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

European Aeronautic Defence and Space Company EADS N.V.

This document is also available
at the following addresses:

EADS Key figures 2003

EADS Group
2003

Revenues
EBIT1 (Earnings before interest and taxes)
Earnings per share2
Dividend per share
Net cash position3
Order intake
Order book
Workforce (number of employees)

€m
€m
€
€
€m
€m
€m

2002

2001

30,133 29,901 30,798
1,543
1,426
1,694
0.96
0.87
1.00
0.4
0.3
0.5
3,105
2,370
2,679
61,150 31,009 60,208
179,280 168,339 183,256
109,135 103,967 102,967

Unless otherwise indicated, EBIT figures presented in this report are pre-goodwill amortisation and exceptionals
Pre-goodwill amortisation and exceptionals
32001 and 2002 figures restated to be comparable with 2003: defeased bank deposits are netted withcorresponding financial liabilities
1
2

Corporate Presentation 2003

EADS Divisions
2003

To New Levels
Corporate Presentation 2003

2002

2001

Airbus1
Revenues
Order bookOrder book/annual deliveries (in aircraft)

€m
€m
Years

19,048 19,512 20,549
141,836 140,996 156,075
4.8
5.0
4.8

Military Transport Aircraft
Revenues
Order bookOrder book/revenues

€m
€m
Years

934
20,007
21.4

524
633
1.2

547
1,320
2.4

Aeronautics2
Revenues
Order bookOrder book/revenues

€m
€m
Years

3,803
9,818
2.6

3,834
10,162
2.7

5,065
13,700
2.7

Defence and Security Systems2
Revenues
Order bookOrder book/revenues

€m
€m
Years

5,165
14,2832.8

4,770
13,406
2.8

3,345
9,100
2.7

Space3
Revenues
Order bookOrder book/revenues

€m
€m
Years

2,424
7,888
3.3

2,216
3,895
1.8

2,439
3,796
1.6

In this report, Airbus order intake and order book are based on catalogue prices
In this report, 2002 figures are adjusted according to the new structure of Aeronautics and Defence andSecurity Systems since 2003
3
Full year 2003 includes EADS Astrium at 100% (full year 2002 at 75%)12European Aeronautic Defence
and Space Company EADS N.V.
Le Carré
Beechavenue 130 – 132
1119 PR Schiphol-Rijk
The Netherlands
www.eads.net

On the cover: wing of Multi-Role Tanker Transport Aircraft (MRTT)EADS 2003 Key Figures

Great products. Great names. Great future. Find out more underneath.

>EADS Key figures 2003

EADS Group
2003

Revenues
EBIT1 (Earnings before interest and taxes)
Earnings per share2
Dividend per share
Net cash position3
Order intake
Order book
Workforce (number of employees)

€m
€m
€
€
€m
€m
€m

2002

2001

30,133 29,901 30,798
1,543
1,426
1,694
0.96
0.87
1.00
0.4
0.3
0.5
3,105
2,370
2,679
61,150 31,009 60,208
179,280 168,339 183,256
109,135 103,967 102,967

Unless otherwise indicated, EBIT figures presented in this report are pre-goodwill amortisation and exceptionals
Pre-goodwill amortisation and exceptionals
32001 and 2002 figures restated to be comparable with 2003: defeased bank deposits are netted withcorresponding financial liabilities
1
2

EADS Divisions
2003

Airbus1
Revenues
Order bookOrder book/annual deliveries (in aircraft)

€m
€m
Years

2002

2001

19,048 19,512 20,549
141,836 140,996 156,075
4.8
5.0
4.8

Military Transport Aircraft
Revenues
Order bookOrder book/revenues

€m
Years

934
20,007
21.4

524
633
1.2

547
1,320
2.4

Aeronautics2
Revenues
Order bookOrder book/revenues

€m
€m
Years

3,803
9,818
2.6

3,834
10,162
2.7

5,065
13,700
2.7

Defence and Security Systems2
Revenues
Order bookOrder book/revenues

€m
€m
Years

5,165
14,2832.8

4,770
13,406
2.8

3,345
9,100
2.7

Space3
Revenues
Order bookOrder book/revenues

€m
€m
Years

2,424
7,888
3.3

2,216
3,895
1.8

2,439
3,796
1.6

€m

In this report, Airbus order intake and order book are based on catalogue prices
In this report, 2002 figures are adjusted according to the new structure of Aeronautics and Defence andSecurity Systems since 2003
3
Full year 2003 includes EADS Astrium at 100% (full year 2002 at 75%)
1
2

On the cover: wing of Multi-Role Tanker Transport Aircraft (MRTT)EADS 2003 Key Figures

Great products. Great names. Great future. Find out more underneath.

>Great products. Great names. Great future.
We are a young, dynamic and innovative company. We are the largest aerospaceand defence company in Europe and the second largest worldwide. We have thefastest growing largest order book in our industry. Few people, perhaps, could
describe the Group in detail. But customers all round the world, ranging fromairline passengers to ministries of defence, recognise – and trust – our brands.

A380

A400M

NH90

Airbus

A400M

Eurocopter

A landmark year for Airbus
Airbus has become the commercial,technological and manufacturingleader in its sector. Managed centrally,
it draws on the skills of employees
at 16 sites in France, Germany,
Spain and the UK. Airbus has soldover 4,800 aircraft to more than180 customers and offers a wide
range of customer services to help
operators maximise the productivity
and profitability of their fleets.
Airbus expertise is also finding
defence applications in the A400M
military transport aircraft and in tanker
aircraft for Germany and the UK.

Largest ever EADS defence contract
The A400M, of which development
started in 2003, is a heavy-lift militarytransport aircraft which makes useof Airbus technology and will provide
Europe with an essential meansof effective force projection in the
defence environment of the earlytwenty-first century. 180 A400M
aircraft have been ordered for€19.7 billion by seven governments –Belgium, France, Germany,
Luxembourg, Spain, Turkey andthe UK. The first flight is scheduled
for 2008.

Delivering world-class helicopters
Eurocopter, the world’s largest
helicopter supplier, offers the mostcomplete and modern helicopter
product range covering civil andmilitary market. Civil machines range
from the light, single-engined Colibri
EC120B to the medium-heavy
Super Puma used for offshore andshuttle work. The NH90 is a militaryhelicopter for naval and tacticaltransport operations and has beenordered by nine governments;
the Tiger is an advanced attack
helicopter due to enter service withinfour countries by the end of 2004.

EADS 2003 Great products. Great names. Great future.

Eurofighter

MeteorAriane 5

Eurofighter

MBDA

ArianeSeizing export opportunities
The Eurofighter (‘Typhoon’ in theexport version) is one of the mostadvanced military aircraft in existence– capable of operating in a numberof roles, ranging from long-range
supersonic combat to maritime attack.
Its features include all-weather andshort take-off and landing capabilities,
high survival and operational rates
and independence from external
ground equipment. Eurofighter iscurrently being delivered to the airforces of Germany, Italy, Spain andthe UK, and has been ordered by
the Austrian Government.

Cutting-edge missile technology
MBDA is the second largest company
active in the field of tactical missiles
and missile systems in the world, andis involved as a prime or subcontractor
in the seven most important segments:
air-to-air, air-to-surface, ground-to-air
and anti-tank ballistic missiles,
surface-to-air/naval, anti-ship, antitank and surface-to-surface. Within
its comprehensive and recent line ofproducts, Meteor figures prominently
as a long-range air-to-air missile family
which will equip the next generationof European combat aircraft and isbeing supplied to the air forces ofFrance, Germany, Italy, Spain, Sweden
and the UK.

Orbital operations since the 1970’s
The first Ariane rocket took to the skies
in 1979. More than 150 successful
lift-offs later, Arianespace is today theworld’s largest commercial launchservice, selling rockets around the world
and carrying out launches from the
Kourou Space Centre in French Guyana.
EADS Space activities also include
EADS Astrium, Europe’s largest
company in the space industry.
It serves all the principal satellite
market sectors, supplying satellites fortelecommunications, earth observationand science and military applications.

EADS – One integrated business

AirbusMilitary
Transport
AircraftSpace

Defence andSecurity
Systems

Aeronautics

Group Highlights 2003
• Airbus delivers 305 aircraft, slightly up on 2002, and makes more than
50% of all above 100-seat jet airliner deliveries in the world market• US low-cost operator jetBlue orders 65 A320s plus 50 options. Firm orders
for the A380 stand at 129 aircraft, including 34 won in 2003
• Eurocopter retains global market leadership and achieves major export
successes with the Tiger in Spain and the NH90 in Greece• Doubled defence order book includes €19.7 billion A400M programme –the largest, single contract since the establishment of EADS• The European Space Agency (ESA) commits to ordering 30 Ariane 5
launchers for its future programmes• EADS subsidiary Paradigm signs £2.5 billion contract for the UK’s
Skynet 5 military satellite communications system

Contents
Great products. Great names.
Great future. (Inside flap)
01
02
10
14
18
20
22
26

One integrated businessTo new levels
Letter from the Chairmen
Interview with the CEOs
Executive Committee
Key measures in 2003
The world in which we operate
Our organisational structure

28

Operational review
28 Airbus
30 Military Transport Aircraft
32 Aeronautics
34 Defence and Security Systems
37 Space
40 Human Resources
41 Global Procurement
42 Research and Technology

44
46
52
54
56

Corporate GovernanceCorporate Social Responsibility
Glossary
Addresses
Owning EADS shares in 2003

EADS 2003 One integrated business 01

strengthening leadership
positions for competitivenessin all markets
Airbus has become the leading commercial aircraft company in terms of order
book, order intake and deliveries. In years to come, the A380 will confirm
EADS’ position as market leader and innovator. To replicate such success,
EADS is breaking into new growth segments, creating military derivatives
based on today’s best commercial aircraft. Customers, such as the UK Ministryof Defence when it downselected the A330-based answer to its Future
Strategic Tanker Aircraft requirement, greet such winning solutions integrating
our broad commercial and military experiences.
EADS’ leadership extends to helicopters through Eurocopter, to missiles through MBDA
and EADS/LFK and to commercial launchers through EADS SPACE Transportation.
Simply put, EADS can capitalise on the excellence of its platforms to broaden thescope of its offering to wider systems.
Significant achievements throughout 2003 illustrate how our space and defence
businesses strive to win ground against their key competitors. Growing in defence
is a key objective, and EADS has set a target to achieve 50% growth in military
revenues from 2002 to 2005. This is achievable in the light of the programmes
acquired in 2003. Last year, we doubled our defence order book with programmes
like the A400M military transport aircraft, the sale of Eurofighter to the Austrian
Air Force and of the NH90 to Greece.
Furthermore, we are leveraging our space capabilities for military applications:
we have been appointed to provide the UK Ministry of Defence (MoD) not onlywith its Skynet 5 satellites, but also with their operations and a whole rangeof telecommunication services.
Our defence business revenues grew from €6 billion in 2002 to €7.1 billion in 2003.
And as many of our products are moving from development to production, we will
see a significant increase in value creation for EADS.

02 EADS 2003 To new levels

NH90 transport helicopter

EADS 2003 To new levels 03

Airbus A340-600

04 EADS 2003 To new levels

extending ourglobal presence
Many of our businesses are already global, such as Airbus, MBDA, Eurocopterand EADS Astrium, having customers all round the world.
It is one of our priorities to become an integral part of the industrial fabric of ourcustomers’ home markets. There are still enormous opportunities for expanding
our international footprint. Purchasing from local suppliers, opening plants andestablishing technological cooperation may feed commercial success for salesof military helicopters, transport, mission and combat aircraft, defence electronics
and secure communications systems. Such expansion will open up larger markets
and will help us smooth out market cycles and grow more consistently.
We are, for example, strengthening our position in the UK, which has Europe’s
largest and fastest-growing defence procurement budget. Currently we have
15,000 employees in the UK. Furthermore we now are the second-largest
aerospace supplier to the UK MoD.
As we have a great deal to offer defence and homeland security customers in theUS, we established EADS North America in late 2002 in order to develop this market.
We are growing local roots, such as in Columbus, Mississippi, where we brokeground for a new helicopter plant in August 2003. We believe we can benefit the
US taxpayer by providing excellent products and services at extremely competitive
prices. Our strengths in marketing, technology and systems integration have madeus a welcome strategic partner for the strongest firms in the world – which is why
we participate in major programmes such as the Ballistic Missile Defence programmein cooperation with Boeing.
EADS will continue to increase the number of industrial partnerships in Asia tostrengthen its local presence, for example through partnerships with Bridgestone
Corporation and Mitsubishi Rayon Co., who recently joined the A380 programme –bringing the total of Japanese partners on the A380 programme to 15. Simultaneously,
EADS has made a first step into China with the acquisition of a stake in AviChina,
to localise the manufacturing of helicopters and to develop upgrade capabilities
for existing aircraft.
EADS is also actively participating in the restructuring of the industrial landscapein Russia. In this market with tremendous long-term potential and a remarkableaerospace industry with proven experience and technology, we have establishedcooperative ventures in design, research and engineering.
We will furthermore capitalise on our strengths and resources to develop businessin these prioritised regions.

EADS 2003 To new levels 05

developing our role
as a systems andsolutions provider
Customers are increasingly demanding comprehensive answers to perform
complex mission requirements. This transformation process has changed
the demand of US and European defence forces and public safety agencies,
which is now more oriented towards large system integration and service
solutions. Our ability to bring a uniquely wide range of skills to bear on
any problem is, and will remain, an appreciating asset.
The civil sector is increasingly reliant on complex air traffic management networks
and obstacle-warning systems for helicopters. Agencies like police, security
and medical services are updating their secure communications facilities.
The capability to integrate systems is also essential in military applications.
For new growth areas of Network Enabled Operations, such as Extended Air Defence,
C4ISR1, or Military Space, EADS aims to achieve a clear, prime position, building on
its aircraft know-how, its excellent positioning in the field of missiles and its capabilities
in defence electronics. EADS’ drive on Unmanned Aerial Vehicles exemplifies how
it derives value from combining key strengths into new uses.
In fact, we see EADS as one of the essential providers to NATO of the improved
resources that will be necessary in coming years, both for the defence of Europe
and for the Organisation’s role in building stability around the world. We are
already beginning to tackle some of the key projects required by the Prague
Capabilities Commitment.
EADS has identified the management of systems and services as another importantfield of development aimed at supporting its programme leadership. As well as
pursuing platform in-fleet services such as the System Support Centre of Eurofighter,the Company will develop further in outsourced services. The successes achievedin the Paradigm (secure communication service through satellites) and FSTA (Future
Strategic Tanker Aircraft) campaigns, illustrate the potential of the Company in thisnew area of service solutions.

1

Command, Control, Communications, Intelligence, Surveillance and Reconnaissance

06 EADS 2003 To new levels

Galileo communications satellite

EADS 2003 To new levels 07

building competitive
advantage through sharing
excellence and innovation

08 EADS 2003 To new levels

Eurofighter

Innovation is the lifeblood of our business.
In our industry, technological innovation is a driving growth factor and a competitive
discriminator of crucial importance. Future key technologies such as robotics,
real-time networks or composite materials build the backbone of tomorrow’s
market leadership.
The success of Airbus, built on a string of bold innovations, illustrates the value toour customers of this approach. We invest heavily in research and technology, withas much as 17% of revenues spent in 2003; into materials, designs and manufacturing
processes, to strengthen our offering.
But to leverage this technology, we are pioneering new ways of working in partnershipand sharing this resource.
The combination of know-how and other resources from different divisions, andthe combination of civil and military products enables the Company to seek new
businesses such as military transport and tanker aircraft.
Group-wide efforts in the area of Research and Technology and cooperation withoutside research partners allow for increased competitiveness and cost efficiency
of EADS products. Innovation is about better serving the needs of our customers.
The challenges of the future? We can afford to welcome them with confidence.

EADS 2003 To new levels 09

Left: Manfred Bischoff
ChairmanRight: Arnaud Lagardère
Chairman

10 EADS 2003 Letter from the Chairmen

Letter from the Chairmen

Dear EADS shareholders,
We are happy to report that during 2003, EADS substantially strengthened
its position in the global aerospace and defence industry.
As this annual report will show, your Group has further strengthened its position
as a major player in its main markets, with excellent products, leadership positions
in many key sectors, strong partnerships with customers, collaborators and suppliers
and an increasingly global reach. We have been able to build further on our assets
as a multi-national company, strengthening our areas of activity by continuously
expanding beyond our home markets. We note with great interest that EADS
seems to serve now as a model of a highly successful cross-national company,in and even outside Europe, with a truly international business portfolio.
The strength of EADS is innovation. Airbus leads the commercial aircraft market andis defining a new standard for passenger aircraft with the A380. In 2003, which wasanother difficult year for the airline industry, Airbus has successfully managed to
become number one in aircraft deliveries – a breakthrough that testifies to the vigour
of EADS in commercial aircraft business. In the defence sector we are a leader in many
segments and are successfully widening our portfolio with tanker and transport aircraftin addition to our programmes in missiles, satellites, space-systems, and air defence –offering the full spectrum of capabilities.
In 2003 the Board of Directors dedicated much of its time and attention to reviewing
and ensuring successful strategy implementation with a focus on expanding into
new markets and on widening the product range, for example in ‘system-of-systems’capabilities. The Board has intensively discussed and examined the situation in those
Divisions that have not yet reached their performance objectives and has made thenecessary decisions on reorganisation and restructuring required for the achievementof defined profitability targets. Along those lines the new reorganisation of the Defence
and Security Systems Division, integrating the Military Aircraft business was approvedby the Board with the aim of bundling and focusing our defence activities and bolstering
our systems approach.
An important area of focus for the Board of Directors was the competitive situationof EADS in the international aerospace industry. We have looked into different waysof developing and positioning your Group for the future in order to participate
proactively in shaping our industry. For the Board this meant both, reviewing theopportunities to develop EADS from within, building on its strong existing capabilities,
and verifying possible scenarios for external growth and development of the structureof EADS at the European and transatlantic levels.

EADS 2003 Letter from the Chairmen 11

Letter from the Chairmen

Throughout 2003, the Board has closely monitored and reviewed major programmessuch as the progress on the Airbus A380, on the A400M transport aircraft and the Aster
missile programme. Regarding personnel and human resources issues at EADS, theBoard has dealt with management qualification as well as with the need to attract, retainand develop our high-potential employees in order to ensure the future quality of EADS’management and its multi-national leadership structure. Finally, financial performanceand structure, hedging strategy, funding policy and accounting principles were debatedand decided among the Board members in a collaborative and trustful way.
Despite the still challenging business environment, the 2003 results of EADS haveonce again surpassed its targets. With an EBIT of €1.54 billion, an impressive orderbook (which grew substantially last year), and a significant net cash position, theGroup has shown that EADS’ strategy and its careful execution are on track, resulting
in increased financial strength and profitability.
The year 2003 was also in many respects a significant one for the Group’s shareholders.
Our share price clearly outperformed major indices to close at €18.85 on
31st December 2003; a 91% increase compared to December 2002. This made us thesecond-best performer in the CAC 40 and one of the strongest performers in the world
aerospace and defence sector. In view of the Group’s financial strength and excellent
prospects, the Board will be recommending payment of a dividend of €0.40 per share,
an increase of €0.10 from the previous year.
We are no less determined to set a standard of excellence in the fields of corporate
governance and corporate social responsibility. We are committed to meet and evenexceed social, legal and statutory requirements to ensure transparent management
and reporting. Given the need and the clear mandate for greater transparency andopenness, the Board has reviewed and renewed our set of corporate governancepractices in 2003 to comply with corporate governance codes of our European
home countries. Furthermore, we fully support management’s undertaking to shareexamples of best practice across the Group in order to further enhance EADS’
standard in the fields of corporate governance as well as social responsibility.

A400M

12 EADS 2003 Letter from the Chairmen

Airbus A340-600

The Board of Directors appreciates that the Management of EADS has succeededin establishing your company as a credible and reliable enterprise, not only for its
customers, suppliers and employees, but in the eyes of the public as well. Our thanks
and congratulations are due to everyone in the Group who has contributed to thisresult, which will be developed and further enhanced for the benefit of all EADS
stakeholders, according to the highest standards of corporate governance.
We enter 2004 with a strong financial, commercial and technological base, and witha clear leadership strategy for the future. When the inevitable market upturn comes
after years of depressed conditions in world economies, we shall be exceptionallywell-positioned to fully benefit from this solid and promising base. This will allow us
to continue creating substantial value for our shareholders and furthermore contributeto the well-being of all our stakeholders.

Manfred Bischoff Chairman

Arnaud Lagardère Chairman

EADS 2003 Letter from the Chairmen 13

Left: Philippe Camus
Chief Executive Officer
A380 production line

14 EADS 2003 Interview with the Chief Executive Officers

Right: Rainer Hertrich
Chief Executive Officer

Interview with the Chief Executive Officers

A successful 2003? Confident forecasts for 2004? What’s the story behind thefigures? We put some of the key questions on the EADS Group’s progress andprospects to Philippe Camus and Rainer Hertrich.
Why are you pleased with the resultsfor 2003?

There are a number of very good reasons. Clearly, we lead the commercial aviation
market. Airbus has in fact for the first time beaten the competition, delivery-wise; andthis success will be a lasting one, thanks to the current Airbus order book. Besides,
we have turned into the global number two defence player in terms of order book.
We are increasingly accredited by the more exacting defence customers who value
our complete range of competitive and young products. Overall, the Group orderintake increased from €31 billion in 2002 to €61.2 billion in 2003, with half of these
new orders emanating from the defence business.
In short, we have passed a clear milestone on the road mapped out for us by the
Board. We have achieved great progress in balancing our portfolio among the defence
and commercial businesses. Also, we have enhanced our leadership in all markets.

Can the defence businesses live
up to your high expectations?

Yes, we are convinced they can. First, our defence products are already achieving
huge successes – like the Tiger and NH90 military helicopter selection by Spainand Greece, and the Austrian purchase of the Eurofighter. On the Space side,
we won the £2.5 billion Skynet 5 military satellite contract from the UK. There wasalso MBDA’s great achievement in winning orders from France, Italy and the UK
for the Aster missile. And the largest ever defence contract came from the A400M
military transport aircraft that was ordered by eight nations and will be worth€19.7 billion. Second, to support the strategic move towards defence growth, we havereorganised our defence activities, and created a new Defence and Security Division.

Surely you had some concerns
in 2003?

The conflict in the Gulf and the SARS epidemic weighed down the financial situationof the airlines and we had to monitor our delivery planning carefully throughout theyear. Apart from this, the weakness of the dollar could be an area of concern if it wereto remain very weak for a very long time. In fact, there is no medium-term impact on
our results because we actively hedged our currency exposures and will continue to do
so in 2004, of course. Beyond our hedging horizon we are expecting to get the benefit
from the productivity measures that we are currently implementing.

How did all this affect the financial
outcome?

For the third year running, we’ve exceeded our financial targets, with an EBIT figureof €1.5 billion against a projected €1.4 billion. We have moved forward significantly,
with, as anticipated, all divisions except Space being profitable. We generated more cashthan expected, too. And we are looking forward to making even more progress in 2004.
What was especially encouraging, was that we achieved this while keeping up ourinvestment in programmes, like the Airbus A380. That’s what we promised; that’s what
we delivered. This is another demonstration of our high standard of financial discipline.

EADS 2003 Interview with the Chief Executive Officers 15

Interview with the Chief Executive Officers

What exactly is the situationin Space?

The Division recorded heavy losses for the third year in a row due to a depressedSpace market and restructuring costs. However, we purchased BAE Systems’ 25%
shareholding in EADS Astrium and we’ve now reorganised the Division to lay thefoundations for the turnaround in 2004. We’re also laying emphasis on efficiencyof all the plants, strict programme control, cost savings and improved procurement
functions, all of which are contributing to the turnaround.

What’s on the agenda for thiscurrent year?

Regarding business acquisition, we have several key programmes that are expected
to be booked. One of them is for example the FSTA programme for the UK Royal Air
Force, where the Air Tanker team in which we are key partner, is in final negotiations;
we will achieve a contract fulfilling our customers’ needs and thereby successfully
expanding our businesses.
We have also some important industrial milestones coming up in 2004. The A400M
programme will pick up speed, and we’re planning the first assembly of the A380
in Toulouse. We’ll also be delivering the first units of the Tiger and NH90 helicopters,
and the Ariane 5–ten tonnes version launcher should resume flights.
Our strategy is to build on our strong competitive position in commercial aircraft,
helicopters, missiles and commercial launchers and to significantly grow our defence
activities. We shall work at developing EADS’ capabilities in the fields of ‘system-ofsystems’ and services to support its programme leadership. We also want to expand
our global reach through industrial engagement in the US, Asian and Russian markets.
And we will keep on building on our broad portfolio of activities and technologies,
combining civil and military products in order to lead the market with innovative andcost-competitive products.

Eurofighter

16 EADS 2003 Interview with the Chief Executive Officers

And how do you see 2004 fromthe financial point of view?

The immediate outlook is very encouraging. We’re targeting an increase in EBIT to€1.8 billion for 2004, largely due to the defence programmes’ ramp up and the Space
turnaround: this could be slightly offset by a possible decline in the contribution from
Airbus arising from the continuing softness of the market. Defence programmes,
especially missiles and helicopters, will increase deliveries, while at the same time wewill be implementing efficiency plans in some defence businesses. Looking further
ahead, we expect growth in all sectors – fuelled by the upturn in commercial aviation,
benefits from productivity and cost savings, and an exceptionally strong order bookin all businesses.

Are there any encouraging signs
in the year so far?

Yes, there are! In the past few months, many airlines have reported strong signs of air
traffic recovery, supporting the International Civil Aviation Organisation forecastof about 4% air traffic growth in 2004. For defence, we are progressing with important
programmes like the GBAD demonstration in the UK, or with the FSTA following ourdown-selection in January 2004. These programmes and others will help us expand
our defence business and enhance our overall competitive position in coming years.

Given the state of the world
economy, is that a rash prediction?

You know, it is our mission to prepare the Group to face uncertainty. We have theflexibility, strength and resilience to surmount upcoming issues and to achieve ourgoals; not least, thanks to the quality, skills and commitment of our employees, who
are probably among the strongest teams in the industry today. Let’s remember thatthey’ve managed to deliver solid returns even in the weak markets of recent years,
while maintaining important investment programmes for the future. We’d like toexpress our admiration and appreciation of what they’ve done. We look forward
to working with them in 2004.

“We are increasingly known to theworld as a company that does what
it promises to do. That’s a pricelessasset for all of us.”“Excellent products, a clear strategy
and the best people in the business.
Can you think of a better formulafor success in tomorrow’s world?”

Philippe Camus Chief Executive Officer

Rainer Hertrich Chief Executive Officer

EADS 2003 Interview with the Chief Executive Officers 17

Executive Committee
The Chief Executive Officers (CEOs) are supported in their operational tasks by an
Executive Committee made up of the Heads of each operational Division, the Head of
EADS North America and of the Heads of the four major functions of the Company.

From left to right Hans Peter Ring, Philippe Camus, Rainer Hertrich, Jussi Itävuori.

Eurocopter production line

Ralph D. Crosby Jr. Chairman and CEO of EADS North America
Previously, Mr. Crosby was President of the Integrated Systems sector at
Northrop Grumman Corporation, Corporate Vice President and General Managerof the company’s Commercial Aircraft Division and of the B-2 Division. He hasa Bachelor of Science degree from the US Military Academy, and master’s degrees
in international relations from the Graduate Institute of International Studies
in Geneva and in public administration from Harvard University.

Noël Forgeard Head of Airbus Division, President and CEO of Airbus
Mr. Forgeard joined Matra in 1987 as Senior Vice President of the Defence andSpace activities. In 1992, he was appointed Managing Director of LagardèreGroup and Chief Executive Officer of Matra Hautes Technologies. He joined
Airbus Industrie as Managing Director in 1998 and became the first President
and Chief Executive Officer of the Airbus integrated company in 2001.
He graduated from the Ecole Polytechnique and the Ecole des Mines in Paris.

Francisco Fernández Sáinz Head of Military Transport Aircraft Division
Previously General Manager of Airbus España, Mr. Fernández-Sáinz joined
CASA in 1971 as a design engineer and occupied positions as ProductEngineering Manager (1975), Project Manager (1979), Engineering Development
Director of the Technical Directorate (1982), Vice President of Engineering(1984) and Executive Vice President Programmes (1997). He is a graduate of
ICADE (Master in Business Administration) and a Senior Aeronautical Engineer.

Gustav Humbert Airbus Chief Operating Officer
Previously a member of the Dasa Management Board responsible for theCommercial Aircraft Division, Mr. Humbert joined Messerschmitt-Bölkow-Blohm(MBB) in 1980, and became President and CEO of Daimler-Benz Aerospace
Airbus GmbH in 1994. He holds a degree in mechanical engineering andproduction technology from Hanover Technical University as well as a PhD
in engineering from the University of Hanover’s School of Machinery.

From left to right Thomas Enders, Jean-Louis Gergorin, François Auque, Dietrich Russell and Jean-Paul Gut.

18 EADS 2003 Executive Committee

Ariane 5 tank>< Philippe Camus Chief Executive Officer
Mr. Camus was previously Chairman of the Management Board of Aerospatiale
Matra. In 1982, he joined the general management of the Lagardère Group
where he was Chairman of the Finance Committee of the Matra Group until
1992. He was appointed Chairman and Managing Director of the FinanceCommittee of the Lagardère Group in 1993, and Managing Partner of Lagardère
in 1998. Mr. Camus is a former student of the École Normale Supérieure de Paris,an agrégé in physical sciences and actuarial science and a graduate of theInstitut d’Études Politiques de Paris (IEP).

Rainer Hertrich Chief Executive Officer
Mr. Hertrich started his career in 1977 at Messerschmitt-Bölkow-Blohm (MBB).
In 1994 he became Senior Vice President for Corporate Controlling of Deutsche
Aerospace AG (Dasa). In 1996, he was appointed Head of Dasa’s Aero Engine
Business Unit, and President and CEO of Dasa’s subsidiary MTU. In 2000 hebecame President and CEO of DaimlerChrysler Aerospace. At the end of 2001,
he was elected President of BDLI, the German Aerospace Industry Association.
Mr. Hertrich studied business administration at the Technical University of Berlin
and the University of Nuremberg, graduating as a Bachelor of Commerce.

Hans Peter Ring Chief Financial Officer
Holding a degree in business administration, Mr. Ring began his career at MBB
in 1977. In 1987 he was appointed Head of Controlling of the Missile business.
Subsequently, he was named Head of Controlling of the Aviation and Defence
Division of Dasa. From 1992–1995, he was CFO and Member of the Board at
Dornier Luftfahrt, a Dasa subsidiary. In 1996, he was appointed Senior Vice
President of Controlling of Dasa and later, of EADS. In 2002, he was named CFO.

Jussi Itävuori Head of Human Resources
Mr. Itävuori joined EADS in September 2001. Previously, he had worked forKone Corporation since 1982 and was appointed in 1989 as Head of Human
Resources and a member of the Executive Committee of Kone Elevators. In 1995
he was appointed member of the Executive Committee and Head of Human
Resources of Kone Corporation. He served in the Finnish Air Force as a pilot andofficer. He earned his Master’s degree from the Vaasa School of Economics.

From left to right Ralph D. Crosby Jr, Francisco Fernández Sáinz, Noël Forgeard and Gustav Humbert.

< Thomas Enders Head of Defence and Security Systems Division
Mr. Enders joined MBB/Dasa in 1991, after various posts in international
research institutes, the German Parliament and the Planning Staff of the German
Minister of Defence. After several years in the company’s marketing sector,
he became Corporate Secretary of Dasa in 1995. From 1996–2000 he was incharge of Corporate Strategy & Technology. Mr. Enders holds degrees fromthe University of Bonn and from UCLA, California.
Jean-Louis Gergorin Head of Strategic Coordination
Mr. Gergorin began his career with the French Government, becoming Headof Policy Planning at the French Foreign Ministry and a member of the French
German Committee on Security and Defence. He then joined the private sector,
holding senior strategic positions at Matra, Lagardère and Aerospatiale Matra. He
graduated from the Ecole Polytechnique and the Ecole Nationale d’Administration(ENA) in Paris and is an alumnus of the Stanford Executive Programme.
François Auque Head of Space Division
Mr. Auque joined Aerospatiale as Chief Financial Officer in 1991, after a careerin the Suez Group and the French Cour des Comptes. He was successively
Executive Vice President Finance and Strategy of Aerospatiale, CFO andGroup Managing Director for satellites and member of the Management

Multi-Role Tanker Transport Aircraft (MRTT) production

Board of Aerospatiale Matra. He graduated from Ecole des Hautes Etudes
Commerciales (HEC), from Ecole Nationale d’Administration (ENA), andfrom Institut d’Etudes Politiques de Paris (IEP).
Dietrich Russell1 Head of Aeronautics Division
Former Chief Operating Officer of Airbus Industrie. Mr. Russell joined Dasa
in 1995 where he was appointed Member of the Board of Management
responsible for the Aeronautics Division. Mr. Russell graduated from the
Departments of Economics and Metallurgical Engineering and holds a Doctorate
in engineering from the Technical University RWTH of Aachen. He worked for
24 years for Mannesmann before joining Dasa.
Jean-Paul Gut Head of EADS International
Prior to the formation of EADS, Mr. Gut was Executive Chairman of Aerospatiale
Matra, Lagardère International and Group Managing Director of Defence andSpace Transport at Aerospatiale Matra. He was previously Managing Directorof the Lagardère Group Board of Management, responsible for International
Operations and the High Technology sector. Mr. Gut graduated from theInstitut d’Etudes Politiques de Paris (IEP), with a Master’s degree in economics.
1

Dietrich Russell retiring as of 30th April 2004

EADS 2003 Executive Committee 19

Key measures in 2003

Revenues
Group revenues of €30.1 billion
slightly exceeded the forecast of€29–€30 billion and were aheadof the €29.9 billion achievedin 2002. At constant US$
exchange rates, revenues
would have increased by 6%.
Growth was mainly driven
by an 18% rise in the defence
businesses, which combined
revenues increased from
€6 billion to €7.1 billion.

EBIT1 margin pre-R&D
EBIT1 margin pre-R&D was
sustained at about 12%
despite the Space Division
losses. This was thanks tostrong growth in the defence
businesses and better than
expected performanceby Airbus.

EBIT1
At €1.54 billion, EBIT1 was
well ahead of the target of€1.4 billion and 8% ahead of 2002.
It benefited from a 40% growthin the Defence and Security
Systems Division, with strong
contributions from Military
Aircraft and MBDA plus theturnaround of the MilitaryTransport Aircraft Division
and a 21% increase at the
Aeronautics Division following
the increased profitabilityof Eurocopter. The Space
Division recorded, as expected,
EBIT1 of (€400) million after
a restructuring charge of€288 million. EBIT1 also
included a higher contribution
from the 46.03% shareholdingin Dassault Aviation.

Revenues (€m)

EBIT1 margin pre-R&D (%)

EBIT1 (€m)

Internally financed
R&D (€m)

Net income (€m)

2003

30,133

2003

12.4

2003

1,543

2003

2,189

2003

152

2002

29,901

2002

11.8

2002

1,426

2002

2,096

2002

–299

2001

30,798

2001

11.5

2001

1,694

2001

1,841

2001

1,372

Revenue breakdownby markets (%)

Free cash flow2 (€m)

Net cash position (€m)

Order intake (€bn)

2003 24

76

2003

2,143

2003

2003

20

80

2002

2001 20

80

2001

2002

Defence
Civil

Revenue breakdownby markets
2003 was a landmark for
defence. EADS is turning
the outstanding defence orderbook into real revenue growth.
The 2003 achievement is a
first milestone in the strategy
to rebalance EADS portfolioof activities towards defence.

1

Net income
Net income was €152 million(2002: €(299) million). Goodwill
amortisation has been regularly
recorded in the Group’s results
Internally financed R&D
since 2000. 2002 had been
Research & Development
affected by a goodwill
expenditure increased, as
impairment for the Spaceplanned, to €2.2 billion (2002: assets. Thanks to improved€2.1 billion) representing 7% of EBIT1, net income before
EADS revenues. Half of this was goodwill amortisation andaccounted for by expenditure
exceptionals is up 10% at
on the A380, of which the first €769 million or €0.96 perdeliveries are planned for 2006. share (2002: €696 million).

3,105

578

3

2002

2,370

2002

867

20013

2,679

2001

2 pre-customer financing

3 Restated to be comparable with 2003

Free cash flow
Free cash flow before customer
financing was boosted from
€0.6 billion to €2.1 billion,
much better than expectations.
This was achieved thanks tobetter hedge rates following the
expiry of some unfavourable oldhedges and thanks to higher
level of customer advancepayments. This performance
included the spendings on
the A380 programme andinitial investment in the
Paradigm project.

Net cash position
The net cash position at
the year end increased from
€2.4 billion to €3.1 billion
on a comparable basis thanks
to strong free cash flow andfinancial discipline. Commercial
aviation customer financing
cash outlay remained undercontrol at €1.1 billion (2002:€0.9 billion), despite challenging
conditions for the airlines.
The net cash position
figure is reported after
netting €1.1 billion defeased
deposit with corresponding
financial liabilities.

31
7

2003

46

179.280

31.0092002

22168.339

60.2082001 18183.256

61.150of which defence (abn),
not available for 2001

Order intake
Order intake doubled to€61.2 billion, twice the level ofrevenues. Defence businesses
contributed to half of thisorder intake level. The greatest
successes were achieved by
Airbus, with net orders of 254
aircraft (including 34 A380s)
and by military businesses withmajor contracts like the Skynet 5
contract for communication
services with UK MoD(£2.5 billion), the militarytransport aircraft A400M(€19.7 billion) and a major
contract for 1,400 missiles won
by an MBDA-led consortium.

Earnings Before Interest and Taxes, pre-goodwill amortisation and exceptionals;
EADS uses EBIT pre-goodwill amortisation and exceptionals as a key indicator of its economic performance

20 EADS 2003 Key measures in 2003

Order book (€bn)

of which defence order book (abn)Order bookThe order book increased from
€168.3 billion to €179.3 billion.
At constant exchange rates
the increase would have been
approximately 20%. The defence
order book doubled to some€46 billion, supporting theobjective of growing defence
revenues by more than 50%
between 2002 and 2005.

Revenues in
defence activities
Combined defence revenues
at EADS amounted in 2003
to €7.1 billion. Existing orderbook comforts managementtarget to increase defence
revenues up to €10 billion in
the next years. Growth willbe specifically driven by
the A400M programme
development, and by
missiles, helicopters andfighter aircraft deliveries.

Revenue breakdownby geography
EADS has a global reach.
It ranks number 1 in Europe
and is the largest European
company on US markets.
Management foresees an
expansion of global reachand especially fast growthfrom Asia.

Revenues in defence activities (%)

Revenue breakdown by geography (%)•Missiles 22•Military Aircraft 20•Eurocopter 19•Defence Electronics,

9
22

9

21
20

10

Communication Systems,
Services 21•Space 9•Military Transport Aircraft 9

4

13
46

•Europe 46•North America 27•Asia/Pacific 13•Middle East 10•Rest of the world 427

19

Employees by country (%)

Employees by business sector (at 2003 year end)

Airbus49,520France39.3

Military Transport Aircraft

3,428

Germany

37.7

Aeronautics

18,031

Spain

7.4

Defence & Security Systems

24,844

UK

12.0

Space

11,991Italy

0.6

HQ & Research Centre

1,321

US

2.3

Total EADS: 109,135 people

Rest of world

0.7

Employees bybusiness sector
EADS headcount has increasedby nearly 5,200 people since
2002, of which 3,100 at Airbus,
namely to work on A380
and A400M. Moreover, theconsolidation of EADS
Astrium in 2003 resulted in
an additional 2,279 employees
for the Space Division, partially
offset by the current
restructuring. The Military
Aircraft Business Unit
(including namely Eurofighter)
was moved from Aeronautics
to Defence and Security
Systems in September 2003.
The Headquarters andResearch Centre sectors
have included employees
of EADS North America
since December 2003.

Employees by country
EADS employees are primarily
located in the four homecountries: France, Germany,
Spain and UK. In the US, EADS
employs directly over 2,000
people and increased in 2003
its industrial footprint by
the launch of the buildingof a new Eurocopter plant.

EADS 2003 Key measures in 2003 21

The world in which we operate

The success of EADS to date has been built on our ability to offer excellent
products – but also on our responsiveness to highly diverse market conditions
and economic environments. This section of the report is designed to give thereader a brief overview of the current market situation and an insight into theforthcoming challenges for EADS.
Commercial aviation – a long-term growth market with cyclical characteristics
The current situation
2003 began badly for the commercial sector, with public confidence hard hit by theprospect of war in Iraq and later by the SARS epidemic; according to the International
Civil Aviation Organisation (ICAO) global air traffic has almost caught up with 2002
levels at the end of 2003 – but 2003 average was still 2% below 2000 levels. This
figure conceals wide regional and sectorial disparities, and many airlines are stillin bad financial shape, with soft growth in air traffic and low yields.
A330-200 MyTravel

US major airlines’ traffic recovery is stalling at 10% below 2000 levels but, thanks tosubstantial government contributions to increased security and insurance costs, there
are some slightly positive financial signs. Major Asian airlines are recovering strongly
from the SARS scare, back to 2000 monthly levels. Passenger air traffic at large
European airlines is now above 2000 monthly levels, but still inferior on a yearly basis.
On the other hand, low-cost airlines in the US and Europe have established a viable
and successful alternative business model. These precursors are now being followedby many new Asian start-up airlines. Low-cost airlines are concentrating on point-topoint short to medium haul routes and are operating large fleets of mostly new aircraft,
all of the same type, optimised to serve selected routes. They are accounting for
approximately 30% of net orders made in 2003. Defined by their low fares, low-costcarriers are taking market share from the major airlines but are also reaching a new
segment of the population which did not fly before for economic reasons. In general,
air traffic is multiplied by a factor of two to three over a short period on most routes,
following initiation of service by a low-cost airline.
Parked aircraft
One response of airlines to a downturn is naturally to reduce capacity. The numberof parked aircraft worldwide currently stands at about 2,000 – of which approximately
500 belong to newer ‘in production’ types, that should come back into passenger
service. The remainder will be either converted into freighters or altogether taken outof service. As air traffic is catching up, parked aircraft are slowly being put back into
service. This is being shown by the slight decrease in the number of parked aircraft.

22 EADS 2003 The world in which we operateWorld passenger traffic recovery
US airlines

European airlines

Asian airlines% change oversame month 2000
30.0
20.0
10.0
0
-10.0
-20.0
-30.0
-40.0
-50.0
Jan

Mar

May

Jul
2001

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

2002

Jul

Sep

Dec

2003

Source: American Transport Association, Association of Asia Pacific Airlines, Association of European Airlines

Leasing companies
Leasing has become a major tool within fleet management worldwide. Orders fromleasing companies make up about one third of the order book and planned deliveries
over the next two years at both Airbus and Boeing. Leasing companies – more robust
than they were in the last downturn – have established their position in the commercial
aerospace value chain. They have become a full partner of both aircraft manufacturer
and airline. For airlines with financial difficulties, leasing companies play an importantrole in making new aircraft deliveries possible. Furthermore, the huge order book of
operating leasers, offers a substantial degree of flexibility to airlines’ operation in anenvironment with short-term uncertainties.

Charles de Gaulle Airport in Paris

Looking ahead
The International Civil Aviation Organisation is forecasting about 4% increase in traffic(in Revenue Passenger Kilometers) for 2004. Airlines, furthermore, will have tocontinuously monitor their operations and control their cost base in order to survive
in a dynamic environment with a high level of competition and pressure on yields.
This implies that the most efficient, flexible and cost-effective aircraft will best meetmarket demands.
World air passenger traffic is forecast to grow at approximately 5% a year on averageover the long term. Around this trend, however, the market is cyclical as it is bothstrongly correlated to the general economic situation and highly exposed to regional
conflicts and new threats such as epidemics and terrorist attacks.

EADS 2003 The world in which we operate 23

The world in which we operate

Defence – market imbalances
The US dominates defence spending, with an annual budget dedicated to procurement
and research of €110 billion, which is rising. Europe spends only €45 billion, thoughmodernisation and improved services offer some upside potential. The rest of the world
spends about €95 billion; this, too, is growing, because of local conflicts and the needto replace obsolescent equipment. Another significant asymmetry deserves notice:
European industry has only 0.3% of the US market, while the US industry has captured
20% of European defence spending, reflecting the openness and the fragmentationof the European defence market. In export markets though, US and EU industries
have roughly equal market shares.
Aster missile

Historically, European procurement programmes have not been integrated strongly
enough. A first step was already achieved with the OCCAR creation. However, theneed for more harmonised action to align defence investment and specification with
future common objectives has now been recognised, and the European Council
has planned to set up the European Defence Agency as a further and particularly
important step towards greater integration of defence and security policies.
Procurement trends
The largest shares of both European and US defence budgets belong to air combat,
missiles and mobility. The trend markedly favours Large System Integration (LSI) andNetwork Enabled Capabilities providing information dominance, minimal response
times, precision strike capabilities and interoperability between Air, Naval, Groundand Space Assets. Examples of current projects include US Ballistic Missiles Defence(BMD), Deepwater (US Homeland Security), UK’s Ground Based Air Defence(GBAD), NATO’s Alliance Ground Surveillance (AGS) and the Medium Extended Air
Defence (Meads). The industry is currently repositioning itself to ensure the required
system architecture and design and in parallel to provide underlying technology inthe field of subsystems and electronics – such as C4ISR.
Another important trend is to bundle hardware and service products, like the UK’s
Future Strategic Tanker Aircraft (related support will be outsourced to industry) andthe purchase from Paradigm of a secure satellite communications service. The UK
has pioneered this type of solution, which can materially reduce our customers’
defence budgets while maximising efficiency. Similar arrangements are expected tospread rapidly to continental Europe with significant contract-volumes and durations(10–20 years). The challenge faced by the industry is to meet customer requirements
while in parallel mastering related risk assessment, long-term project management
and legal structuring.
Future Strategic Tanker Aircraft (FSTA)

24 EADS 2003 The world in which we operate

Space – commercial recovery at the heart of advanced defence systems
Commercial telecommunications satellites
In 2003, 19 of these satellites were ordered around the world; a substantial increaseover 2002’s six, but well below the annual average of 25 for the seven years to 2002.
Orders are expected to stabilise at around 15–20 a year, mainly replacing satellites –already in orbit – that have reached the end of their service life. This replacement
market represents $8 billion over the next five years, excluding launch services.
The advance of High Definition TV (HDTV) should provide further growth opportunities,
limited only by the continued consolidation of operators.

Metop satellite

Space in defence
Space is a key asset to offer modern defence systems. Examples include satellites
designed for highly secure telecommunications, early warning systems, intelligencegathering (imaging and signals), navigation and exo-atmospheric interceptors forBallistic Missile Defence.
The European budget is nearly €1 billion with the US budget being significantly bigger.
Both institutional markets are substantially captive, however export opportunities
exist. European programmes include Skynet 5 (UK), the secure telecom programme
for Germany, the French military satellites Helios and Syracuse, as well as the Pleiades
imaging intelligence system (France) and a number of demonstrator programmessuch as for early warning and laser links technologies. These demonstrators andother development programmes may open the way to the deployment of larger
operational assets in Europe.

Skynet 5

Europe in space
A comprehensive initiative led by the European Commission and the European Space
Agency has concluded that space activity has a key role to play in environmental
management and protection, higher homeland security and – via space exploration –the acquisition of knowledge.
Galileo, the €3 billion+ satellite navigation programme has entered a new phase witha request for proposals to deploy and operate the system through a concessionaire.
EADS expects to participate as the provider of space hardware, and has also beenshort-listed for the mandate as concessionaire.
The European Guaranteed Access to Space programme (EGAS) has been approvedby ESA member states. Its aim is to counterbalance the downturn in the commercial
launcher business and to safeguard an independent European launch capacity forheavy payloads using Ariane 5.
The International Space Station
The possible two-year delay of the International Space Station (ISS) final assembly
sequence caused by the Columbia shuttle accident impacts the European contribution
as well (Columbus module delivery and operations). The ESA is holding talks with
the industry, with a view to managing this interim period.

EADS 2003 The world in which we operate 25

Our organisational structure
EADS is organised into five major Divisions. Each is closely aligned to the specificneeds of customers in its sector; at the same time, the integration of the Group
allows for the maximum generation of value from information exchange, technology
sharing and working practice synergies to enhance each Division’s product andservice offering.
Headquarters Structure
EADS CEOs

Group Functions

Finance
General Secretary
Laurence Dors

Hans Peter Ring

Strategic
Coordination
Corporate Communications
Christian Poppe

Jean-Louis
Gergorin
Philippe Camus,
Rainer Hertrich

EADSInternational
Legal Affairs
Diane de Saint Victor1

Jean-Paul Gut

Human
Resources
Purchasing
Hans Mundt

Jussi Itävuori

EADS North
America

Ralph D.
Crosby Jr.

Executive Committee Members

26 EADS 2003 Our organisational structure

Political Affairs
France: Dennis Verret
Germany: Wolf-Peter Denker
Spain: Carlos Grandal

1

As of 1st May 2004

Operational Structure
DivisionsOperating Companies

AirbusNoëlForgeard (CEO)Gustav
Humbert (COO)

Military Transport
AircraftFranciscoFernández Sáinz

Eurocopter
Fabrice BrégierEADS Sogerma Services
Yves Richard

Elbe Flugzeugwerke
Horst Emker

ATR
Jean-Michel Léonard

Military Aircraft
Johann Heitzmann1

Defence Electronics
Bernhard Gerwert1

EADS/LFK
Werner Kaltenegger

Thomas Enders

Defence andCommunication Systems
Stefan Zoller (CEO)Patrick Jourdan (COO)

MBDA
Marwan Lahoud

EADS Services
Jacques Vannier

Space

EADS Astrium
Antoine Bouvier

EADS SPACE
Transportation
Josef Kind (President)
Hervé Guillou (CEO)Aeronautics

Dietrich Russell2

Defence andSecurity Systems

François Auque

1
2

EADS Socata
Stéphane Mayer

Eurofighter1
Aloysius Rauen

EADS SPACE Services
Eric Béranger

As of 1st May 2004
Retiring as of 30th April 2004, responsibility taken over by Rainer Hertrich

EADS 2003 Our organisational structure 27

Operational review

Airbus(€m)

2003

2002 variation %Revenues
19,048 19,512
EBIT
1,353
1,361
Order intake 39,904 19,712
Order book 141,836 140,996
in number of aircraft 2003

Deliveries
Order book

305
1,454

–2
–1
102
1

2002 variation %

303
1,505

1
–3

Revenue breakdown by markets (%)
Civil 100

Airbus enjoyed a landmark year. The Airbus family, ranging from the 100-seatA318 to the 555-seat A380 now in production, emerged as the global market
leader. Airbus met its delivery targets, surpassing its competitor for the firsttime, and consolidated its position as ideally placed to benefit from theexpected upturn in passenger aviation.
The year in review
Operating in a market which was still difficult and uncertain due to the conflict in
Iraq, the SARS impact, the gloomy economic outlook, Airbus not only managed its
business effectively and prudently, but improved underlying profitability. EBIT margin
pre-R&D reached 16.5% in 2003.
The A380 programme which is now going through its investment peak, led Research andDevelopment (R&D) to a record level of 10% of revenues; After R&D, EBIT margin stoodat 7.1%. Cash has remained a management key focus and was sustained by continuing
customers’ advance payments. Also, customer financing additions – a key measure
for aircraft manufacturers in difficult markets – were carefully controlled, and customer
financing exposure net increase was limited to a modest 3% of annual revenues.
Commercial results
The year saw deliveries of 305 aircraft, slightly ahead both of the targeted 300 andof the 2002 figure of 303. This represented 52% of the global market.

Highlights 2003
• Airbus achieves world market leadership• A380 order book stands at 129 aircraft• Airbus linked to three major
defence projects

284 firm orders were won from 24 customers (four of them first-time Airbus buyers)
worth $32.8 billion at catalogue prices; net order intake for the year was 254 aircraft
after allowing for cancellations. At the end of December the order book stood at
1,454 aircraft, representing some five years of production at current levels.
Overall, this result underlines the leadership of Airbus in all segments of the market.
Airbus now offers a complete product range from 100 to 555 seats which is clearly
becoming the industry standard. Particularly remarkable is the 80%+ market shareof orders achieved by the A330/A340 in the wide-body, long-range sector.
A318
First deliveries of the A318, the smallest member of the Airbus single-aisle family, weremade to Frontier Airlines in the US and to Air France. The A318 seats 107 passengers
in a standard layout.
A340
Airbus made the first deliveries of the A340-500, the longest-range airliner ever built,
to Emirates, Qatar and Singapore Airlines. The aircraft enables them to open up new,very long distance no-stop routes such as Sydney–Dubai or Los Angeles–Singapore.
A380
Work progressed on the double-deck A380. Four customers – three of them placing
orders for the A380 for the first time – placed orders during the year, bringing the totalorder book up to 129 at the end of 2003 and confirming the market’s interest in thisrevolutionary aircraft.

A320 family

28 EADS 2003 Operational review

The programme currently involves more than 6,000 engineers at Airbus sites around theworld, linked by the proprietary Airbus Concurrent Engineering system. The 50-hectare
main assembly facility in Toulouse is being completed, and will join other sites in France,
Germany, Spain and the UK, in which production work is progressing as planned.
2003 saw the completion of a number of key subassemblies including the centre
wing box, the nose and forward fuselage sections and wings. The complex deliverynetwork – which includes sea, river, road and air transport links – was successfully
tested, and is scheduled to be used for the first time in the spring of 2004.
The work allocations for the project are substantially complete, with 98% of all
subcontracts by value placed by the year end. The list of suppliers includes companies
from many countries such as Japan, Korea, Malaysia and Australia.
BelugaMilitary programmes
Airbus is successfully applying its experience and resources in three major defence
programmes – the A400M military transport, the Multi-Role Tanker Transport Aircraft(MRTT – based on the A330-200 and A310-300) and the UK’s Future Strategic Tanker
Aircraft (FSTA – based on the A330-200). In these programmes, Airbus manufacturesand delivers ‘green aircraft’ to the EADS Military Transport Aircraft Division which isin charge of integration and commercialisation. These businesses give Airbus a strong
buffer against fluctuations in the civil market.
Airbus freighters
There are currently more than 150 freighters in service with cargo operators,
including FedEx, DHL, TNT, Air Hong Kong, UPS and other carriers. The A300F4-600R
is the industry’s best-selling cargo plane, and during 2003, six further orders wereplaced, bringing the total order book to 61.
Airbus has now moved into the very upper end of the freighter market with the launchof the A380-800F, based on the double-deck A380, which will carry a massive payloadof 150 tons. The aircraft can accommodate 71 large cargo pallets – over 30% more thanits nearest competitor. Customer interest has meant that for the first time ever, production
go-ahead could be given simultaneously for the passenger and freight versions of a new
aircraft. There are 17 firm orders outstanding for the A380-freighter from three customers,
with the first deliveries scheduled for 2008.

A380 production
The first A380 is to have its maiden
flight in early 2005. Production of major
components began in 2003, and the firstof the major subassemblies (the wingspar box) was delivered to Saint-Nazaire
in August. Airbus plants in France,
Germany, Spain, and the UK are all
involved, and are linked by the Airbus
Concurrent Engineering system. Thisrelies heavily on information technology
and allows the reduction of time spent in
the development cycle, the optimisationof production and the avoidance of many
teething problems – as well as savingsin non-recurrent costs. During 2003,
first trials were performed to verify thecompatibility of the trucks with the roadinfrastructure to Toulouse, where final
assembly will take place.

A380 cockpit production

EADS 2003 Operational review 29

Operational review

OutlookFor 2004, Airbus still foresees a fairly soft market, which could become steadierin the last part of the year and pick up in 2005. Airbus deliveries are planned to beclose to 300, compared to 305 in 2003. The total R&D budget for Airbus is expected
to remain about stable at approximately €1.8 billion, with more than half for the A380.
Included in this R&D budget are about €100 million development that will be capitalisedin compliance with the accounting rule on development costs (IAS38). Thanks to thelarge hedge portfolio put in place by the Group, Airbus is expected to be unaffected in
2004–2005 by the US Dollar’s volatility and weakness against the Euro. For subsequent
years, a significant cost-saving programme entitled ‘Route 06’ is designed to bolster
resistance to the effects of a sustained low level of the dollar.

Transport’s test of the main componentsof the A380

For the longer term, global air traffic is forecasted to grow at close to 5% p.a., and thecurrent surplus of aircraft is expected to unwind itself; Airbus – with a highly competitive
product range which is the most comprehensive and modern in the industry – isexceptionally well-positioned to benefit strongly from the market recovery expected to
begin in 2005, a year before the A380 enters service. At the same time, Airbus plans to
see its R&D budget progressively decreasing as the A380 gets closer to entry in service.

Military Transport Aircraft
(€m)

2003

Revenues
934
EBIT
30
Order intake 20,326
Order book 20,007

2002 variation %

524
–80
403
633

78
–
4,944
3,061

Revenue breakdown by markets (%)
Defence 91
Civil 9Highlights 2003
• €19.7 billion A400M contract signed• CN-235 ordered for
US Deepwater programme

2003 was the year of the signature of the A400M contract. First revenues
from this programme have triggered nearly two-fold revenue increase.
The Division returned to profit and achieved an EBIT of €30.1 million.
The year in review
We again confirmed our leadership in the field of medium military transport aircraft,while military derivatives of Airbus and aerostructures won a number of substantial
orders. Revenues almost doubled to €0.9 billion, and order intake amounted
to €20.3 billion, including €19.7 billion for the A400M military transport aircraft –the largest contract ever signed by EADS. The current order book is €20 billion,
representing a sound basis for the future development of the Division.
A400M
The 180 aircraft A400M contract signed at the end of May, 2003 by Airbus Military and
OCCAR (Organisation for Joint Armament Co-operation) representing France, Germany,
Spain, Turkey, Belgium, Luxemburg and the UK constitutes a major success for EADS.
This order will already generate approximately €2 billion of revenues over theperiod 2003–2005. This first domestic order opens sizeable perspectives, in particular
for the replacement of the important, but ageing fleet of C-130s presently in service.
The A400M export potential is estimated at over 200 aircraft during the next 20 years,
in a market segment where no competitor offers a comparable alternative, based on
the most advanced technologies. The final assembly line construction was started
in Seville, Spain.
CASA platforms and other derivatives
Deliveries of C-212, CN-235 and the new C-295 were made to the Spanish Ministry ofAgriculture, the air forces of France, Spain, Poland, Paraguay and Jordan, as well as to
Aero Contractors and L-3 of the US. Orders for these models were also received fromrepeat customers as well as from the Ecuador Navy and from Skytraders of Australia.
The first flight of the modernised version of the Spanish P-3 Orion took place in theyear. In the Deepwater programme, we reached a contract agreement for two CN-235s,
aircraft configuration, mission system development, logistic support development,
spares and GSE, rig and programme management.

30 EADS 2003 Operational review

Military derivatives
AirTanker, a consortium in which EADS holds a 40% share, submitted its bid for the
UK’s Future Strategic Tanker Aircraft programme. In January 2004, the UK MoD
selected AirTanker, as single bidder to negotiate the final contract. This strategic
breakthrough in a market, up to now monopolised by Boeing, was achieved thanks
to the EADS solution competitiveness. This excellence is built on an A330 derivative,a low-risk and cost effective platform that also offers a greater supply capacity.
This success in the UK lends credibility to EADS’ ability to penetrate the US market.

EADS CASA C-295

The year also saw the roll-out of the German Air Force Tanker. We won a contract for
two tanker kits for the Canadian Air Force and delivered two A310-300 VIP versions
to the Spanish MoD.
Aerostructures
2003 saw intensive development activities on the main new programmes: the A380
belly fairing and main landing gear doors. Other projects included A380 fan cowls, thehorizontal tail plane for the Dassault Falcon F7X, and the new design for A340-500/600
fan cowls.
Outlook2004 will be a key year, with the progress of large programmes such as the A400M
and US Deepwater programmes. These will foster revenues and profitability growthat the Division in 2004 and subsequent years. Besides, while we strive for the formal
signature of the expected FSTA contract – which will open doors to the global tanker
market – we expect consolidation in the P-3 modernisation programme for Brazil
in 2004. Longer term other opportunities for tanker aircraft include France,
Australia, as well as the US market that we continue to target.

Deepwater programme
The US Coast Guard selected andcontracted the EADS CASA CN-235
Maritime Patrol Aircraft as part of its
Deepwater programme, which also
involves other EADS divisions, with
upgrades for Eurocopter helicoptersand radars from the Defence andSecurity Systems Division. The wide
range of EADS capabilities makes it
one of the largest subcontractors in thiscomprehensive recapitalisation drive
to upgrade homeland security.
While positions on both sides of theAtlantic were the most contrasted
in 2003, the EADS team comprising
members from Madrid and Washington
was collaborating with Lockheed
Martin, the prime contractor of the
Deepwater programme, to obtain theapproval of government departments
and congressional support for this productfrom our Group’s facilities in Spain.
CN-235 aircraft

EADS 2003 Operational review 31

Operational review

Aeronautics(€m)

Revenues
EBIT
Order intake
Order book

2003

3,803
217
3,661
9,818

2002 variation %

3,834
180
4,095
10,162

Revenue breakdown by markets (%)
Defence 38
Civil 62

–1
20
–11
–3

The Aeronautics Division groups together a portfolio of civil and military aviationrelated businesses including helicopters, regional and general aviation aircraft andaircraft maintenance, repair and overhaul (MRO) service providers. One of theDivision’s members – Eurocopter – is the world leader in its sector.
The year in review
We have been laying the groundwork for the deliveries of our two new militaryhelicopters from 2004. At the same time, our civil aviation-related services activity
has demonstrated satisfactory resilience.
Overall, revenues were approximately stable and the continuing increase in profitabilityof our helicopter business has led the Aeronautics Division’s profitability to a newrecord – from 4.7% in 2002 to 5.7% in 2003.
During 2003, the Division earned consolidated revenues of €3.8 billion; a 1% decrease
compared to 2002, and equivalent to 12.6% of the Group’s total revenues.

Highlights 2003
• Eurocopter retains global
market leadership• German Air Force Tanker rolled out

Eurocopter
Once again, Eurocopter completed the year as the world market leader, with orders
worth €2.6 billion for 293 helicopters representing 45% of market in terms of units and
25% of value. It captured 53% by value of the civil and parapublic markets, and ranked
first in the US market. A strong recovery in the second half of the year suggests
healthy growth potential in 2004.
The most recent military helicopters of our range – Tiger combat helicopter andNH90 transport helicopter – have confirmed their competitivity on export markets.
Spain committed for 24 Tigers, and Greece signed a contract for 20 NH90s.
In the US, we teamed up with Lockheed Martin on the Deepwater programme,
and began construction of our new facility in Mississippi. In Spain, we started
to concentrate helicopter activities in a new entity, Eurocopter Espana.
Highlights of the year included the start of Tiger and EC120 assembly by Australian
Aerospace, and the signature of partnership agreements with AviChina and Hindustan
Aeronautics in India.
Regional Aircraft – ATR
We delivered nine new aircraft in 2003 – a lower number than expected, due tothe bankruptcy of a customer which had five on order. We won 10 new orders for
the ATR 42-500 from Air Tahiti (2), Guardia di Finanza (1) and the Czech CSA (7)and signed transactions for 43 used aircraft, with residual values holding up well.
We successfully developed our e-business site, added new services and saw
a significant increase in our worldwide support activities.
For 2004, we are targeting growth linked to services and to additional businessgenerated by the AeroChain e-marketplace we are developing with Embraer
for launch in the first quarter of 2004.

EC135 in a rescue mission

32 EADS 2003 Operational review

EADS Sogerma Services
In the face of a difficult market, EADS Sogerma Services maintained revenues and profits,
and doubled the number of aircraft for which total care is provided. New operationsin Miami and Lake Charles strengthened our position in the US. We won important
contracts for VIP modifications and cabin completions – a high added value market that
we are targeting. Line maintenance contracts were signed with Eurofly, Lauda Air and
Livingstone and new support contracts with SAS and FedEx.
After more than two years of consolidation and fierce competition in the MRO market,
we expect the first signs of recovery in 2004. We plan to increase our full-support
portfolio of business, to develop our military programmes, to consolidate our US
activities and to build a solid partnership in North Asia to take a major share of therapidly-growing Airbus MRO market in China.
EADS Socata
Major developments included the launch of the C2 version of the TBM 700, theshipping of the first A380 lower nose structure and nose landing gear doors andthe signing of a contract to become the subcontractor for the A400M sponsors.
We successfully launched a number of initiatives to cut costs and improve performance.

EFW freighter conversion

Freighter conversion – EFW
The conversion market remained depressed, and EFW does not anticipate recovery
in the short term. We did, however, deliver eight freighter conversions, 3,000 cockpit
security doors for retrofitting and 140,000 panels. The first A310-based Multi-Role
Tanker Transport (MRTT) was rolled out and flown for the first time at Dresdenin December 2003.
Outlook2004 will be the year of the first units deliveries for NH90 and Tiger helicopters.
Eurocopter’s military business is expected to drive growth of the overall Division
revenues and profitability in 2004 and subsequent years.

Global support network
Customer support services account forover a third of Eurocopter’s revenues.
The company has established aninternational service network of
subsidiaries, authorised distributors
and service centres that covers morethan 130 countries around the world,and provides services including training,
maintenance repairs and spare part
supply. The network’s existence is
one reason for customers to trust theEurocopter product offering – andprobably explains why there are about
9,000 Eurocopter machines in use today.

EC145 production

EADS 2003 Operational review 33

Operational review

Defence and Security Systems
(€m)

2003

Revenues
5,165
EBIT
171
Order intake
6,288
Order book 14,283

2002 variation %

4,770
122
5,413
13,406

Revenue breakdown by markets (%)
Defence 93
Civil 7Highlights 2003
• EADS welcomes Austria as thefifth customer of the Eurofighter• Three governments order the Aster
missile system• New divisional organisation effective

8
40
43
7

Benefits are beginning to flow from deliveries of products, for example missiles andthe Eurofighter that have long featured in our order books. Pro-forma revenues –taking into account changes to the Division’s structure – grew by 8% and EBIT
by 40%. Eurofighter won its first export success and three European governments
ordered the Aster missile-based air defence system.
The year in review
The Defence and Security Systems (DS) Division was created in 2003 as the new mainpole of EADS Defence and Security activities, following the transfer of Military Aircraftbusiness (mostly related to Eurofighter) from the Aeronautics Division to this new
Division. DS now contains almost all the Group’s military businesses except for militarytransport and mission aircraft, military helicopters and military space. By combining
Missile Systems (MBDA and EADS/LFK), Defence and Communication Systems(DCS), Defence Electronics (DE), Military Aircraft (MA) and Services activities within
one division, EADS has equipped its defence business better to meet the needsof customers requiring integrated defence and security solutions.
EADS Military Aircraft
The first production units of the 620 Eurofighters were delivered to the UK, German,
Italian and Spanish customers after receiving the Type Acceptance on 30th June 2003.
We intensified our close cooperation with the German Air Force at the jointly-operated
Eurofighter System Support Centre, and set up a combined service and overhaul facility.
The first ground crews graduated from the German Air Force’s Technical Academy.
Moreover, a contract for 18 Eurofighters was signed with Austria, representing the firstexport success of the Eurofighter.
Retrofit and upgrade programmes for domestic customers and NATO are proceedingon schedule.
Defence and Communications Systems
DCS forms the centre of competence, the ‘Systems House’, for the ‘sensor to shooter’
integration of the complete C4ISR chain and related platforms. The objective is tosatisfy customer needs in network-centric capabilities – as well as to offer a wide rangeof platform products – acting as a Large System Integrator (LSI).
Examples of LSI competence include our selection by the UK MoD for a Ground-based
Air Defence demonstrator, as well as our involvement in joint projects like EuroHawk
with Northrop Grumman, Sccoa (Système de Commandement et de Conduite desOperations Aériennes) with Thales and MALE in France. These projects are opening
up new horizons in the field of Unmanned Aerial Vehicles (UAVs) and air defence,
therefore expanding into new markets with reinforced capabilities.
Secured telecommunications is a key feature for a network of single platforms or
subsystems. In particular, it will provide access to new business areas in the fieldof public safety based on our recognised Tetrapol technology.

34 EADS 2003 Operational review

Defence Electronics
As the Sensors and Avionics House of EADS, Defence Electronics encompasses
mission-critical sensor technologies, providing components and subsystems based onradar and electronic warfare technologies, as well as avionics and electronics for defence
systems. DE applications in the fields of multi-sensor fusion, sensor networks, tacticaland broadband data links represent core elements of Network Enabled Capabilities.

Command, Control, Communications andInformation: C3I Systems

DE was selected for the design, development and integration of electronic countermeasures on the A400M. It has also developed the new Elint (Electronic Intelligence)
sensor for the EuroHawk and the first operational lightweight Synthetic Aperture
Radar for tactical drones.

Intelligent Systems
In October 2003, a US Air Force aircraft
flew from California to Germany – without
its crew. No accident, though: this was
Global Hawk, a UAV (Unmanned Aerial
Vehicle) to be equipped with an Elint(Electronic Intelligence) system payload
developed and integrated by EADS’Defence and Security Systems Business
Units as a first step towards the
EuroHawk system. Flying high above
commercial airlanes, the system canscan over 100,000 square kilometresfor electromagnetic transmissions – from,say, enemy radar and radio links – anddeliver the data to ground stations foranalysis. The result: highly effective
intelligence gathering at a lower cost
and without risking aircrews’ safety.
Global Hawk UAV

EADS 2003 Operational review 35

Operational review

Missile Systems
MBDA
MBDA, the second-largest missiles company worldwide, is owned by EADS (37.5%),
BAE Systems (37.5%) and Finmeccanica (25%). The integration of MBDA is progressing
well as we rationalise and coordinate our technical and commercial strengths. Witha consolidated order book worth €15 billion and annual revenues in the range of€2.4 billion, the Company is the clear leader in Europe and is poised to grow rapidly.

Storm Shadow production

Three major multinational programmes reached important milestones during theyear. We began implementing the six-nation contract for the Meteor air-to-air missile.
In stand-off weapons, Storm Shadow is now in operation with the UK Royal Air Force,and Scalp-EG is now being delivered to the French Air Force. The Phase Three contract
for the Aster air defence missile system was signed with OCCAR in December 2003;
MBDA’s share being worth €2.3 billion, its largest-ever contract.
EADS/LFKEADS/LFK successfully continued its turnaround programme, reducing structural costs
to about 50% of the 2000 level and raising productivity by 43%.
The cancellation of the Polyphem programme has resulted in a reallocation of staff
within EADS.
Taurus development has entered its final phase, and we underwent successful trials.
Contracts with the German procurement authority for Troop Trial missiles and system
upgrades have been signed. Export opportunities for Taurus have also been identified
and are being pursued.
The Long-Range Trigat multi-purpose guided missile system was successfully
demonstrated in Germany, while the Spanish have committed to fit the Tiger withthe system.

Taurus KEPD 350 on Tornado

EADS Services
EADS Services comprises the Test & Services unit and provides outsourced service
solutions to defence customers. It became – as part of a consortium – the preferredbidder on the €6.5 billion Herkules project for the outsourcing of Bundeswehr
communications and IT.
OutlookIn 2004, the integration of the Division will continue following the transfer of theMilitary Aircraft business from Aeronautics division. Starting 1st January, it has become
fully operational. 2004 will be a challenging year as we continue with parallel effortsof reorganisation and investments to enhance the efficiency of our restructured
businesses and to adapt capacity to Defence budget constraints. However, these
additional costs should be compensated by performance improvement, mainly
from the MBDA business. The Division will also pursue all efforts towards signatureof Eurofighter’s tranche 2, Meads development and Long-Range Trigat progress.
Over time, the Division will benefit from the fruits of efficiency and restructuring
plans and from the continuing ramp-up of the missile and Eurofighter deliveries.

36 EADS 2003 Operational review

Space(€m)

Revenues
EBIT
Order intake
Order book

2003

2,424
–400
6,062
7,888

2002 variation %

2,216
–268
2,145
3,895

Full year 2003 includes EADS Astrium at 100%
(Full year 2002 at 75%).

Revenue breakdown by markets (%)
Defence 27
Civil 73

9
–
183
103

In 2003, we implemented a drastic restructuring and reorganisation plan
to adapt our capacity to the low demand and regain efficiency. This weighedon the 2003 EBIT but the ground has been laid to ensure the turnaround of theDivision. Revenues increased due to the first-time full consolidation of Astrium.
Order book was boosted by the £2.5 billion UK MoD contract for securecommunication services through Skynet 5 satellites.
The year in review
The Division’s revenue growth from €2,216 million to €2,424 million reflects the fullconsolidation of Astrium as from January 2003, following the EADS acquisition of the
BAE Systems’ 25% shareholding, which resulted in a €400 million uplift. An upsurge
in defence-related activities was offset by the reduction in launcher activity and therescheduling of Ariane 5 production.
The overall EBIT figure of minus €400 million – compared with 2002’s minus €268 million
which included 75% of the Astrium result – is largely accounted for by the costs incurredin the complete restructuring of the Space Division. The restructuring programmeannounced in January 2003 has been implemented and results in a dramatic headcountreduction as well as a new organisation. The Division now consists of three main
activities: satellite systems (EADS Astrium), launchers and space infrastructure (EADSSPACE Transportation), and services (EADS SPACE Services).

Highlights 2003
• EADS Astrium becomes awholly-owned subsidiary• Ariane 5 wins 50% of year’s
launch contracts• UK’s Skynet 5 contract signed

ArianeSince last year, we are the sole industrial prime contractor for the Ariane 5 launcher,with a role that has expanded from procurement to the integration of all launcher
activities. 2003 saw the last Ariane 4 mission as well as three successful launches ofAriane 5, which launched a total of eight satellites. During the year, Arianespace won
eight of the new contracts that were open to bidding; this represented 50% of theyear’s global commercial market.
In May, the ESA ministerial conference made a strong commitment to the European
Guaranteed Access to Space (EGAS) programme. Detailed negotiations are taking place
between Arianespace, EADS and other partners for the delivery of 30 Ariane 5
launchers in a programme to reduce costs sufficiently to match international competition.
In-orbit infrastructures
We play a key role in the development and utilisation of the International Space Station,(ISS) as prime contractor for the Automated Transfer Vehicle (ATV) which is designed
to deliver fuel and other supplies to the ISS as well as providing reboost and waste
disposal functions. In 2003, we passed important milestones in the programme andare on track for the first flight in 2005. We also delivered proposals to ESA for the
production phase.
Another of our prime contractor responsibilities is for Columbus – a manned ISS
module for zero-gravity research and Europe’s main ISS contribution. The launch –postponed following the Columbia shuttle accident in 2003 – is planned for 2006.

EADS 2003 Operational review 37

Operational review

Skynet 5 – securecommunications system
Paradigm, a subsidiary of EADS SPACE
Services, has signed a contract with the
UK MoD to provide end to end service
for a 15 year period. We therefore
design and build two secure militarycommunications satellites – Skynet 5A
and 5B – and to provide launch services
and the ground infrastructure. The
technology is ground-breaking;the Private Finance Initiative, which
effectively outsources the system’s
operations to EADS, is intended to be
tax-payer friendly. It could be worth
more than €3.6 billion over 15 years.

Installation of propellant tanks

Other launcher activities
These include Eurockot Launch Services, a 51%-owned joint venture operating theRockot launcher. We carried out two successful launches in 2003. We also own 35%
of Starsem, which operates the Soyuz launcher from Baikonur. Starsem also made two
successful launches in 2003 as well as winning two new orders for the Venus Express
and Amos 2. ESA has approved the offering of Soyuz launches from Kourou, and theseshould begin in 2007.
Defence
We have continued to build on our leadership in European military space programmes.
In October, we signed the £2.5 billion contract to provide end-to-end service –satellites, ground systems and terminals – for the UK’s Skynet 5 programme. We arealso at the proposal stage for similar programmes for NATO and the German MoD.
Other events included the introduction of the airborne laser optical link demonstrator(LOLA), progress on developing the submarine-based M51 missile and a contract
for the early warning satellite Spirale demonstrator. Antiballistic missile systems are aperfect example of projects in which we can take the leading role in complex systems
offers, using synergies between our space and defence businesses.

38 EADS 2003 Operational review

Telecommunications satellites
We won three important contracts in 2003: Anik F1R for the Canadian Telesat
Company in January, Hotbird 8 for Eutelsat in September and Arabsat 4A and 4B
in October. We are also building the two Skynet 5 satellites for Paradigm; and May
saw the launch of the Hellas-Sat satellite, designed to provide broadcasting services
from the 2004 Olympics in Athens.
Navigation
ESA member states have reached agreement on funding for the development phaseof the Galileo global satellite navigation system. We are a 38% shareholder in Galileo
Industries which, in July, was awarded a contract for the first of two test satellites.
The programme has a potential contract value of over €3 billion, and we plan to submit
proposals for the full constellation of 30 satellites. Together with Inmarsat and Thales,
we are also part of a consortium which has been chosen as one of the three final bidders
for the Galileo Concession.
Earth observation and science satellites
We won contracts from the French Space Agency CNES for two Pleiades highresolution imaging satellites to be launched in 2008 and 2009, and from ESA for
Venus Express (the first European spacecraft to visit Venus) and for Aeolus satellite
development, including the platform and the Aladdin wind-studying instrument.
Outlook
We are in line with our plan to achieve EBIT breakeven in 2004, assuming the fulfilmentof existing contracts and increased benefits from our ongoing restructuring. In subsequent
years, the EADS Space division is expected to progressively increase profitability.
Thanks to our strong foundations in the current depressed climate (as illustrated by oursolid order book), we expect to reap rewards when the commercial telecom satellites
market turns around, as we would be in a strong position to drive future consolidation of
space activities at the European level. In the institutional and military fields, medium-term
growth will be fuelled by major programmes such as Skynet 5/Paradigm and Galileo.

Ariane 5

EADS 2003 Operational review 39

Operational review

Human Resources
Workforce 2003:
High level of qualification (%)

11•University (4 years and more) 22•University (up to 3 years) 17•Higher Vocational School 8•Vocational School 42•General School only 11

22

17

42
8

From a Human Resources point of view, EADS is unique: it is one of the mostinternational Groups, and its workforce is one of the most highly educated,with around 40% of them having Masters’ or higher degrees in engineering.
Both these factors, of course, generate high expectations from a Human
Resources point of view, especially in the areas of learning opportunities, mobility
and career management, recruitment of key people and internal relations.
In 2003, we launched several initiatives in the field of training and learning. Our Corporate
University (the Corporate Business Academy, CBA) has deployed new programmes tointegrate and internationalise EADS senior management. To support career development
for high potential individuals, CBA launched strategic workshops for the top 200 leaders(the ‘Executive Forums’) as well as a number of other programmes focusing on key
competencies such as international management and entrepreneurship. The CBA has
now trained and developed more than 1000 Managers and Executives and has won the‘Corporate XChange Award’ sponsored by the Financial Times.
At the same time, all the Group’s training activities were reinforced through the workof the Training Network which met regularly in order to optimise our overall Groupinvestment in learning and training.

32 Airbus’ employees inside of thesection 18.1 of the A380 in Hamburg

40 EADS 2003 Operational review

A significant effort has been made to leverage Management Development throughinternal mobility, both between the Divisions and their Business Units, and between
the countries in which we operate. In terms of image, EADS has consolidated its
reputation as an employer of choice. It has been ranked number one for engineers
in France, number five in Germany, and more globally number six in Europe. Our
recruitment pages on the EADS web site (the most often-accessed pages) achieved
more than a million hits.
Being a global company, EADS considers mobility as a key element of cross culturaldevelopment and a tool for further personal development and collective integration.
For that purpose, EADS has launched a new mobility policy in 2003 defining common
rules across all EADS Business Units and Divisions.
Finally, the Human Resources community launched several initiatives to improve its
internal efficiency, notably by promoting its role of ‘business partner’ with management.
The yearly EADS Human Resources conference, in conjunction with training programmes
has contributed to the building of a more powerful network of Human Resources
professionals, able to contribute increasingly to the management of one of theGroup’s key assets.

Global Procurement
Purchasing breakdown by geography (%)•Europe 77•North America 22•Rest of the world 1

1
22

77

Bought-in products, services and components account for some 65% of EADS’revenues, and our suppliers make a major contribution to the technical andcommercial performance of the Group. Purchasing volume will increase in futureyears as sales grow, as we focus on core competencies and develop outsourcing
programmes. Effective sourcing is therefore a key function of management –especially because value creation in this field has a great effect on profits.
The EADS sourcing strategy is designed to deliver competitive advantage by selecting,integrating and developing the world’s best suppliers. In implementing it, we arebuilding new forms of relationship which include involving suppliers in issues at
an early stage, taking a proactive approach to changing market requirements andagreeing criteria by which performance can be assessed. These include price, delivery
performance, product quality, technical requirements and customer support, as well
as targets and rules for fair and appropriate risk and opportunity management between
the Group and its suppliers. As a support to sales campaigns and to reaching-out
globally, EADS is continuously analysing potential supply markets in order to identify
new sources in countries which are considered as strategic sales markets. Furthermore,
the idenfication of new sources also enhances the competition in our supply markets.
A key goal is the maximisation of the Group’s purchasing power through joint sourcing
and we have established a Lead Buyer network to achieve this under the directionof the EADS Procurement Directors Board.

EADS 2003 Operational review 41

Operational review

During 2003, we concentrated on strategic, common supplier and joint procurement
activities, and held a series of meetings with suppliers to launch improvement initiatives
including targets for logistics, quality and value performance. Memorandum ofUnderstandings (MoUs) on EADS’ sourcing principles have been signed with our
major suppliers and the resulting improvements will be cornerstones for ‘Competitive
Partnerships’ as well as for professional supplier relationship management. MoUs are
the basis for forming a long-term relationship with major suppliers that are willingto develop sustained, excellent performances to better meet end-customer markets’
needs and contribute to EADS’ global business interests.
We are also developing methods and processes essential to the implementation of
joint projects including a leading-edge information system (SourceIT). E-procurement
is another important enabler, and we have built a ‘negotiation platform’ supported
by several leading service providers to handle electronic calls for tender andreverse auctions.

Airbus high-bay warehouse for spare parts,
Customised Spares Logistics (CSL)

Finally, any successful initiatives depend on qualified personnel; and we have instituted
a best practice qualification programme to develop existing skills and capabilities, andto ensure that our procurement teams are world-class in their fields.

Research and Technology
EADS spends about €5 billion, 17% of revenues, on Research and Development (R&D).
In 2003, some €648 million was devoted to Research and Technology (R&T) projects.

Research and Development (€bn)
2.2

4.8
30.1

2003
2.1

4.2

2002

29.9
1.9

4.0
30.8

2001
Revenues
Total R&D including

self-financed R&D

Our innovation strategy is based on a balanced system of centralised and decentralised
activities. Individual Business Units have full responsibility for product development(R&D), enabling them to track customer and market needs and to enhance theircompetitiveness. In terms of centralised effort, there are two main pillars: the EADS
R&T Network and the Corporate Research Centre (CRC), with the Network being
structured around 18 technology domains of transversal interest.
These include Materials and Structures, Electronics and Microelectronics,
Electromagnetic Compatibility, Stealth and Signature Control, Optics and Optronics,
IT and Knowledge Management, Fluid Mechanics, Propulsion and On-board Energy,
Guidance, Navigation and Control and other subjects including Image Processingand Data Fusion as well as Microwaves and Telecommunications.
The EADS R&T Network is structured to produce useful ‘top-down’ and ‘bottom-up’
exchanges between technical experts and business management – facilitating better
communication, encouraging the exchange of best practices and saving costs. In the
Common Research Programme, the Network generates about €85 million of shared
R&T activities, with 121 projects involving more than 1,200 experts of the Group.

42 EADS 2003 Operational review

It enables organised cooperation with other companies, industrial organisations,research laboratories and universities to acquire the best available knowledge and toprovide continuous innovation trend monitoring (PATRIA, CNRS, ONERA-DLR, INTA,
EDF, etc.).
The CRC main sites are located in Paris and Munich and include research proximity
centres in Toulouse and Hamburg which mainly serve Airbus, the CRC’s largest EADS
customer. CRC opened a Research and Technology Office in Moscow in March 2003.
About 600 people work in the CRC including students engaged in obtaining doctorates
or working in university internships. In addition to its role of performing R&T, the CRC
acts as a hub for the exchange of know-how, as a promoter of synergies and as a driverof innovation throughout the EADS Group.
The CRC core competencies include Materials & Processes and Advanced Manufacturing;
Structures Engineering & Acoustics; Microsystems, Electronics and Image Processing;
Systems Engineering and Environmental Control of Systems; Advanced process
Engineering and Information Technologies for Engineering; Standardisation; Patents;
Intellectual Property Strategy and Knowledge Management.
The CRC cooperation policy is based on partnering with universities and public/private
laboratories for upstream and institutional research, enabling superior return on
innovation investment.

Engineer testing the strengthof a thermal Velcro fastener

EADS 2003 Operational review 43

Corporate GovernanceMembers of the Board of Directors
Manfred Bischoff
Chairman of EADS
DaimlerChrysler Delegate for the Aerospace Industry
Arnaud Lagardère
Chairman of EADSGeneral Partner and Chief Executive Officer
of Lagardère
Philippe Camus
Chief Executive Officer of EADS
Deputy Chairman and Deputy Chief Executive
Officer of Arjil Commanditée – Arco (General
Partner and Chief Executive Officer of Lagardère)
Rainer Hertrich
Chief Executive Officer of EADS
President of the German Associationof Aerospace Industries, BDLI
Eckhard Cordes
Member of the Management Boardof DaimlerChrysler
Pedro Ferreras
President of Ferreras AbogadosNoël Forgeard
President and Chief Executive Officer of Airbus
Member of the Board of Directors of IMS SA
Jean-René Fourtou
Chairman and Chief Executive Officer
of Vivendi Universal
Louis Gallois
President of SNCF
Hans Peter Ring
Chief Financial Officer of EADSMember of the Supervisory Board of M+W Zander –D.I.B. Facility Management GmbHMichael Rogowski
Chairman of the Supervisory Boardof J.M. Voith AG
Resolutions to take note of the resignations of
Jean-René Fourtou and Eckhard Cordes as
members of the Board of Directors and to appoint
François David (Chairman and Chief Executive
Officer of COFACE since 1994) and Rüdiger Grube(member of the Board of Management ofDaimlerChrysler in charge of corporate development
since 2002) as their respective successors will be
submitted to the Annual General Meeting of EADS
called for 6th May 2004. Such appointments shall beeffective as of the end of such Annual General Meeting.

44 EADS 2003 Corporate GovernanceIn 2003 the Board of EADS continued to uphold the driving principle of maximising
shareholder value in conformity with applicable law and Corporate Governanceprinciples in the countries relevant to the Company. EADS’ management structure
has proved efficient and perfectly adapted to fulfil its commitment to a sustainable
and balanced relationship with stakeholders.
Applicable Rules
EADS N.V. is a Dutch company governed by the laws of The Netherlands – in particular,
by Book 2 of the Dutch Civil Code – and by its Articles of Association. Since its sharesare listed in France, Germany and Spain, it is also subject to various regulations which are
set out in more detail in the Financial Statements and Corporate Governance – 2003
document, part of the EADS Annual Report 2003.
It should be noted that some specific and national company law regulations (such as
the French ‘loi NRE’ on corporate governance) are not applicable to EADS; nevertheless,the rules governing the proceedings of the Board, initially adopted by the Board in July
2000 were amended during the Board meeting held on 5th December 2003 to reflect
the decision of the Board with respect to the enhancements in Corporate Governanceas described below. In addition, EADS’ previously existing Insider Trading Rules havebeen reinforced, building on the recent changes in the laws applicable to the Company
in The Netherlands and in each country where EADS is listed. Those rules became
effective on 1st January 2004.
The Board of Directors
The Board met eight times in 2003 and was regularly informed of developments
through business reports from the Chief Executive Officers, including rolling forecasts
as well as strategic and operational plans. Topics discussed and operations authorisedat these meetings included EADS’ strategy, reorganisation processes, major businessissues and contracts, and the approval of operational plans, budgets, hedging andfunding policy, remuneration (including a Stock Option Plan and an Employee
Shareholding Plan) and the Group’s financial results and forecasts.
As mentioned above, a Board meeting held on 5th December 2003 discussed
recommendations for changes to EADS’ Corporate Governance in the light ofCorporate Governance best practices developed in the jurisdictions relevant to EADS.
In particular, the Board adopted recommendations relating to its functions including
the implementation of an evaluation process of its performance, the personal statusof its Directors including their individual compensation, Board remuneration policy,
and the role of the Board Committees. Enhancements of shareholders’ rights werealso decided, including, inter alia, access to information by the setting up of specificcorporate governance pages on EADS’ website.

The Audit Committee
The Audit Committee set up by the Board in 2000 from among its members is chairedby Manfred Bischoff and Arnaud Lagardère and also includes Eckhard Cordes andLouis Gallois. The Audit Committee met twice during 2003 to review the 2002 results
as well as the half-year results for 2003. As decided by the Board on 5th December
2003, the role of the Audit Committee will be increased with new tasks such as, inparticular, the review of the quarterly financial report and the supervision of theinternal risk management and control system as of 2004.
The Remuneration and Nomination Committee
The Remuneration and Nomination Committee, formerly the Personnel Committee,
was also set up by the Board in 2000 from among its members. It is composed ofPhilippe Camus, Rainer Hertrich, Eckhard Cordes and Louis Gallois and is chaired by
Manfred Bischoff and Arnaud Lagardère. The Committee met six times during 2003
to review compensation policy (including a pension scheme for Executive Committee
members), the bonus payments for 2002, and the Employee Share Ownership Plan
(ESOP) and Stock Option Plan (SOP) for 2003, and to recommend the appointmentof the chief executive officers of the Company’s main Business Units. Pursuant to
the Board’s decision to amend its Internal Rules, new tasks were assigned to theRemuneration and Nomination Committee such as making recommendations regarding
the appointment of the Chairmen of the Supervisory Board (or similar bodies) and theChief Executive Officers (or equivalent position) of important EADS Group companies
and Business Units, as well as the Company’s Corporate Secretary.
In January and March 2004, the Board carried out an annual assessment of its performance.
For more detailed information about Corporate Governance at EADS, see the
Financial Statements and Corporate Governance – 2003 document, part of the
EADS Annual Report 2003.

Capital structure as of 31st December 2003 (as %)

30.1

30.1

5.5

•DaimlerChrysler 30.1
30.1
•SOGEADE
Lagadère and SOGEPA(French State Holding Company)

5.5
•SEPI
(Spanish State Holding Company)
retail and employee ownership 32.8
•Institutional,+ shares held out of the contractual partnershipby DaimlerChrysler and the French State

32.8

1.5

shares 1.5•Treasury(Shares without economic or voting rights)

EADS 2003 Corporate Governance 45

Corporate Social Responsibility

As a major economic player of the aerospace and defence sector, EADS is fully
aware of the impact that its activities have on the world in which it operates. Our
global perspective implies that we recognise our ethical and social responsibilities
towards all stakeholders and the community at large. We strive not only to comply
with all legislations and regulations relevant to our business, but to follow values
and principles consistent with the pride running through our Group. To this end,
we are assigning management responsibilities and implementing internal systems
to ensure that the highest standards become engrained in all our operations. We
intend to further enhance the dialogue with our neighbours and our communities
on environmental, ethical and social aspects that affect them.
Reporting on our exercise of corporate social responsibility is one of our major
concerns. During 2003, a senior management working group was assembled withthe objective of defining overall guidelines and their implementation. Its primary task
is to identify core issues throughout the Group related to the sustainability of its modelfor growth, to diagnose the state of current practice, and to propose updated standards.
The next step is the implementation of a management and reporting systems applicableto each of our businesses and with the Group-wide spreading of best practices.
“We are committed to defend
irreproachable ethical standards inour business relations inside and outside
the Company. As a leading Group
listed on international stock markets,
our business partners, shareholders
and customers expect that we live
up to highest standards with regards
to integrity and professionalism.”

Our spirit: Integrity
In May 2001, EADS adopted a Code of Ethics setting Integrity as a guiding principleof conduct, and linking lasting success to the promotion of value generating
innovation. This code, one of the earliest initiatives in our integration efforts, wasintended to inspire the management style of our Group. It addresses each of our
stakeholders, and in particular, it places customers at the center of our attention
because we believe that their satisfaction leads to the satisfaction of employees
and shareholders.

EADS Code of Ethics – message from the CEOs

We share the UN Global Compact vision of constructive interaction between
business and society
As a global company, we share the principles of and abide by the Universal Declarationof Human Rights, the International Labour Organisation Declaration on Fundamental
Principles and Rights at Work, and the Rio Declaration on Environment andDevelopment. To commit further, in 2003, we became a signatory of the UN Global
Compact1, which lays down nine principles in the area of human rights, labour and theenvironment, and we are acting to ensure that those principles are embedded in our
strategies, culture and day-to-day operations. In the future, we shall be participatingin Global Compact initiatives and programmes in different countries.

1

46 EADS 2003 Corporate Social Responsibility

Detailed information can be found on the UN Global Compact website www.unglobalcompact.org

We act responsibly in developing and selling defence products
Approximately 24% of our revenues are earned from products and services connectedwith national sovereignty and defence – an area which demands the most carefulmonitoring of standards. We strictly apply all national and international regulations
governing the sale and marketing of sensitive products and technologies and we
abide by international export and customs regulations governing both sales andthe exchange of information.

Operational qualities have enabled the CN-235
to take part in numerous humanitarian missions.
It is shown here in UN colours

Foreign trade: we are fully committed to comply with all applicable legislation
Fighting against corruption in foreign trade is a major challenge for all international
companies. To meet it, EADS is fully committed to complying with all relevant national
and international legislation, including the OECD Convention of November 1997,
as incorporated into the legislation of 35 countries. We have implemented a corporate
policy applying to all international operations of EADS subsidiaries, intended to detectand prevent bribery and have also developed internal control systems.
This policy entails effective control of international operations, through the conductof appropriate due diligences of business partners, regular audit and reporting
mechanisms and the conduct of enhanced training sessions within all Business Units.
A number of such training sessions addressing senior management teams wereorganised in 2003, involving external participants, such as the Central Service
for Prevention of Corruption in France. Each Business Unit has appointed senior
executives responsible for ensuring full compliance with the Group policy, and aGroup wide International Compliance Officer with a dedicated committee (‘Companies
Selection Committee’) is responsible for monitoring the implementation of such policy.
This network is monitored by EADS International which provides regular bulletins
aiming at disseminating a compliance culture within the Group and alerting allconcerned employees about their obligations with respect to the Group policy
and the promotion of sound international business practices.

Philippe Camus, EADS CEO, madehis commitment to promote womenin aerospace at the Paris Airshow 2003

Women: a key asset for aerospace future
Women constitute a large untapped potential in the aerospace industry, and weare actively working at attracting more into our pool of talent and skills. We intend
that at least 20% of our annual graduate engineering intake are women and we arecommunicating regularly with more than 50 educational institutions to promote theaerospace industry to women. To that effect, we are focusing on policies to enable
employees to balance their family and working lives, in order to create a genuine
equal opportunity working environment.

EADS 2003 Corporate Social Responsibility 47

Corporate Social Responsibility

Nurturing quality and trust with employees
We expect our remarkable work force to give their best to the cause of EADS, andwe want their experience to be rewarding and fulfilling; a climate of trust and mutual
contribution is essential to sustain dedication and free up the creative power that
underpins our rare mix of innovation and business focus.
Not only is EADS genuinely European, it is present in 30 countries. Dealing daily withvastly different rules in the jurisdictions where we operate, we draw from local bestpractice to disseminate top standards and solutions across the company; for example,
our site in Munich is currently implementing measures relating to flexibility, work
schedules and return from long leave that exist in France or in Spain, benefiting
employee quality of life and satisfying company objectives.
As suits the key asset of our Company, the responsibility of managing human resources
lies with a member of the Executive Committee.
The comfort factor. The fourth instalment of‘Industry meets University’ – a project in which
EADS co-operates with German universities –came up with innovative designs for interiors

We have close relations with the organisations and unions representing EADS
employees working together to minimise the social impact of the recent downturn –for example, by negotiating flexible working practices to avoid layoffs. For instance,the ‘+3 Accounts’ system exemplifies the cooperative approach adopted bymanagement and the Corporate Works Council to develop a modern capacity
management solution benefiting Airbus employees in Germany. For each employee,a Working-Time Account and a Reserve Account track working hours in excess
of contractually agreed working time, and deductions made to accommodate
individual needs or to manage short and medium-term capacity problems.
A Lifelong Working Time Account translates working hours into interest bearing
funds, and withdrawals therefrom can be used as ‘early retirement’ compensation,
providing additional flexibility.

The European Works Council: A transnational cooperative approachfor promoting social dialogue
On 23rd October 2000, the management and employee representatives fromthe unions and works council operating within EADS in France, Germany, Spainand the United Kingdom signed an agreement for the establishment of the European
Works Council (EWC).
The purpose was to jump-start EADS’ integration by fostering a common visionand understanding while building on institutions provided by law in our member
countries. This extremely innovative agreement encapsulates the will of EADS
to maintain a proactive and fluid dialogue with its employee representatives.
National Committees in France, Germany, Spain and the UK engage in thediscussion of national matters under the subsidiarity principle.
The 16 members Council also comprises a European Economic Committee.
The later reviews financial performance and results, with CEO attendance twice
yearly to spell-out developments of corporate strategy.
European sub committees replicate the EWC model for certain business entities,
such as those already existing at Airbus and Eurocopter. In 2003, representatives ofSpace and of Defence and Security Systems approved the creation of such committees.

48 EADS 2003 Corporate Social Responsibility

Health and safety
Health and safety policies and practice have in the past been dealt with at site andBusiness Unit level. Examples of initiatives taken include: risk prevention plans forsite-subcontractors (e.g. EADS Sogerma Services) in addition to the protection
measures for EADS staff; the extension of the company health insurance fund inGermany; a ‘Health and Work’ project at Military Aircraft in cooperation with ETH
Zurich for which we received the European Award for Occupational Medicine; andthe sponsorship of sports activities, fitness and health centres and local company
sports facilities. More recently, we began establishing guidelines to ensure theexchange of best practice and to bring standards across the Group up to a common level.
Supporting people suffering from handicaps is another important social task within
EADS. In the context of the European Year for People with Disabilities, EADS
Deutschland has committed to an agreement in favour of equal opportunities
for all employees and against discrimination and social exclusion of handicapped
persons: initiatives include improvement of working place design and accessibility,
working time adaptability and preferential recruitment of handicapped people
with equal qualification.
Personal career development
EADS recruits around 2,000 young graduates every year, specialising primarily inaerospace engineering, electronic engineering, information technology and economics
or business studies. We focus on life-long learning – from specific technical qualification
courses up to advanced management training in cooperation with international leadingbusiness schools. Further on, divisions’ training departments and the EADS Corporate
Business Academy offer a huge spectrum of professional training opportunities, as well
as a forum for creative exchanges and the sharing of experience.

5th EADS Welcome day. 400 recently recruited
young graduates meet the top management in
Broughton, UK

Management Development is one of the manager’s key tasks. In order to support this wehave introduced a Management Assessment & Potential System which includes evaluation
tools based on expected leadership competencies, and processes that help employees
to review individual potential and to plan individual career development options.
Continuous improvement of processes and products drives customer satisfaction
Our most important obligations to our customers and suppliers relate to the qualityof our products in operation and of our services. Quality is the realm of a networkof Quality Vice Presidents representing all Business Units and reporting to the EADSVP for Quality. The network meets four times a year to issue and manage policies andguidelines applicable across the Group and to identify and spread best practices
between Units.
The EADS quality policy provides a general framework for all Business Units to develop
a proprietary comprehensive quality strategy, policy and improvement actions withregards to customer and employee satisfaction, partners and suppliers integration,
integrating social, safety and environmental aspects.
All Business Units have been instructed to achieve quality systems certification underthe ISO 9000/EN 9100 standards and we expect to achieve this result by end of 2004.

EADS 2003 Corporate Social Responsibility 49

Corporate Social Responsibility

Fostering a mutually beneficial relation with our suppliers
The EADS supplier base represents a high proportion of the value-added in our
products. Therefore EADS endeavours to deliver competitive advantage by winning,
integrating and developing the world’s best suppliers.
Aside quality specifications, the EADS Sourcing network sets targets to our supplierbase not only on operational criteria such as price development or delivery performance,
but also on the way to manage risks deriving from end-customer and market requirements
borne by each EADS Business Unit. Enhanced opportunity and risk sharing allow
to systematically flow down each Business Unit end-customer market related setof business characteristics to the supply base in a fair and balanced way. This formal
set of targets and rules is part of the Procurement Policy.
EADS Procurement Policy provides guidelines and principles to EADS suppliers sothat they understand and implement EADS standards and requirements across alllevels of the supply chain to improve performances and to share business responsibilities.
In the frame of the Procurement Policy, EADS expects from its supply base community
to follow, cascade, and provide evidence of the application of practices such as safety,
legal, ethical, social and environmental responsibilities. At the heart of EADS Sourcing
Strategy principles is the quest for responsible and solid suppliers.
We strive to improve environmental impacts in all phases of any of our
product’s life
As stated in last year’s report, we are fully conscious that our business interacts with theenvironment. Traditionally, management of environmental aspects of our operations
is the responsibility of our subsidiaries and sites which ensure compliance with thelaws and regulations of the countries in which they operate. Each of our businesses
is strictly controlled and audited by authorities, with respect to manufacturing
processes certification. A number of Business Units have implemented Environmental
Management Systems based on ISO 14001 standards or on EMAS (Eco-Management
and Audit Scheme).
Protecting the environment. Development of thelaser welding process for aluminium materials to
replace conventional machining and riveting
technology, which weakens materials and produces
metal waste

Our Business Units have taken into account environmental criteria in all phases of anyof our products’ life cycles, from conception and design, manufacturing and productsupport. Nevertheless, EADS is embarking on ways to better assess integrated risks
and to provide employees and the public with better comprehensive information
on environmental protection issues.
EADS is committed to continuous improvement of its environmental impact, beyond
the simple fulfilment of legal obligations. For example, the European NH90 militaryhelicopter programme specifies that every underlying chemical within each of its
components has to be identified in order to limit environmental consequences andrisks in use.
Airbus too is strongly committed to environmental standards when developing aircraft.
It upholds the standards mandated by the International Civil Aviation Organisation(ICAO) on noise reduction and emissions. Airbus’ awareness of environmental
concerns has been recognised in all countries where it has industrial sites with different
awards. Specific research programmes – some co-financed by the European Commission– are targeted at improving the aerodynamics of future aircraft to reduce drag, fuelconsumption and noise.

50 EADS 2003 Corporate Social Responsibility

In 2003, the Military Aircraft Business Unit received the ‘Environment Certificate’recognising compliance and good practice with respect to environmental protection.
Several initiatives to reduce emissions, including the use of virtual flight testing
simulation techniques (which decreases the number of test flights), the replacementof fuel-oil by natural gas for heating (which limits sulphur derivatives, solid waste,
CO (carbon monoxide), and other emissions) and the use of renewable energy sources(like solar panels for water heating) were recognised through this award.
In the Military Transport Aircraft Division, besides replacing fuels with cleaner
ones and using renewable energy for water heating, we are controlling energy
losses and using HFCs (hydrofluorocarbons) to replace CFCs (chlorofluorocarbons)in cold-chambers and air-conditioning systems. We are also eliminating the use ofmaterials containing asbestos and making use of selective waste collection to allow
more efficient subsequent treatment, as well as increasing the use of recycled materials.
In Eurocopter, over the past four years, environmental action has reduced water
consumption by almost 5% and energy burn by almost 9% despite an increase inturn over. Over the same period, metal pollution in water waste was virtually halved.
All in all, over €30 million are currently being spent by EADS on R&T projects
specifically devoted to environmental improvements in products and processes.
Working in our communities
We bear responsibilities towards the communities neighbouring our operations.
Various actions are taken locally, reflecting our social, educational or cultural commitments
to specific local needs or concerns, such as support for Children’s Heart-centres andhandicapped children, for Technical Universities related to Aeronautics and Space,and commitments to German-French Youth-Exchange as well as to theatres, museums,
and orchestras.

EADS as a partner of the ‘Aviation Sans Frontières’ (ASF).
The ASF fleet flies medical evacuation missions toremote areas

At a more global level, EADS’ corporate sponsorship is designed to reconcile support
to worthy causes with the shaping of the Group’s public image. In particular, we havecommitted ourselves to support the French, German and Spanish chapters of Aviation
without Borders, a humanitarian organisation which provides air transport for seriously
ill children or humanitarian air transport in general. For instance, ATR has signed apartnership contract making the baggage hold in new aircraft ferried for delivery to
one of its customers available for freight transport. We also encourage our employees
to support this endeavour and to take part in its action, providing a new meaning anddimension to the aerospace family we form together.

EADS 2003 Corporate Social Responsibility 51

Glossary

ACE
Airbus Concurrent Engineering; atechnology allowing Airbus engineers
in widely-separated locations to work
together in real-time

EBIT
Earnings Before Interest and Taxes;
EADS uses EBIT pre-goodwill
amortisation and exceptionals as a key
indicator of its economic performance

Aerochain
An e-marketplace established by
ATR with Embraer of Brazil to enhance
support services for all areas ofairline operation

ESA
European Space Agency

AEW
Airborne Early Warning

ETAP
European Technology Acquisition
Programme

AGS
Airborne Ground Surveillance
ATV
The Automated Transfer Vehicle serving
the ISS
BMD
Ballistic Missiles Defence
C3I
Command, Control, Communication andIntelligence Systems
C4ISR
Command, Control, Communication
Computers, Surveillance, andIntelligence Systems
CATS
Combined Aerial Target Services –a procurement programme for the
UK MoD
CRC
Corporate Research Centre
CSR
Corporate Social Responsibility

52 EADS 2003 Glossary

ESOP
Employee Share Ownership Plan

EWC
European Works Council
FAA
Federal Aviation Authority (USA)FSTA
Future Strategic Tanker Aircraft;a UK programme
Fleet commonality
A feature of the Airbus family, allowing
airlines to operate type variants ofdifferent sizes while minimising the needfor pilot retraining and re-certification
Fly-by-wire
An aircraft control system relying
on electronics rather than mechanicallinkages
GBAD
Ground Based Air Defence system
Galileo
The European satellite navigation system,
now being developed

COTS
Commercial Off-The-Shelf Technologies(telecommunications)

Hub
A major, strategically-located airport
from which ‘spokes’ radiate to carryregional traffic

Deepwater
A comprehensive US Coast Guard
modernisation programme for acquiring
new aircraft and surveillance systems

ICAO
International Civil Aviation Organisation.
‘United Nations’ agency for international
civil aviation

ISINInternational Securities Identification
Number
ISRIntelligence, Surveillance andReconnaissanceISS
The International Space Station
LSI
Large System Integration
MALE
A novel Medium Altitude Long
Endurance UAV now being developed
by EADS
MoD
Ministry of Defence
MoU
Memorandum of Understanding
MRO
Maintenance, Repair and Overhaul
MRTT
Multi-Role Tanker Transport Aircraft
Mission aircraft
Aircraft designed to fulfil specialisedfunctions (flight refuelling, Bordercontrol, ISR, AEW etc.). They areusually adaptations of existing types
Network-centric
Information superiority is becoming evermore important in defence. ‘Network
centric’ systems allow armed forces
to tackle new tasks in reconnaissanceand surveillance, sensor technology,
and command and communications
OCCAR
Organisation conjointe de coopérationen matière d’armement (‘Organisation
for Joint Armament Co-operation’)

RAF
Royal Air Force, UK
R&D – Research and Development
All activities related to the evolutionof new products and services
R&T – Research and Technology
All activities in the field of researchand generic technologies not directly
attributable to products and designed
to maintain or expand knowledge or
the technological base
SOP
Stock Option Plan
SCCOA
Système de Commandement et deConduite des Operations Aériennes(‘Air Command and Control System’)System-of-systems
Modern armed forces require theright information at the right time andin the right place. This calls for integrated
weapon system solutions linking
military aircraft, missiles, defence
and communication systems, defence
electronics and related services
WarfareA type of conflict in which advanced
data-processing and telecommunications
systems allow forces to gather, interpretand use information seamlessly and
immediately
P to F conversion
Passenger to Freight conversion; adapting
used airliners for cargo-carrying purposes
UAV
Unmanned Aerial Vehicle
White-tailAn airliner produced before a customer
has ordered it (and therefore withno airline insignia on the stabiliser).
Airbus does not make white-tails

Order book
Firm orders received by EADS for
delivery in the future. Values quoted
are based on catalogue prices for
Airbus and do not include options

EADS 2003 Glossary 53

Addresses

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

Head Offices
In France:
EADS
37, boulevard de Montmorency
75781 Paris cedex 16
FranceTel +33 1 42 24 24 24
In Germany:
EADS
81663 Munich
GermanyTel +49 89 607 0
In Spain:
EADS
Avenida de Aragón 404
28022 Madrid
Spain
Tel +34 915 85 7000
EADS North America
EADS of North America, Inc.
Suite 700
815 Connecticut Avenue, N.W.
Washington, D.C. 20006
USA
Tel +1 202 776 09 88

Military Transport Aircraft
EADS Military Transport Aircraft
Avenida de Aragon 404
28022 Madrid
Spain
Tel +34 91 585 70 00
Aeronautics
Eurocopter
Aéroport International de MarseilleProvence
13725 Marignane cedex
FranceTel +33 4 42 85 85 85
EADS EFW
Grenzstrasse 101109 Dresden
GermanyTel +49 351 8839 0
EADS Sogerma Services
Aéroport International
Bordeaux-Merignac
Rue Marcel Issartier
33701 Merignac
FranceTel +33 5 56 55 40 00
ATR Avions de Transport Régional
1, allée Pierre Nadot
31712 Blagnac cedex
FranceTel +33 5 62 21 62 21
EADS Socata
Zone d’Aviation et d’Affaires
Le Terminal,
Bât 41393350 Le Bourget
FranceTel +33 1 49 34 69 69

Business Units
AirbusAirbus1, rond-point Maurice Bellonte
31707 Blagnac
FranceTel +33 5 61 93 33 33

Defence and Security Systems
EADS Military Aircraft
81663 Munich
GermanyTel +49 89 607 0
Defence and Communication Systems
81663 Munich
GermanyTel +49 89 607 0

Defence Electronics
Woerthstrasse 85
89077 Ulm
GermanyTel + 49 731 392 0
MBDA
11 Strand
WC2 5HR LondonUK
Tel + 44 207 451 6000
EADS/LFK –Lenkflugkörpersysteme GmbH
Landshuter Strasse 26
85716 Unterschleissheim
GermanyTel +49 89 3179 0
EADS Services
63, ter. Avenue Edouard Vaillant
92517 Boulogne Billancourt
FranceTel +33 1 58 17 77 77
81663 Munich
GermanyTel +49 89 607 0
Space
EADS Astrium
37, avenue Louis Breguet
78146 Velizy-Villacoublay
FranceTel +33 1 34 88 30 00
EADS SPACE Transportation
Hünefeldstrasse 1 – 528361 Bremen
GermanyTel +49 421 539 0
66, Route de Verneuil, BP 3002
78133 Les Mureaux
FranceTel +33 1 39 06 12 34
EADS SPACE Services
63, ter. Avenue Edouard Vaillant
92517 Boulogne Billancourt
FranceTel +33 1 58 17 77 77
81663 Munich
GermanyTel +49 89 607 0

54 EADS 2003 Addresses

Turkey
Tel +90 312 448 09 40
Fax +90 312 448 09 46

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

External Offices

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

Malaysia
Tel +60 3 21 63 02 33
Fax +60 3 21 63 02 11

North America
CanadaTel +1 613 230 39 02
Fax +1 613 230 14 42

Middle East/Maghreb
Abu Dhabi
Tel +97 12 681 28 78
Fax +97 12 681 10 27

SingaporeTel +656 737 50 77
Fax +656 733 58 15

Central & Eastern Europe
Czech Republic
Tel +420 22 445 42 20
Fax +420 22 445 42 22

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

EADS International
Tel +33 1 40 69 20 14
Tel +33 1 40 69 18 37
Fax +33 1 40 69 21 31

PolandTel +48 22 627 05 28
Fax +48 22 627 05 34
RussiaTel +7 095 797 53 67
Fax +7 095 797 53 66
Western Europe
Belgium
Tel +32 2 502 60 05
Fax +32 2 502 30 81

Oman
Tel +97 12 681 28 78
Fax +97 12 681 10 27
Saudi Arabia
Tel +96 61 46 53 456
Fax +96 61 46 30 844
AfricaSouth Africa
Tel +27 12 677 15 23
Fax +27 12 677 17 44

FinlandTel +35 8 968 723 690
Fax +35 8 968 723 691

North Asia
China
Tel +86 10 64 10 68 80
Fax +86 10 64 10 68 78

GermanyTel +49 30 259 26 911
Fax +49 30 259 26 919

Korea
Tel +8 227 98 49 25
Fax +8 227 98 49 27

GreeceTel +302 10 69 83 871
Fax +302 10 69 83 870

TaiwanTel +88 6 227 12 15 94
Fax +88 6 227 12 10 89

Italy
Tel +39 06 853 53 51 5
Fax +39 06 841 62 26

South Asia/Pacific
Australia
Tel +61 2 9225 05 00
Fax +61 2 9225 05 01

Spain
Tel +34 915 857 00
Fax +34 915 470 019

ThailandTel +66 2 67 01 734
Fax +66 2 67 01 738
Latin America
BrazilTel +55 61 321 42 51
Fax +55 61 321 47 04
Tel +55 9 11 55 04 15 00
Fax +55 9 11 55 04 15 01
Chile
Tel +56 2 244 41 00
Fax +56 2 244 33 34
MexicoTel +52 55 54 88 20 41
Fax +52 55 54 88 20 45

India
Tel +91 11 2460 45 68
Fax +91 11 2465 75 86

EADS 2003 Addresses 55

Owning EADS shares in 2003

EADS share price trends in 2003
EADS shares performed strongly in 2003, rising by 91% from €9.85 to €18.85 andoutperforming all major European and American indices as well as the shares ofour competitors.
In the early months, pending the Iraq War, equity markets faced an uncertain environment
and focused more on geopolitical issues than on economic fundamentals or corporate
news. As a result, on 10th March 2003, the share price recorded an all-time low of €6.50.
Over the weeks to the end of May, the shares recovered, though volatility remained
high due to market uncertainty triggered by the conflict in Iraq, a weak global economic
climate and the effects of the SARS outbreak.
At the end of May, sentiment on the Group changed. This was partly due to theending of the war, the containment of the SARS virus and a more favourable Euro/US Dollar exchange rate – but also to a newsflow on EADS which included thesigning of the A400M contract and positive developments in our Space Division.
In subsequent months, there were important commercial wins at Airbus and export
successes for the Eurofighter, Tiger and NH90. Increasingly encouraging economic
data and company news helped positive sentiment, despite the increasing strengthof the Euro towards the end of the year.
The weight of Anglo-Saxon investors significantly increased during the year. Anothernoticeable feature of 2003 was the increased level of interest and investment from‘growth’ and ‘momentum’ investors.
The EADS Board of Directors will recommend to the Annual General Meeting called
for 6th May 2004 a cash distribution of a €0.40 (gross amount) per share with respect
to the year 2003.

Stock price evolution
EADS

MSCI World Aero/Defence1

CAC 40Base 100: 10th July 2000

EADS Stock Price in €

160
140

24.5

120

21.0

100

17.5

80

14.0

60

10.5

40

7.0

20

0
Jan
2000

1

56 EADS 2003 Owning EADS shares

2001

in €, adjusted at daily $/€ rate

2002

Feb Mar Apr May

Jun

Jul

2003

Aug Sep Oct Nov Dec

EADS Annual General Meeting
2003, Amsterdam

Financial calendar 2004
Annual General Meeting:
6th May 2004, Amsterdam, The Netherlands
First Quarter 2004 results release:12th May 2004
Global Investor Forum:
21st–22nd June 2004, Spain
First Half 2004 results release:29th July 2004
Third Quarter 2004 results release:
4th November 2004
Key information for shareholders
EADS proactively offers a variety of information sources updating shareholders
on its major events and progress such as the quarterly newsletter called ‘Aeronotes’
and a monthly investor summary available on the EADS website.
The EADS website, www.eads.net, also provides a wide range of information including
financial topics. Shareholders can contact us every day on our special toll-free lines.
Investor Relations contact:
Toll-free telephone numbers:
France 0 800 01 2001
Germany 00 800 00 02 2002
Spain
00 800 00 02 2002
Shareholders from other countries can contact us at:+33 1 41 33 90 94
An e-mail box is dedicated to answering shareholders’ inquiries:
ir@eads.net
or visit our website at:www.eads.net
Designed and produced by Addison Corporate Marketing Limited
Printed by Kriechbaumer© Copyrights: Airbus, Airbus Military, Airtanker, EADS, EADS Astrium, EADS CASA, EADS EFW,EADS Defence and Communications Systems, EADS/LFK, EADS Military Aircraft, EADS SPACE
Transportation, ESA, Eurocopter, I3m, MBDA, Th. Jullien, C. Serna, Getty Images.
All rights reserved

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

European Aeronautic Defence and Space Company EADS N.V.

This document is also available
at the following addresses:

EADS Key figures 2003

EADS Group
2003

Revenues
EBIT1 (Earnings before interest and taxes)
Earnings per share2
Dividend per share
Net cash position3
Order intake
Order book
Workforce (number of employees)

€m
€m
€
€
€m
€m
€m

2002

2001

30,133 29,901 30,798
1,543
1,426
1,694
0.96
0.87
1.00
0.4
0.3
0.5
3,105
2,370
2,679
61,150 31,009 60,208
179,280 168,339 183,256
109,135 103,967 102,967

Unless otherwise indicated, EBIT figures presented in this report are pre-goodwill amortisation and exceptionals
Pre-goodwill amortisation and exceptionals
32001 and 2002 figures restated to be comparable with 2003: defeased bank deposits are netted withcorresponding financial liabilities
1
2

Corporate Presentation 2003

EADS Divisions
2003

To New Levels
Corporate Presentation 2003

2002

2001

Airbus1
Revenues
Order bookOrder book/annual deliveries (in aircraft)

€m
€m
Years

19,048 19,512 20,549
141,836 140,996 156,075
4.8
5.0
4.8

Military Transport Aircraft
Revenues
Order bookOrder book/revenues

€m
€m
Years

934
20,007
21.4

524
633
1.2

547
1,320
2.4

Aeronautics2
Revenues
Order bookOrder book/revenues

€m
€m
Years

3,803
9,818
2.6

3,834
10,162
2.7

5,065
13,700
2.7

Defence and Security Systems2
Revenues
Order bookOrder book/revenues

€m
€m
Years

5,165
14,2832.8

4,770
13,406
2.8

3,345
9,100
2.7

Space3
Revenues
Order bookOrder book/revenues

€m
€m
Years

2,424
7,888
3.3

2,216
3,895
1.8

2,439
3,796
1.6

In this report, Airbus order intake and order book are based on catalogue prices
In this report, 2002 figures are adjusted according to the new structure of Aeronautics and Defence andSecurity Systems since 2003
3
Full year 2003 includes EADS Astrium at 100% (full year 2002 at 75%)12European Aeronautic Defence
and Space Company EADS N.V.
Le Carré
Beechavenue 130 – 132
1119 PR Schiphol-Rijk
The Netherlands
www.eads.net

On the cover: wing of Multi-Role Tanker Transport Aircraft (MRTT)EADS 2003 Key Figures

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