to dissolve

1

3.1 General Description of the Company (continued)

2
3

the Company shall only be capable of being adopted with amajority of at least two-thirds of the valid votes cast at ashareholders’ meeting, whatever the quorum present atsuch meeting.
Pledgees of shares and beneficiaries of a usufruct, which do
not have voting rights, do not have the right to attend and to
speak at shareholders’ meetings. The owners of shares which
are subject to a pledge or a usufruct, which do not havevoting rights, are entitled to attend and to speak atshareholders’ 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.

3.1.11 Disclosure of Holdings

Any person, acting alone or in concert (as defined in the
Netherlands Act on reporting of shareholdings, Wet melding
zeggenschap in ter beurze genoteerde vennootschappen 1996 (the‘‘WMZ’’)), acquiring or disposing of, directly or indirectly, aninterest in the share capital or voting rights of the Company
resulting in such person, after such acquisition or disposal,
being in a different range of thresholds in terms of capital or
voting rights than that in which he was prior to suchacquisition or disposal is required by the WMZ to promptly
notify the Company and the AFM of such interests. The same
notification requirements apply in relation to acquiring or
disposing of actual or contingent rights to obtain shares orvoting rights. The applicable ranges of relevant interests
pursuant to the WMZ are as follows: 0% to 5%; 5% to 10%;
10% to 25%; 25% to 50%; 50% to 662/3%; 662/3% and over. The
AFM publishes all disclosures made to it in newspapers with anationwide circulation in each of the Member States of theEuropean Economic Area where the shares are admitted forlisting on a regulated stock exchange. In addition, the Articles
of Association require notification to the Company in theevent of an acquisition or disposal of an interest resulting, forany person acting alone or in concert, in a change of range
from or to the ranges 25% to 331/3% and 331/3% to 50%.
Furthermore, pursuant to the WTE, an additional disclosure
requirement applies for certain categories of persons. This
disclosure requirement applies to, among others, shareholders
with a direct or indirect interest of 25% or more in the sharecapital of a listed company and their spouses, ascendants anddescendants in direct line and other persons with whom theshareholders share a common household. These shareholders
are required to notify the AFM of all transactions in securities
pertaining to the company in which they hold an interest of
25% or more. If the shareholder with an interest of 25% ormore is a company, this obligation extends to its directors.
According to § 26 of the German Securities Trading Act(Wertpapierhandelsgesetz), the Company has to publish in a
German supra-regional mandatory stock exchange newspaper, if
the percentage of voting rights held by a shareholder of theCompany reaches, exceeds or falls short of 5%, 10%, 25%, 50%
or 75% of the voting rights.

EADS Business and Legal Description 2004

73

4
5

3.1 General Description of the Company (continued)

Disclosure Requirements for Members of the Board of Directors

The members of the Board of Directors must report to the
AFM their shareholdings in EADS, whether or not suchshareholdings reach specified thresholds. Each member of theBoard of Directors must report the number of shares andvoting rights held by him or an entity controlled by him andnot only the percentage of shares and voting rights.5
EADS must report any resignation or termination of
appointment of members of its Board of Directors to the
AFM immediately. All reports are incorporated by the AFM
into a public register that is accessible on the AFM website
and can be consulted by any interested person.
The Company has to inform the AMF, the CNMV and the
Spanish Stock Exchanges of any disclosure of holdings
exceeding the above-mentioned 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 (as defined in the WMZ) more than one
tenth of the issued share capital or voting rights of theCompany must notify the Company of its intentions (i) to
buy or sell shares of the Company in the following
12 months; (ii) to continue or to stop acquiring shares orvoting rights of the Company; (iii) to acquire control of theCompany; or (iv) to seek to designate a member of the Boardof Directors of the Company. The Company will provide theAMF with the information received in this context.
The AMF has indicated that it will publish a noticeconcerning any communication so transmitted. The CNMV
will publish all such notifications received.
Failure to comply with the legal obligation to notify a change
in range of thresholds under the WMZ is a criminal offence
punishable by criminal and administrative penalties as well ascivil law penalties, including the suspension of voting rights.

According to § 15a of the German Securities Trading Act,
Directors of the Company or related persons must disclosetransactions conducted for their own account involving sharesof the Company or financial instruments that relate to thoseshares, especially derivatives. These persons have to notify theCompany and the German Federal Financial Supervisory
Authority of the transactions within five trading days unlessthe aggregate amount of such transactions does not exceed
45,000 in respect of all transactions in a calendar year. The
Company is required to publish the notification without
undue delay on the Company’s website or in a German supraregional mandatory stock exchange newspaper. Thisrequirement also applies in connection with employee profit
sharing and incentive plans and other kinds of stock option
plans granted by the Company.
Pursuant to the Spanish Transparency Law, the Directors of
the Company must not carry out transactions or suggest thattransactions be carried out involving the shares of theCompany or related companies on which they possess, due totheir position, privileged or confidential information, if thisinformation has not been made public. In addition, when adirector, either by himself or through an intermediary,acquires or transfers shares or share options in the Company,
he must inform the Company, the markets on which its
shares are traded and the CNMV, which incorporates suchinformation to its registries, which are of public access. In
addition, the Company must update the information containedin its website related to holding of shares by directors.
Likewise, pursuant to EC Directive 2003/6 and EC Directive
2004/72, EADS must report to the CNMV or any other
Spanish competent authority any transaction carried out bymembers of the Board of Directors, members of the Executive
Committee and any person closely associated with them onboth listed shares of EADS and derivative instruments linked
to them (a Royal Decree implementing such Directives in
Spain is expected to be enacted during 2005).
Pursuant to Article 222-14 of the AMF General Regulations,the Company must report to the AMF, within a period of five(5) trading days, any transactions in securities of the Company
carried out by members of the Board of Directors, members of
the Executive Committee and any person closely associatedwith them, unless the aggregate amount of such transactions
does not exceed 45,000 in respect of all transactions in acalendar year. The Company must also disclose theinformation to the public by way of release withinsuch period.

5 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.

74

EADS Business and Legal Description 2004

1

3.1 General Description of the Company (continued)

2
3

3.1.12 Mandatory Tender Offers

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
the control over the number of shares or votes reaches orexceeds 331/3% 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 procure that such an offer is made. Such offer must comply
with all of the applicable regulatory or other legal
requirements in each jurisdiction 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 ineach of the jurisdictions where the Company’s shares arelisted) within two months after notification to the Companyof shareholdings reaching or exceeding 331/3% or failing such
notification, within a period of 15 days of receipt of noticefrom the Board of Directors confirming the obligation to makethe public offer, then any person(s) who is (are) required tomake the offer shall within the period specified by the noticesent by the Board of Directors exchange for depository
receipts to be issued by the Stichting Administratiekantoor
EADS (the ‘‘Foundation’’), such percentage of shares theyhold over and above the 331/3% of the shares issued by theCompany (the ‘‘Excess Percentage’’). From the date specified
in the notice sent by the Board of Directors, the right toattend meetings, to vote and to receive dividends shall besuspended in respect of the Excess Percentage. If, within aperiod of 14 days from a further notice from the Board of
Directors, the person required to exchange his shares
representing his Excess Percentage for depository receipts still
has not done so, then the Company is irrevocably authorized
to exchange such shares for depository receipts issued by theFoundation. The constitutive documents of the Foundation
provide that the Foundation shall not have the right to attend
shareholders’ meetings of the Company as a shareholder, tospeak at such meetings and to exercise the voting rights
attached to the shares it holds, except if, in the view of theBoard 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.

EADS Business and Legal Description 2004

The obligation to make a public offer does not apply in thefollowing situations:4(i)to a transfer of shares to the Company itself or to
the Foundation;(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 16of the Articles of Association described above;(iii)

to a transfer of shares by the Company or to an issueof shares 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 to define ‘‘concert parties’’ where the agreement
is entered into before 31st December 2000 (as amended,
supplemented or replaced by a new agreement by theadmission of one or more new parties or the exclusionof one or more parties) except that this exemption will
not apply to a new party that individually or with its
subsidiaries and/or group companies holds at least 331/3%of the control over shares or votes in the Company; thisexemption is intended to exclude the parties to theParticipation 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 exclusion of one or moreparties) from the obligation to make the mandatory 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 acompany which holds more than 50% in suchtransferring shareholder.

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 inarticle 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 (i) for atleast 10% if the investor acquires 25% of the shares, or othersecurities (such as subscription rights, convertible debentures,75

5

3.1 General Description of the Company (continued)
warrants, or any other similar securities that may directly or
indirectly entitle such investor to subscribe or acquire shares)
or a threshold that, without reaching such percentage, enables
the appointment of a number of directors who, together withthose already appointed, if any, represent more than 1/3 andless than 1/2 plus one of the total directors of the target
company, or, if the investor already holds between 25% and50%, and intends to purchase an additional 6% within thefollowing 12 months, and (ii) for 100% in the event that theinvestor reaches or exceeds the threshold of 50% or a
threshold that, without reaching such percentage, enables theappointment of a number of directors who, together withthose already appointed, if any, represent more than 1/2 of thetotal directors of the target company. Given the different
thresholds set forth in article 1 of the Royal Decree
1197/1991 and in Article 15 of the Articles of Association of
EADS (which in short requires, in principle, that a tender
offer for 100% of the share capital be launched in the event a
shareholder controls (alone, or in concert with othershareholders) directly or indirectly a number of shares orvoting rights exceeding 331/3% of the share capital of EADS, as76

EADS Business and Legal Description 2004

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,
as a 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 331/3% of the share capital is taken, has, on behalfof EADS, consulted on this issue with the CNMV, which has
confirmed in writing that ‘‘the event posed does not fallwithin those contemplated in the aforementioned Royal
Decree 1197/1991’’ and, therefore, said Royal Decree
1197/1991 is not applicable 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 1197/91 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.

1

3.2 General Description of the Share Capital2
3

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 pre-emptive
right to subscribe for any newly issued shares pro rata to the aggregate nominal value of shares held by them, except for sharesissued for consideration other than cash and shares issued to employees of the Company or of a Group company. For thecontractual position as to pre-emption rights, see ‘‘3.3.2 Relationships with Principal Shareholders’’.
The shareholders’ meeting has the power to issue shares. The shareholders’ meeting may also authorize the Board of Directors
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 of shares,
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 thecase where less than half of the capital issued is present or represented at said meeting.
A resolution will be submitted to the annual shareholders’ meeting of EADS called for 11th May 2005 in order to authorize
the Board of Directors to issue shares representing up to 1% of the Company’s authorized share capital from time to time, togrant rights to subscribe for shares for a period up to and including the date of the annual shareholders’ meeting to be held in2006 and also in the case where the subscription rights may be exercised thereafter, and to determine the terms and conditionsof the shares issuances. Further resolutions will also be submitted to such shareholders’ meeting to authorize the Board of
Directors to limit or exclude the preferential subscription rights for the period up to and including the date of the annual
shareholders’ meeting to be held in 2006 and to approve stock option plans and employee share ownership plans which may
include the granting of rights to subscribe for shares, which can be exercised at such time as may be specified in such plans.
The shareholders’ meeting may reduce the issued share capital by cancellation of shares or by reducing the nominal value of theshares by means of an amendment to the Articles of Association, the latter requiring the approval of at least two-thirds of thevotes cast at the general meeting.
3.2.2 Issued Share CapitalAt the date of this document the Company’s issued share capital is 4809,706,931 comprising 809,706,931 shares of a nominal
value of 41.0 each.
3.2.3 Authorized Share CapitalAt the date of this document the authorized share capital of the Company is 43 billion comprising 3,000,000,000 shares of
41.0 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 Options Granted to Employees’’), 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 which would occur if all the stock options issued as at 31st December 2004
were exercised:
EADS’ potential share capital

Total number of EADS shares issued as of the date of this document:
Total number of EADS shares which may be issued following exercise ofstock options:
Total potential EADS share capital

Numberof shares

Dilution
percentage
in capital

Numberof voting rights

Dilution
percentage invoting rights

809,706,931

95.96%

803,312,117

95.93%

34,092,141
843,799,072

4.04%
100%

34,092,141*
837,404,258

4.07%
100%

* The 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 subsequent cancellation of repurchased shares. See ‘‘3.3.7 Purchase by the Company of its Own Shares – Dutch Law’’.

EADS Business and Legal Description 2004

77

4
5

3.2 General Description of the Share Capital (continued)

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

Nature of Transaction

Nominal value
per share

Number of sharesissued/cancelled

Premium*

Total number ofissued shares
after transaction

Total issued capital
after transaction

29th December 1998
3rd April 2000
8th July 2000

Incorporation
NLG 1,000
Conversion into 001
Issue of shares in exchange forcontributions by Aerospatiale
Matra, Dasa AG and SEPI
01
Issue of shares for the purposeof the initial public offering andlisting of the Company
01
Issue of shares for the purposeof the employee offering
carried out in the context of
the initial public offering andlisting of the Company
01
Issue of shares for the purposeof an employee offering (noted’opération approved by the
COB** on 13th October 2001
under number 01-1209)
01
Issue of shares for the purposeof an employee offering (noted’opération approved by the
COB on 11th October 2002
under number 02-1081)
01
Issue of shares for the purposeof an employee offering (noted’opération approved by the
COB on 25th September 2003
under number 03-836)
01
Cancellation of shares upon
authorisation granted by theannual shareholders’ meeting
held on 6th May 2004
01
Issue of shares following
exercise of options granted to
employees***01
Issue of shares for the purposeof an employee offering (noted’opération approved by the
AMF on 10th September 2004
under number 04-755)
01

100
50,000––100
50,000

NLG 100,000
050,000

715,003,828

01,511,477,044

715,053,828

0715,053,828

80,334,580

01,365,687,860

795,388,408

0795,388,408

11,769,259

0168,300,403

807,157,667

0807,157,667

2,017,894

019,573,571.80

809,175,561

0809,175,561

2,022,939

014,470,149.33

811,198,500

0811,198,500

1,686,682

019,363,109.36

812,885,182

0812,885,182

5,686,682–

807,198,500

0807,198,500

490,609

08,325,803.64

807,689,109

0807,689,109

2,017,822

034,302,974

809,706,931

0809,706,931

13th July 2000

21st September 2000

5th December 2001

4th December 2002

5th December 2003

20th July 2004

From 2004 to thedate of the present
document
3rd December 2004

* 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
055,849,772.
** Former name of the Autorité des marchés financiers (the ‘‘AMF’’).
*** For information on stock options plans under which these options were granted to EADS employees, see ‘‘Part 1/2.3.3 Options Granted to Employees’’.

78

EADS Business and Legal Description 2004

1

3.3 Shareholdings and Voting Rights

2
3

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
held by DaimlerChrysler AG (‘‘DaimlerChrysler’’), SEPI andSociété 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 obligationsof DaimlerChrysler.

EADS Business and Legal Description 2004

As of the date of this document, 30.19% of the EADS sharesare held by Dasa AG, which is a wholly owned subsidiary ofDaimlerChrysler Luft- und Raumfahrt Holding AG(‘‘DCLRH’’), a 93.85% subsidiary of DaimlerChrysler.
SOGEADE, a French partnership limited by shares (société encommandite par actions) whose share capital is held 50% by
SOGEPA (a French state holding company) and 50% byDésirade (a French société par actions simplifiée wholly owned
by Lagardère), owns 30.19% of the EADS shares. Thus,
60.38% of the share capital of EADS is held in equal
proportions by DaimlerChrysler and SOGEADE who jointly
control EADS through a Dutch law contractual partnership(the ‘‘Contractual Partnership’’). SEPI (a Spanish stateholding company), being a party to the ContractualPartnership, holds 5.52% of the share capital of EADS. The
public (including EADS employees) and the Company hold,respectively, 33.25% and 0.79% of the share capital of EADS.
The République Française (the ‘‘French State’’) holds directly
0.06% of such share capital, such shareholding being subject tocertain 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 atthe date of this document.

79

4
5

3.3 Shareholdings and Voting Rights (continued)
The diagram below shows the current ownership structure of EADS (% of capital (voting rights)) before exercise of outstanding
stock options granted for the subscription of EADS shares. See ‘‘Part 1/2.3.3 Options Granted to Employees’’.

Shareholdings and Voting Rights
French StateSOGEPA

Spanish State

LagardereDaimlerChrysler****
93.85 %

100 %

100 %
Desirade

DCLRH
50 %

50 %

SOGEADE

100 %
SEPI

Dasa

5.52 % (5.56 %)30.19 % (30.43 %)(managed by SOGEADE Gerance)

30.19 % (30.43 %)Contractual partnership (managed by EADS Participations B.V.)

65.90 % (66.42 %)*0.06 %** (0.06 %)***EADS N.V.

33.25 % (33.52 %)Public0.79 % (–)****** EADS Participations B.V. exercises the voting rights attaching to these EADS shares pledged by SOGEADE, DaimlerChrysler and SEPI who retain title to theirrespective 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.
***** As of the date of this document, the Company holds, directly or indirectly through another company in which the Company holds directly or indirectly more than
50% of the share capital, 6,394,814 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’’.
Approximately 3.13% of the capital and 3.15% of the voting rights are held by EADS employees.

80

EADS Business and Legal Description 2004

1

3.3 Shareholdings and Voting Rights (continued)

2
3

3.3.2 Relationships with Principal Shareholders

Organisation of EADS Participations B.V.

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). EADS Participations B.V. is a Dutch privatecompany with limited liability (besloten vennootschap met
beperkte aansprakelijkheid ) and is the managing partner of theContractual Partnership. The Indirect EADS Shares held byDaimlerChrysler, SOGEADE and SEPI have been pledged to
EADS Participations B.V., which has been granted theexclusive power to exercise the voting rights attaching to thepledged shares (including the right to attend and speak atshareholders’ meetings) in accordance with the ContractualPartnership Agreement.

The board of directors of EADS Participations B.V. has anequal number of directors nominated by DaimlerChrysler and
by SOGEADE, respectively (taking into account proposals
made by Lagardère in respect of the SOGEADE-nominateddirectors). DaimlerChrysler and SOGEADE each nominate
four directors, unless otherwise agreed, and each nominatesfrom among its nominated directors a chairman and a chief
executive officer. In addition, although from 8th July 2003,
SEPI no longer has a right to nominate a director, based upon
the proposal of DaimlerChrysler and SOGEADE, the board of
directors of EADS Participations B.V. decided to propose to
the shareholders’ meeting of EADS Participations B.V. to beheld on 11th May 2005 to appoint an additional Spanish
director bringing the total number of directors to nine.

The agreements above contain, among other things, provisions
relating to the following matters:

During the period commencing at Completion and ending on
1st July 2003 (the ‘‘Standstill Period’’), there wererestrictions on DaimlerChrysler’s, SOGEADE’s, SEPI’s,
Lagardère’s, SOGEPA’s and the French State’s ability totransfer EADS shares.

– 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
over its 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’sownership of EADS.

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

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 shareson 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 inaccordance with the provisions set out below;– on the sale of Indirect EADS Shares, DaimlerChrysler (inthe case of a sale by SOGEADE), SOGEADE (in the caseof a sale by DaimlerChrysler) or SOGEADE andDaimlerChrysler (in the case of a sale by SEPI) may either
exercise a pre-emption right or sell its Indirect EADS Shareson the market in the same proportions as the respective
Indirect EADS Shares of the relevant parties bear to eachother;

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

EADS Business and Legal Description 2004

81

4
5

3.3 Shareholdings and Voting Rights (continued)– 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 eventthat such pre-emption right is not exercised, the Indirect
EADS Shares may be sold (a) to an identified third party
subject to Lagardère’s or SOGEPA’s consent (as the casemay be) and also to DaimlerChrysler’s consent and (b) if
such consent is not obtained, the Indirect EADS Shares may
be sold on the market, subject to DaimlerChrysler’s
pre-emption right referred 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 of EADS shares, other than the EADS Indirect
Shares, by DaimlerChrysler, SOGEADE or Lagardère, at atime when a Hostile Third Party is a shareholder andpurchaser of EADS shares on the market, is subject to thepre-emption right of 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 Partnership and EADSParticipations 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 thedifference between the holdings of DaimlerChrysler and
SOGEADE (calculated as a percentage by reference tothe number of Indirect EADS Shares held by each ofthem as against the total number of EADS shares) is 5%
or less, in which case the dissolution and winding up
shall only occur if the proportion which the Indirect
EADS Shares of DaimlerChrysler 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 a third party to purchase the SOGEADE shares or
the Indirect EADS Shares held by the party undergoingthe change of control (the ‘‘Changed Party’’) (which
offer the Changed Party wishes to accept) has been
served in accordance with the Participation Agreement(see below ‘‘Change of Control’’) within 12 months ofthe date of the change of control occurring (the absenceof notice of an offer by a third party to purchase theIndirect EADS Shares held by SEPI upon a change ofcontrol of SEPI does not trigger a dissolution of theContractual Partnership or EADS Participations B.V. butshall cause SEPI to lose its main rights or liabilities
under the Participation Agreement or the ContractualPartnership Agreement).

Any sale on the market of EADS shares in accordance with
the Participation 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 shallconsult 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
the number of such EADS shares the voting rights of which
are pooled through the Contractual Partnership (a‘‘Qualifying Interest’’), then, unless a Hostile Offer (asdefined below) has been made by the Hostile Third Party or
until such time as DaimlerChrysler and SOGEADE agree thatthe 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 all means of control and influence inrelation 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
to provisions requiring, inter alia, the party wishing to accept,
to first 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.

82

EADS Business and Legal Description 2004

On the occurrence of a Termination Event, EADSParticipations B.V. is prohibited from conducting further
business except as is necessary to its liquidation or theliquidation of the Contractual Partnership.

1

3.3 Shareholdings and Voting Rights (continued)

2
3

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 changeof control 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:(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 theparty subject to the change of control is Lagardère or
SOGEPA, the third party purchaser shall be nominatedwith 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 andthe party undergoing the change of control wishes to
accept that offer, such offer shall immediately be
notified to (a) DaimlerChrysler in the case of a changeof control occurring to Lagardère or SOGEPA,(b) SOGEADE in the case of the change of control
occurring to DaimlerChrysler, (c) DaimlerChrysler in thecase of the change of control occurring to SOGEADE,or (d) DaimlerChrysler or SOGEADE in the case of thechange of control occurring to SEPI (the party notified
under (a), (b), (c) or (d) being the ‘‘Non-Changed
Party’’). The Non-Changed Party shall have a first rightto purchase the SOGEADE interest or the Indirect
EADS shares being offered for sale at the price being
offered by the third party. In relation to (d), if
DaimlerChrysler and SOGEADE have both elected thatSEPI procure a third party purchaser, then they shalleach have the right to acquire SEPI’s Indirect EADS
Shares in the respective proportions which the numberof their EADS shares bear to one another at that time.
In the event that the Non-Changed Party does not givenotice of its intention to purchase the SOGEADE
interest or the Indirect EADS Shares within 30 days ofthe 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 the third
party’s original offer.

EADS Business and Legal Description 2004

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.

4
5

Events of Default Other Than Change of Control

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, thenon-defaulting party (respectively SOGEADE, DaimlerChrysler
and SOGEADE and DaimlerChrysler acting together) has acall option over the defaulting party’s EADS shares andinterest in EADS Participations B.V. If such an event ofdefault occurs in relation to Lagardère or SOGEPA, such party
is obliged to use its best efforts to sell its interest in thecapital of SOGEADE on bona fide arm’s length terms to athird party purchaser (who must not be a competitor of EADS
or DaimlerChrysler). In the case of a sale by Lagardère, thethird party purchaser must be nominated by SOGEPA with
DaimlerChrysler’s consent (which may not be unreasonably
withheld). In the case of such a sale by SOGEPA,
DaimlerChrysler must consent to the sale (again, such consent
may not be unreasonably withheld).
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 EADSParticipations 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.

833.3 Shareholdings and Voting Rights (continued)
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) aveto right 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 LagardèreGroups acquires, directly or indirectly, either alone or inconcert, more than 10% or any multiple thereof of the sharecapital or voting rights of EADS or (ii) the sale of the ballistic
missiles assets or of the shares of such companies carrying out
such activity is 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 durationof 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 simplifiéewhich 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 thefollowing matters which require the approval of a qualified
majority of six of the eight directors: (a) acquisitions ordivestments of shares or assets the individual value of which
exceeds 4500 million; (b) agreements establishing strategic
alliances, or industrial or financial co-operation; (c) a capitalincrease of EADS of more than 4500 million to which no
preferential right to subscribe for the shares is attached;(d) any decision to divest or create a security interest over theassets relating to prime contractor status, design, development
and integration of ballistic missiles or the majority
shareholdings in the companies Cilas, Sodern, Nuclétudes andthe GIE Cosyde. The decisions contemplated under (d) above
are also governed by the Ballistic Missiles Agreement (seeabove ‘‘– Specific Rights and Undertakings of theFrench State’’).

84

EADS Business and Legal Description 2004

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
EADS Participations 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 changeof control of Lagardère, Lagardère shall grant a call option overits SOGEADE shares to any non-public third party designatedby 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 thecapital of SOGEADE, except that: (a) the provisions relating to
the call option granted by Lagardère described above shallremain in force as long as the Participation Agreement is inforce, (b) as long as SOGEPA holds at least one SOGEADE
share, it will remain entitled to nominate a SOGEADE
Gérance Director whose approval will be required in respect ofany decision to divest or create a security interest over theassets relating to prime contractor status, design, development
and integration of ballistic missiles activity or the majority
shareholdings in the companies Cilas, Sodern, Nuclétudes andthe GIE Cosyde; and (c) the SOGEADE Shareholders’
Agreement will be terminated in the event of a dissolution of
EADS Participations B.V. caused by DaimlerChrysler. In thelatter case, the parties have undertaken to negotiate a newshareholders’ agreement in the spirit 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 of the dissolution of
EADS Participations B.V.
Put Option
Under the Participation Agreement, SOGEADE grants a put
option to DaimlerChrysler over its EADS shares which shallbe exercisable by DaimlerChrysler, (i) in the event of adeadlock arising from the exercise by SOGEPA of its rights
relating to certain strategic decisions (listed above under thedescription of SOGEADE) other than those relating to theballistic missiles activity or (ii) during certain periods provided
that in both cases the French State still holds any direct or1

3.3 Shareholdings and Voting Rights (continued)

2
3

indirect interest in EADS shares. The put option may only be
exercised in respect of all and not some only ofDaimlerChrysler’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 right to require SOGEPA to substitute itself for
SOGEADE in relation to the acquisition of DaimlerChrysler’s
EADS shares following the exercise by DaimlerChrysler ofthe put option. Such substitution right has been accepted byDaimlerChrysler. In the event that Lagardère does not exercise
such substitution right, Lagardère would have to provide its
pro rata part of the financing necessary for such acquisition.
SOGEPA undertakes to provide its pro rata part of thefinancing corresponding to its rights in SOGEADE. Should
Lagardère decide not to take part in the financing, (a) SOGEPA
undertakes to substitute itself for SOGEADE to buy theshares sold by DaimlerChrysler as a result of the exercise of
its put option and SOGEPA or Lagardère may request theliquidation of SOGEADE and EADS Participations B.V. andthe termination of the SOGEADE Shareholders’ Agreement(notwithstanding the termination provisions of the SOGEADE
Shareholders’ Agreement described under the paragraph‘‘SOGEADE’’ above). In that case, Lagardère could freely sell
its EADS shares on the market or in a block sale to athird party.
Pledge over EADS Shares Granted to EADS Participations 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 ofseven years. 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 sharesprovided that EADS shall, on demand, indemnify Lagardèreand SOGEPA (in the case of a sale of shares contributed by
Aerospatiale Matra), Dasa AG or SEPI, as the case may be, forall tax disadvantages (tax actually paid or borne by them as

EADS Business and Legal Description 2004

well as any consumption of loss-carry-forward potential) they
suffer as a result of the loss of the tax benefit triggered by
the disposal of the shares by EADS. Such obligation toindemnify shall cease after seven years from the date ofcontribution. In the event that the indemnification would bemade to all three of Lagardère, SOGEPA and Dasa AG, theBoard of Directors would decide on the amount of theindemnity on the basis of a report made and presented by thetwo independent Directors of EADS. The amount and theconditions of this indemnification will be reported to theshareholders’ meeting.
DADC
EADS holds 75% of the shares in DADC Luft- undRaumfahrt Beteiligungs AG (‘‘DADC’’) (the other 25% being
held by DCLRH). The share capital of Dornier GmbH is held
as to 93.58% by DADC and as to 6.42% by the Dornierfamily. In shareholders’ meetings, DADC is entitled to morethan 89.9% and the Dornier family to less than 10.1% of thevoting rights in Dornier GmbH. DADC and Dornier GmbHhave entered into a control and profit and losstransfer 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 theminority shareholders, reduction of share capital, mergers(unless Dornier GmbH is the surviving entity), the transfer ofholdings in other enterprises or the transfer of whole areas ofenterprise activities with the exception of transfers of assets inreturn for shares or as a contribution in kind or to a company
associated with DaimlerChrysler, which is assumed to be thecase if DaimlerChrysler controls at least 20% of its sharecapital. The same requirement applies with regard to alltransfers of shares of Dornier GmbH held by the
DaimlerChrysler Group (including associated enterprises)
subject to certain exceptions including the transfer to otherDaimlerChrysler Group companies (including associatedenterprises). Furthermore, the Dornier family receives aguaranteed dividend from Dornier GmbH (depending on thenature of the shares) of 8.7% or 15% of the nominal amountof 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 andDornier GmbH, the Dornier family shareholders are entitled
to receive payments corresponding at least to the amount

85

4
5

3.3 Shareholdings and Voting Rights (continued)
which they would be entitled 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 DeutschlandGmbH and Dasa AG entered into an agreement according towhich 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 theshares. Moreover, DADC will assume certain other rights andobligations relating to the protection of the interests of theDornier family.
On 29th December 2004, Silvius Dornier andDaimlerChrysler entered into an agreement to transfer all of
the remaining shares of Silvius Dornier in Dornier GmbH(3.58%) to DaimlerChrysler or another company of theDaimlerChrysler Group nominated by DaimlerChrysler and tosettle all of the rights and potential claims of Silvius Dornier
resulting from or in connection with his shareholding in
Dornier GmbH. The other family shareholders had a threemonths’ right of first refusal to acquire these shares so that
their legal transfer will become effective in the first half-year2005 which expired on 17th April and was not exercised sothat the sale of Silvius Dornier’s shares has become effective.
According to the above mentioned agreement between
DaimlerChrysler, DCLRH, DADC, EADS DeutschlandGmbH and Dasa AG (‘‘Handhabungsvereinbarung’’), DADC
has irrevocably offered to DaimlerChrysler to buy these sharesat market value upon effectiveness of their sale toDaimlerChrysler which offer is expected to be accepted byDaimlerChrysler and the deal being brought to closure in thesecond quarter of 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
behalf of each member of the Lagardère Group) and SEPI andshall keep them indemnified, against (save in respect of any

86

EADS Business and Legal Description 2004

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,
the Contractual 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 Groupor any member of the Dasa AG Group. This indemnity shallalso extend to EADS to the extent such protection is notprovided for in the transfer of the Dasa business to EADS.
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 theissue of a certificate. Share certificates shall be issued in suchform as the Board of Directors may determine. Registeredshares shall be numbered 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 authorized share capitalof 500,000 Netherlands Guilders (NLG) divided into
500 shares each having a nominal value of 1,000 NLG, ofwhich 100 were issued to Aerospatiale Matra on
29th December 1998. These shares 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’’).
Since July 2000, 4,293,746 EADS shares (representing 0.53%
of the share capital of EADS as of the date of this document)
have been distributed without payment of consideration by
the French State to certain former shareholders of Aerospatiale
Matra as a result of its privatisation in June 1999. The last
distribution took place in July 2002.

1

3.3 Shareholdings and Voting Rights (continued)

2
3

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 representing 0.92% and 2.06% of the share capital of EADS as of the date of thisdocument) 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 ‘‘– Relationships 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 carried out 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 over-allotment 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 at that date,
except for its Indirect EADS Shares. On 20th July 2004, the Company cancelled 5,686,682 of its own shares. Finally, during
2004 and until the date of this document, the Company issued 490,609 shares following the exercise of options granted toGroup employees within the framework of stock option plans granted to them in 2000, 2002 and 2003 (see ‘‘Part 1/2.3.3
Options Granted to Employees’’).
Since the date of filing with the AMF of the Document de Référence of the Company for the financial year 2003 (1st April
2004), the Company has not received any threshold notification. To the knowledge of the Company, none of the shareholdersof the Company, other than as disclosed in the chart below, hold more than 5% of the share capital or voting rights of theCompany.
The Division of the issued shares and voting rights of the Company before exercise of outstanding stock options granted for thesubscription of EADS shares (see ‘‘Part 1/2.3.3 Options Granted to Employees’’) in respect of the past three years is indicated in
the table below:
Position as at 19th April 2005

Position as at 1st April 2004

Position as at 2nd April 2003

Shareholders

Number ofshares% ofcapital% ofvotingrightsDasa AG244,447,704

30.19%

30.43%

244,447,704

30.07%

30.52%

244,447,704

30.13%

30.52%SOGEADE

244,447,704

30.19%

30.43%

244,447,704

30.07%

30.52%

244,447,704

30.13%

30.52%

SEPI

44,690,871

5.52%

5.56%

44,690,871

5.50%

5.58%

44,690,871

5.51%

5.58%

Sub-total Contractual Partnership

533,586,279

65.90%

66.42%

533,586,279

65.64%

66.62%

533,586,279

65.77%

66.62%–––

22,227,478

2.73%

2.78%

22,227,478

2.74%

2.77%

Dasa AGFrench State
PublicOwn share buy-back***
Total

Number ofshares% ofcapital% ofvotingrightsNumber ofshares% ofcapital% ofvotingrights502,746*

0.06%

0.06%

502,746

0.06%

0.06%

502,746

0.06%

0.06%

269,223,092**

33.25%

33.52%

244,640,745

30.10%

30.54%

244,640,745

30.16%

30.55%

6,394,814

0.79%

–

11,927,934

1.47%

–

10,241,252

1.27%

–

809,706,931

100.00%100.00%812,885,182

100.00%100.00%811,198,500

100.00%100.00%* Shares held by the French State following the distribution without payment of consideration of 4,293,746 shares to certain former shareholders of Aerospatiale Matraas 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.
** Including EADS employees. As of the date of this document, EADS employees hold approximately 3.13% of the share capital and 3.15% of the voting rights.
*** The EADS shares owned by the Company itself do not carry voting rights.

To the knowledge of the Company, except as disclosed previously in ‘‘Relationships with Principal Shareholders’’, there are nopledges over the shares of the Company.
The Company requested a disclosure of the identity of the beneficial holders of its shares held by identifiable holders (‘‘Titres
au porteur identifiables’’) holding more than 10,000 shares each. The study, which was completed on 31st December 2004,
resulted in the identification of 1,718 shareholders holding a total of 220,913,277 EADS shares (including 4,242,818 shares heldby Iberclear on behalf of the Spanish markets and 20,843,199 shares held by Clearstream on behalf of the German market).
The current shareholding structure of the Company is as shown in the diagram in ‘‘3.3.1 Shareholding Structure’’.

EADS Business and Legal Description 2004

87

4
5

3.3 Shareholdings and Voting Rights (continued)

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 shows the main Business Units of EADS.
European Aeronautic Defence and Space Company EADS N.V. (EADS)

AirbusMilitary
Transport Aircraft

Aeronautics

Defence andSecurity Systems

Space

Eurocopter

EADS Military
Aircraft

EADS Astrium

ATR

EADS Defence& Communication
Systems

EADS SpaceTransportation

EADS Services

EADS Space
Services

EADS EFWEADS Sogerma
Services
MBDA
EADS Socata
EADS LFKEADS DefenceElectronics

3.3.7 Purchase by the Company of its Own Shares
3.3.7.1 Dutch Law

The Company may acquire its own shares, subject to certain provisions of the law of The Netherlands and the Articles of
Association, if (i) the shareholders’ equity less the payment required to make the acquisition does not fall below the sum ofpaid-up and called portion of the share capital and any reserves required by the law of The Netherlands 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 ingeneral meeting have authorized 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 the Company
are, however, not excluded from their voting rights in such cases where the right of usufruct or pledge was vested before theshare was held by the Company.
The annual shareholders’ meeting of EADS held on 6th May 2004 authorized the Board of Directors, in a resolution that
renewed the previous authorisation given by the annual shareholders’ meeting of EADS held on 6th May 2003, for a period of
18 months from the date of such meeting, to repurchase shares of the Company within the limit of 5% of the Company’s
issued share capital, on the stock exchange or otherwise in return for payment, at a price between the nominal value of theshares (41.0) and an amount equal to 110% of the price at which the relevant shares were quoted on any stock exchange at closeof business on the trading day before the day of the purchase by the Company.

88

EADS Business and Legal Description 2004

1

3.3 Shareholdings and Voting Rights (continued)2
3

As of July 2004, the Company had purchased in aggregate
11,927,934 of its own shares, 5,686,682 of which werecancelled on 20th July 2004.
The Board of Directors, considering its previous resolution
dated 5th December 2002, resolved on 10th October 2003 andrequested the Chief Executive Officers to implement, in thecontext of the employee share ownership plans for 2000, 2001
and 2002 (see ‘‘Part 1/2.3.2 Employee Share Offering’’), a
share purchase programme for the Company to repurchase up
to a maximum of 20,092,075 of its own shares (depending on
the number of shares actually subscribed for by the relevant
employees), which on 30th June 2004, represented 2.49% of
the issued share capital of the Company. The objectives andcharacteristics of this share purchase programme are set out inthe note d’information approved by the AMF on 30th July
2004 under number 04-708. The implementation of this sharepurchase programme has resulted in the acquisition by theCompany of 153,562 of its own shares.
As of the date of this document, the Company had purchasedin aggregate 6,394,814 of its own shares.
A resolution will be submitted to the annual shareholders’meeting of EADS called for 11th May 2005 in order tosupersede and replace the authorisation given by the annual
shareholders’ meeting held on 6th May 2004 and authorize
the Board of Directors, for a new period of 18 months asfrom the date of such meeting, to repurchase shares of theCompany, by any means, including derivative products, on any
stock exchange or otherwise, as long as, upon such repurchase,
the Company shall not hold more than 5% of the Company’s
issued share capital 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.
After making purchases of its own shares, the Company isrequired to immediately file a report with the AFM that
contains specified information about such purchases, unless an
exemption applies. The AFM makes this information
publicly available.

EADS Business and Legal Description 2004

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
summarized below.
Pursuant to Articles 241-1 to 241-7 of the AMF General
Regulations, the purchase by a company of its own shareswill, in principle, require the filing of a note d’information thathas received the prior approval (or ‘‘visa’’) of the AMF.
Under Articles 631-1 to 631-4 of the AMF General
Regulations, a company may not trade in its own shares forthe purpose of manipulating the market. Articles 631-5 and631-6 of the AMF General Regulations also define theconditions for a company’s trading in its own shares tobe valid.
After purchasing its own shares, the Company is required todisclose, within at least seven trading days, specified
information regarding such purchases by way of a release
which is available to the public on the websites of theCompany and the AMF. Additionally, the Company must
notably report to the AMF, on at least a monthly basis,
information concerning the cancellation of such
repurchased shares.
3.3.7.3 German Regulations

As a foreign issuer, the Company is not subject to German
rules on trading in its own shares, which only apply toGerman issuers.
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
not trade in its own shares for the purpose of manipulating
the market.

89

4
5

3.4 Stock Exchange Information
The Company’s issued share capital is divided into 809,706,931 shares currently listed under the symbol ‘‘EAD’’ on the Paris
Stock Exchange, the Frankfurt Stock Exchange and the Spanish Stock Exchanges and included in the CAC 40 index as well as
the MDAX index.
The following tables set forth, for the periods indicated, the average daily trading volumes and the high and low prices of
EADS shares on the Paris, Frankfurt and Spanish Stock Exchanges.
Paris Stock Exchange

2003
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2004
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2005
January
February
March
Source: Bloomberg Database

90

EADS Business and Legal Description 2004

Share tradevolumeAverage daily
trade volumes

Trade value(1)

Average daily
trade value(1)

Month’sHigh

Month’sLow

41,084,015
31,503,649
46,872,323
51,698,858
45,882,586
62,648,698
55,248,723
30,590,530
47,237,941
60,098,669
70,012,235
46,490,041

1,867,455
1,575,182
2,232,015
2,349,948
2,085,572
2,983,271
2,402,118
1,456,692
2,147,179
2,612,986
3,500,612
2,213,811

420,579,852
271,850,579
355,854,789
406,330,625
390,153,125
659,656,740
696,341,886
436,033,159
698,671,170
938,858,930
1,257,952,390
891,365,537

19,117,266
13,592,529
16,945,466
18,469,574
17,734,233
31,412,226
30,275,734
20,763,484
31,757,780
40,819,953
62,897,620
42,445,978

11.70
9.93
9.10
8.65
9.80
11.48
14.45
14.74
16.47
18.04
19.18
20.20

8.89
7.25
6.33
6.87
7.75
9.22
10.41
13.56
12.80
12.99
16.60
18.00

49,595,902
35,148,871
37,211,004
44,332,841
41,273,832
46,095,936
41,068,783
31,743,649
26,580,654
43,192,407
47,999,902
47,368,038

2,361,710
1,757,444
1,617,870
2,216,642
1,965,421
2,095,270
1,866,763
1,442,893
1,208,212
2,056,781
2,181,814
2,059,480

908,903,760
620,323,172
661,915,000
891,469,580
828,340,471
981,764,060
906,332,590
667,669,830
572,446,776
965,030,580
1,134,816,660
1,008,467,673

43,281,131
31,016,159
28,778,913
44,573,479
39,444,784
44,625,639
41,196,936
30,348,629
26,020,308
45,953,837
51,582,575
43,846,421

19.39
18.81
19.13
22.08
21.95
23.45
23.39
22.88
22.90
23.78
24.95
23.72

17.26
16.95
16.37
17.64
18.52
19.53
21.16
19.92
20.93
21.12
22.26
20.78

50,722,823
38,710,331
49,459,044

2,415,373
1,843,349
2,248,138

1,131,603,240
917,400,620
1,130,919,750

53,885,869
43,685,744
51,405,443

23.90
24.60
24.14

20.76
22.83
21.66

1

3.4 Stock Exchange Information (continued)

2
3Frankfurt Stock Exchange

2003
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2004
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2005
January
February
March

Share tradevolumeAverage daily
trade volumes

Trade value(1)

Average daily
trade value(1)629,888543,124
1,746,387
1,365,736
1,058,476
1,667,506
1,734,296
863,962
1,702,772
1,674,219
1,616,328
1,738,852

28,631
27,156
83,161
62,07948,11379,40575,404
41,141
77,39972,79280,81682,8026,440,735
4,680,095
14,362,272
10,669,097
8,970,172
17,802,437
21,359,965
12,316,746
25,378,004
26,604,092
29,053,089
33,370,991

292,761
234,005
683,918
484,959
407,735
847,735
928,694
586,512
1,153,546
1,156,700
1,452,654
1,589,095

11.80
9.98
9.38
8.65
9.75
11.50
14.40
14.94
17.85
17.99
19.10
20.27

8.80
7.27
6.30
6.90
7.70
9.25
10.35
13.57
12.90
13.00
16.60
17.86

2,132,747
1,170,392
1,780,177
2,114,858
1,382,766
1,946,516
1,580,9781,269,570
1,064,203
1,383,811
1,815,231
1,659,987

101,559
58,52077,399105,743
65,84688,47871,86357,70848,37365,89682,511
72,17339,223,881
20,711,768
31,604,920
42,725,967
27,872,799
42,420,693
35,097,201
26,950,522
23,371,557
31,197,269
43,011,854
36,528,029

1,867,804
1,035,588
1,374,127
2,136,298
1,327,276
1,928,213
1,595,327
1,225,024
1,062,344
1,485,584
1,955,084
1,588,175

19.40
18.80
19.15
22.08
21.94
23.45
23.39
23.10
22.85
23.76
24.99
23.72

17.25
16.90
16.30
17.50
18.33
19.56
21.05
19.80
20.80
21.10
22.20
20.50

2,140,539
1,518,967
1,294,254

101,930
72,332
58,83048,235,301
35,994,778
29,548,163

2,296,919
1,714,037
1,343,098

23.99
24.60
24.16

20.72
22.76
21.71

Month’sHigh

Month’s
Low

Source: Bloomberg Database

EADS Business and Legal Description 2004

91

4
5

3.4 Stock Exchange Information (continued)

Spanish Stock Exchanges

2003
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2004
January
February
March
April
May
June
July
AugustSeptember
OctoberNovember
December
2005
January
February
March
Source: Bloomberg Database

92

EADS Business and Legal Description 2004

Share tradevolumeAverage daily
trade volumes

Trade value(1)

Average daily
trade value(1)

Month’sHigh

Month’sLow

904,400
623,576
1,175,515
2,867,930
2,576,034
2,671,875
2,224,848
776,963
1,754,879
1,735,945
1,308,781
1,863,354

41,10931,17955,977130,360
117,092
127,232
96,73336,99879,76775,47665,43988,731

9,267,742
5,271,716
9,026,197
22,731,695
22,034,774
28,002,606
27,389,359
11,054,279
26,109,086
27,239,068
23,407,929
35,231,343

421,261
263,586
429,819
1,033,259
1,001,581
1,333,457
1,190,842
526,394
1,186,777
1,184,307
1,170,396
1,677,683

11.62
9.90
9.02
8.65
9.77
11.48
14.38
14.71
16.48
17.99
19.10
20.10

8.90
7.28
6.41
6.91
7.75
9.26
10.42
13.59
12.89
13.00
16.61
18.01

1,698,734
1,276,509
1,044,676
1,117,624
477,061
914,354475,319412,611
393,023654,685
679,171
1,611,679

80,892
63,82545,42155,881
22,717
41,562
21,60518,755
17,86531,17530,87170,07331,138,245
22,531,318
18,529,269
22,292,422
9,593,515
19,770,523
10,474,857
8,765,651
8,683,397
14,687,094
15,968,687
35,888,830

1,482,774
1,126,566
805,620
1,114,621
456,834
898,660
476,130
398,439394,700
699,385
725,849
1,560,384

19.40
18.79
19.13
22.08
21.90
23.40
23.37
22.82
22.85
23.79
24.95
23.75

17.29
16.98
16.44
17.69
18.43
19.60
21.11
19.98
20.90
21.16
22.29
20.85

1,052,121
738,490572,697

50,10135,16626,032

23,680,618
17,515,814
13,056,401

1,127,648
834,086
593,473

23.88
24.59
24.11

20.79
22.80
21.70

1

3.5 Dividends

2
3

3.5.1 Dividends and Cash Distributions Paid Since theIncorporation of the Company

A cash distribution was paid in respect of the years 2000 and2001 for a gross amount of 40.50 per share respectively on
27th June 2001 and 28th June 2002. In respect of the years
2002 and 2003, a cash distribution was paid for a grossamount of 40.30 per share and 40.40 per share respectively
paid on 12th June 2003 and 4th June 2004.
3.5.2 Dividend Policy of EADSThe Board of Directors will recommend to the annual
shareholders’ meeting of EADS called for 11th May 2005 a
cash distribution of a gross amount of 40.50 per share withrespect to the year 2004.
The amount of the proposed cash distribution results from theCompany’s performance during the year 2004 and from theexamination of payout ratios based on net income before
goodwill amortisation for a collection of relevant
European companies.
This distribution level reflects Management’s confidence in the
Company’s future earnings as the growth of air traffic and its
translation into demand for aircraft, the successes of defence
activities and the continued attraction of the A380 as it isnearing initial deliveries, suggest a vision of sustained growth.
In the future, EADS’ dividends and attributions to reserves
will be proposed to the shareholders by the Board of Directors
depending on factors such as EADS’ distribution capacity
arising from performance, its priorities for cash utilisation andconfidence in future prospects (payment levels will also takeexternal factors into account, such as the dividend policies of
relevant European and International companies) (see also‘‘3.1.9 Allocation and Distribution of Income’’). No assurance
may be given in respect of the proposed dividend levels forthe years 2005 onwards.
3.5.3 Unclaimed Dividends

Pursuant to article 31 of the Articles of Association, the claim
for payment of a dividend or other distribution approved by
the general meeting shall lapse five years after the day on
which such claim becomes due and payable. The claim forpayment of interim dividends shall lapse five years after the
day on which the claim for payment of the dividend against
which the dividend could be distributed becomes dueand payable.

EADS Business and Legal Description 2004

3.5.4 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 The
Netherlands 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
to their 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 respectof Shares will be subject to a withholding tax imposed by The
Netherlands at a statutory rate of 25%. Dividends include
dividends in cash or in kind, deemed and constructive
dividends, repayment of paid-in capital not recognized ascapital for Netherlands dividend withholding tax purposes, andliquidation proceeds in excess of the average paid-in capital
recognized as capital for Netherlands dividend withholding tax
purposes. Stock dividends paid out of the Company’s paid-inshare premium, recognized 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
or complete exemption or refund of all or a portion of theabove 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.
French, German, and Spanish Tax Treaties

Under the Convention between the Republic of France andthe Kingdom of The Netherlands for the Avoidance ofDouble Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income and Capital, concluded 16th
March 1973, the Convention between the Federal Republic of
Germany and the Kingdom of The Netherlands for the
Avoidance of Double Taxation with respect to Income andCapital and Various Other Taxes and for the Regulation of
Other Questions relating to Taxation, concluded 16th June
1959 or the Convention between the Government of the Stateof Spain and the Government of the Kingdom of The
Netherlands for the Avoidance of Double Taxation withrespect to Taxes on Income and Capital, concluded 16th June
1971, dividends paid by the Company to a Non Resident

93

4
5

3.5 Dividends (continued)
Holder that is a resident of France, Germany or Spain as
defined in the respective Convention are generally eligible fora reduction of the 25% Netherlands withholding tax to 15%,
provided that the dividends are not attributable to an
enterprise or part thereof which is carried on through apermanent establishment or permanent representative in
The Netherlands.
Withholding Tax on Sale or Other Dispositions of Shares

Payments on the sale or other dispositions of Shares will not
be subject to Netherlands withholding tax, unless the sale orother disposition is, or is deemed to be, made to the Company
or a direct or indirect subsidiary of the Company. A
redemption or sale to the Company or a direct or indirect
subsidiary of the Company will be treated as a dividend andwill in principle be subject to the rules set forth in‘‘Withholding Tax on Dividends’’ above.

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
Non-Resident Holder, unless:(i)the transfer is made by or on behalf of a person who,at the time of the gift or death, is or is deemed to beresident in The Netherlands; or(ii)

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

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 saleor disposition of Shares, will not be subject to Netherlands
taxation on income or capital gains unless:(i)such income or gain is attributable to an enterprise orpart 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(ii)

the Non-Resident Holder is not an individual and the
Non-Resident Holder has, directly or indirectly, a
substantial interest (aanmerkelijk belang) or a deemed
substantial interest in the Company and such interest
does not form part of the assets of an enterprise, or(iii)

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

94

EADS Business and Legal Description 2004

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 resultof holding a Share or of the execution, performance, delivery
and/or enforcement of rights in respect of the Shares.

1

Chapter 4: Information Concerning Securities Issued

2
3
NOT APPLICABLE
45

EADS Business and Legal Description 2004

95

Chapter 5: Persons Responsible for the Reference Document and Persons Responsible for the Audit of
the Financial Statements

5.1 Persons Responsible for the Reference Document

Mr. Philippe Camus and Mr. Rainer Hertrich, Chief Executive Officers of EADS
5.2 Statement of the Persons Responsible for the Reference Document‘‘To our knowledge, the information set out in this Reference Document relating to EADS is true and correct; it includes all
the information required by investors to base their opinion on EADS’ assets and liabilities, business, financial position, results
and prospects of the issuer; there are no omissions that could affect the significance of such information.’’Philippe Camus
Chief Executive Officer

Rainer Hertrich
Chief Executive Officer

5.3 Persons Responsible for the Audit of the Financial Statements
5.3.1 Persons Responsible for the Review of EADS’ Financial Statements
Date of First Appointment

KPMG Accountants N.V.
K.P. Van der Mandelelaan 41-43
3062 MB Rotterdam
The Netherlands
Represented by
Mr. Leo Blok
Ernst & Young Accountants
Drentestraat 20, 1083
HK Amsterdam
The Netherlands
Represented by
Mr. Martin Van Dam

Term of Current Office

10th May 2000 11th May 20056

24th July 2002 11th May 20056

6 A resolution will be submitted to the shareholders’ general meeting of EADS called for May 11, 2005, in order to resolve that the Company’s auditors for theaccounting period being the financial year 2005 shall be Ernst & Young Accountants and KPMG Accountants N.V.

5.3.2 Statement of the Auditors

In our capacity as auditors of EADS N.V. (‘‘EADS’’), we have verified, in accordance with International Standards on Auditing,the financial information relating to the financial statements and the consolidated financial statements prepared in accordancewith International Financial Reporting Standards (‘‘the IFRS consolidated financial statements’’) of EADS for the years ended
December 31, 2004, 2003 and 2002, contained in the present Reference Document.
This Reference Document has been prepared under the responsibility of EADS Chief Executive Officers, Philippe Camus andRainer Hertrich. Our responsibility is to report on the fairness of the financial information included in this document withrespect to the financial position and the financial statements of EADS as referred to above.
Our procedures conducted in accordance with International Standards on Auditing, comprised an assessment of the fairness of
the information presented relating to the financial position and the financial statements including its consistency with thefinancial statements and the IFRS consolidated financial statements on which we have issued our audit reports.
Our procedures also comprised the reading of the consolidated financial information for 2004 and 2003 included in the section‘‘Management Discussion and Analysis of Financial Condition and Results of Operation’’ included in the Reference Document,in order to identify material inconsistencies with the information relating to the IFRS consolidated financial statements and toreport any apparent misstatement of facts that we may have uncovered in reading the other information based on our generalknowledge of the company obtained during the course of our engagement.
Forward-looking financial information that is presented corresponds to EADS top management’s objectives, and not to isolated
forecast figures resulting from a structured planning and reporting system.

96

EADS Business and Legal Description 2004

1
2
3
The financial statements and the IFRS consolidated financial
statements as of December 31, 2004, 2003 and 2002, thathave been approved by the EADS Board of Directors, havebeen audited, in accordance with auditing standards generally
accepted in the Netherlands and International Standards on
Auditing.
In each of our two audit reports dated March 8, 2005
respectively on the financial statements and on the IFRS
consolidated financial statements for the year ended
December 31, 2004, we expressed an unqualified opinion.
In our audit report dated March 5, 2004, we expressed an
unqualified opinion on the financial statements (including theconsolidated financial statements) for the year ended
December 31, 2003.
The audit report dated March 7, 2003, on the financial
statements (including the consolidated financial statements) for
the year ended December 31, 2002, contained in respect of
the opinion that, because the auditors had not been able toperform the audit procedures they normally would have
performed in relation with the EADS investment with
Dassault Aviation which was accounted for under the equity
method (level of net income from equity investment in 2002of Euros 111 millions and equity investment in Dassault
Aviation of Euros 1,333 millions as of December 31, 2002),
they have issued a qualification in respect of the effects ofsuch adjustments, if any, as might have been determined to benecessary had they been able to perform the audit procedures
they normally would have performed in relation to the
Dassault Aviation investment. In all other respects, on the one
hand according to KPMG Accountants N.V. and Ernst &Young Accountants, except for the effect of the departurefrom IFRS for development costs that have been expensed as
incurred, whereas IFRS require that development costs becapitalized as intangible assets when certain criteria for asset
recognition are met; and, on the other hand according to
KPMG Accountants N.V., except for the effect of thedeparture from IFRS relating to the proportionate consolidationof MBDA, as EADS is accounting for its interest in MBDA

EADS Business and Legal Description 2004

joint venture with a proportionate consolidation of 50% for thefinancial statements of MBDA and accounts for minority
interests of 12.5%, whereas the above standards require a
venturer to report its effective net proportionate interest in ajointly controlled entity, being 37.5% for MBDA, the financial
statements (including the consolidated financial statements)
gave a true and fair view of the financial position of theCompany as of December 31, 2002, and of the result for year
then ended, in accordance with the financial accounting
principles generally accepted in the Netherlands and inaccordance with IFRS.
Based on the procedures described above, except for theeffects of such adjustments, if any, as might have been
determined to be necessary had we been able to perform theaudit procedures we normally would have performed inrelation to the Dassault Aviation investment in 2002, except
for the effect of the departure from IFRS and accounting
principles generally accepted in the Netherlands relating to theaccounting for development costs in 2002, and according to
KPMG Accountants N.V., except for the effect of thedeparture from IFRS and accounting principles generally
accepted in the Netherlands for the proportionate consolidationof MBDA in 2002, we have no other matters to report
regarding the fairness of the financial information relating to
the financial statements of EADS N.V. as referred to above
for the years ended December 31, 2004, 2003 and 2002 andany other information mentioned here above.
This statement has been prepared following a specificrequirement of the Autorité des marchés financiers so as to be
included in the 2004 EADS Reference Document.

Rotterdam, April 19, 2005,
KPMG Accountants N.V.
Amsterdam, April 19, 2005,
Ernst & Young Accountants

97

4
5

Specific statement related to the translation of the financial
information

In the context of the preparation of the Reference Document,
we have read the French language translation of the financial
information relating to the financial statements and theconsolidated financial statements prepared in accordance with
International Financial Reporting Standards (‘‘the IFRS
consolidated financial statements’’) of EADS for the years
ended December 31, 2004, 2003 and 2002, contained in thepresent Reference Document, all documents being originallyprepared in English.
Based on our reading, the financial information relating to thefinancial statements and the IFRS consolidated financial
statements of EADS for the years ended December 31, 2004,
2003 and 2002, the Statement of the Auditors and the two
audit reports of the auditors respectively on the financial
statements and the IFRS consolidated financial statements forthe year ended December 31, 2004, should enable a French
reader to understand the financial position of the EADSGroup as of December 31, 2004.

Paris, April 19, 2005,
KPMG Audit
Department of KPMG SA
Michel Piette
Partner
Barbier Frinault & AssociésJean-François Ginies
Partner

98

EADS Business and Legal Description 2004

1
2
3
5.4 Information Policy

5.5 Undertakings of the Company Regarding Information

Details of the person responsible for 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 summarized in ‘‘3.1.3
General Description of the Company – Governing Law –Dutch Regulations’’.

Mr. Pierre de Bausset
Senior Vice-President Investor Relations and Financial
Communication
EADS
81663 Munich
Germany
Telephone: + 49 89 607 34113
Fax: + 49 89 607 34110
E-mail: ir@eads.com
A website, www.eads.net, provides a wide range of
information on the Company. Special toll-free hotlines areavailable to shareholders in France (0 800 01 2001), Germany(00 800 00 02 2002) and Spain (00 800 00 02 2002). An email
box is dedicated to shareholders’ messages: ir@eads.com.

EADS Business and Legal Description 2004

99

4
5

Reference Document Thematic Index

In order to simplify the reading of this document which is filed as part of the EADS Reference Document for the financial year
2004, the following thematic index permits the identification of the main information required by the Autorité des marchésfinanciers within the framework of its regulation.
Statements of Responsible Persons

Part 2Analysis of EADS Risk Factors

Statement of the Persons Responsible for the Reference
Document

5.2

Risk Factors

Statement of the Persons Responsible for the Financial
Statements

5.3.2

Information Policy

5.4

General Information on EADS and its Share CapitalPart 2Governing Law and Regulations Applicable to EADS

3.1.3 –
3.1.11 –3.1.12

Share Capital
Modification of Share Capital or Rights Attaching to the
Shares3.2.1

Issued Share Capital

3.2.2

Authorised Share Capital

3.2.3

Table Showing Changes in the Share Capital over theLast Five Years

3.2.5

Stock Exchange Information

Part 1Market Risks

1.1.8 –
1.4.1

Specific Risks Linked to EADS Business

1.4.2

Legal Risks

1.4.3

Industrial and Environmental Risks

1.4.4

Insurance and Risks Cover

1.4.5

Net Assets, Financial Position and Results

Part 1

Consolidated Financial Statements and Related Notes

1.2.1

Off Balance Sheet Commitments

1.1.8

Statutory Auditors’ Fees

1.3

Statutory Financial Statements and Related Notes

1.2.2

Corporate GovernancePart 1

Composition and Functioning of the Board of Directors,
Chairmen and Chief Executive Officers

2.1.1

Table Showing Changes in Prices and Volume Since
January 2003

3.4

Composition and Functioning of the Board Committees

2.1.2 –
2.1.3

Dividends

3.5

Compensation Granted to Directors and Principal
Executive Officers

2.2.1 –
2.3.3

3.3.1

The Ten Highest Granted Options Employees that are
not Corporate Officers

2.3.3

Shareholding Structure and Voting Rights
Changes in the Shareholding of the Company since its
Incorporation

3.3.4

Related Party Transactions

2.2.3

Internal Control and Risk Management Systems

2.1.5

Relationships with Principal Shareholders

3.3.2

Corporate Social Responsibility

Information Concerning EADS’ Business Activities

Part 2

Part 2
Chapter 2

Presentation of the Group (relationships between EADS
and its subsidiaries)

1.1.1

Recent Developments

Part 2

Key Figures for the Group

1.1.1

Information by Divisions

1.1.1 to
1.1.6

EADS’ Markets and Competitive Positioning

1.1.2 to1.1.6

Investment Policy

1.1.7

Share Capital, Voting Rights

100

EADS Business and Legal Description 2004

1.2
OutlookPart 1
3.1

The complete EADS Annual Report Suite2004 consists of:

EADS Annual Review 2004 (1)EADS Financial Statements andCorporate Governance 2004 (2)EADS Business andLegal Description 2004 (3)(available upon request)
The online version of the EADSAnnual Report Suite 2004 is available
at the Investor Relations section ofwww.eads.com

This Reference Document was filed in French with the Autorité des marchés
financiers on 19th April 2005 pursuant to Articles 211–1 to 211–42 of the General
Regulations of the Autorité des marchés financiers. It may be used in support ofa financial transaction only if it is supplemented by a transaction note approved by
the Autorité des marchés financiers.
Warning
The AMF draws the attention of the public to the fact that:
European Aeronautic Defence and Space Company EADS N.V. (“EADS” or the“Company”) is a Dutch company, which is listed in France, Germany and Spain.
Given this fact, the applicable regulations with respect to public information andprotection of investors, as well as the commitments made by the Company tosecurities and market authorities, are described in this Reference Document.
This document contains information which forms an integral part of EADS’
Reference Document filed with the Autorité des marchés financiers on
19th April 2005. When used as a Reference Document, it must be read in
conjunction with the document entitled Financial Statements and Corporate
Governance – 2004 (Reference Document Part 1), containing, among
other things, the Company’s financial statements and the notes thereto.

Designed by williams and phoa.
Typeset by Bowne.

3
European Aeronautic Defence and Space Company EADS N.V.

www.eads.com

This document
is also available at thefollowing 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

Cover image
Airbus A340-300

EADS Business and Legal Description 2004

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

Business andLegal Description
2004