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    Registration Document 2008 BUSINESS, GOVERNANCE AND CORPORATE RESPONSIBILITY FINANCIAL STATEMENTS


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    1 2 3 4 5 6 Back to Contents Registration Document 2008 BUSINESS, GOVERNANCE AND CORPORATE RESPONSIBILITY EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 1


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    1 2 3 4 5 6 Back to Contents European Aeronautic Defence and Space Company EADS N.V. (the “Company” or “EADS” and together with its subsidiaries, the “Group”) is a Dutch company, which is listed in France, Germany and Spain. The applicable regulations with respect to public information and protection of investors, as well as the commitments made by the Company to securities and market authorities, are described in this registration document (the “Registration Document”). In addition to historical information, this Registration Document includes forward-looking statements. The forward-looking statements are generally identified by the use of forward-looking words, such as “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, “project”, “predict”, “will”, “should”, “may” or other variations of such terms, or by discussion of strategy. These statements relate to EADS’ future prospects, developments and business strategies and are based on analyses or forecasts of future results and estimates of amounts not yet determinable. These forward-looking statements represent the view of EADS only as of the dates they are made, and EADS disclaims any obligation to update forward-looking statements, except as may be otherwise required by law. The forward-looking statements in this Registration Document involve known and unknown risks, uncertainties and other factors that could cause EADS’ actual future results, performance and achievements to differ materially from those forecasted or suggested herein. These include changes in general economic and business conditions, as well as the factors described in “Risk Factors” below. This Registration Document was prepared in accordance with Annex 1 of EC Regulation 809/2004, filed in English with, and approved by, the Autoriteit Financiële Markten (the “AFM”) on 22 April 2009 in its capacity as competent authority under the Wet op het financieel toezicht (as amended) pursuant to Directive 2003/71/EC. This Registration Document may be used in support of a financial transaction as a document forming part of a prospectus in accordance with Directive 2003/71/EC only if it is supplemented by a securities note and a summary approved by the AFM. 2 EAD S R EG I S TR ATI O N DO CU ME N T 2 0 0 8


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    1 2 3 4 5 6 Back to Contents Registration Document 2008 Risk Factors 1 Information on EADS’ Activities Management’s Discussion and Analysis of Financial Condition 2 and Results of Operations 3 General Description of the Company and its Share Capital 4 Corporate Governance 5 Corporate Responsibility & Sustainability 6 Entity Responsible for the Registration Document EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 3


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    GENERAL TABLE OF CONTENTS | REGISTRATION DOCUMENT 2008 Registration Document 2008 BUSINESS, GOVERNANCE AND CORPORATE RESPONSIBILITY General Description of the Company Risk Factors 7 3 and its Share Capital 93 1. FINANCIAL MARKET RISKS 8 3.1 GENERAL DESCRIPTION OF THE COMPANY 94 3.1.1 Commercial and Corporate Names, 2. BUSINESS-RELATED RISKS 11 Seat and Registered Office 94 3. LEGAL RISKS 17 3.1.2 Legal Form 94 3.1.3 Governing Laws and Disclosures 94 4. INDUSTRIAL AND ENVIRONMENTAL RISKS 19 3.1.4 Date of Incorporation and Duration of the Company 97 3.1.5 Objects of the Company 97 1 Information on EADS’ Activities 21 3.1.6 3.1.7 Commercial and Companies Registry Inspection of Corporate Documents 97 97 1.1 PRESENTATION OF THE EADS GROUP 22 3.1.8 Financial Year 97 1.1.1 Overview 22 3.1.9 Allocation and Distribution of Income 98 1.1.2 Airbus 28 3.1.10 General Meetings 98 1.1.3 Eurocopter 38 3.1.11 Disclosure of Holdings 100 1.1.4 Astrium 42 3.1.12 Mandatory Offers 101 1.1.5 Defence & Security 47 3.2 GENERAL DESCRIPTION 1.1.6 Other Businesses 53 OF THE SHARE CAPITAL 103 1.1.7 Investments 54 3.2.1 Modification of Share Capital or Rights Attached 1.1.8 Insurance 55 to the Shares 103 1.1.9 Legal and Arbitration Proceedings 56 3.2.2 Issued Share Capital 104 1.1.10 Incorporation by Reference 58 3.2.3 Authorised Share Capital 104 1.2 RECENT DEVELOPMENTS 58 3.2.4 Securities Granting Access to the Company’s Capital 104 3.2.5 Changes in the Issued Share Capital Since Incorporation of the Company 105 Management’s Discussion 3.3 SHAREHOLDINGS AND VOTING RIGHTS 106 and Analysis of Financial Condition 2 and Results of Operations 61 3.3.1 3.3.2 Shareholding Structure Relationships with Principal Shareholders 106 108 3.3.3 Form of Shares 113 2.1 OPERATING AND FINANCIAL REVIEW 62 3.3.4 Changes in the Shareholding of the Company 2.1.1 Certain Information 62 Since its Incorporation 113 2.1.2 Overview 62 3.3.5 Persons Exercising Control over the Company 115 2.1.3 Critical Accounting Considerations, Policies and Estimates 66 3.3.6 Simplified Group Structure Chart 115 2.1.4 Measurement of Management’s Performance 71 3.3.7 Purchase by the Company of its Own Shares 117 2.1.5 EADS Results of Operations 75 3.4 DIVIDENDS 121 2.1.6 Changes in Consolidated Total Equity (including Minority Interests) 80 3.4.1 Dividends and Cash Distributions Paid Since the Incorporation of the Company 121 2.1.7 Liquidity and Capital Resources 82 3.4.2 Dividend Policy of EADS 121 2.1.8 Hedging Activities 89 3.4.3 Unclaimed Dividends 121 2.2 FINANCIAL STATEMENTS 3.4.4 Taxation 121 (included in separate booklet) 90 3.5 ANNUAL SECURITIES DISCLOSURE REPORT 123 2.3 STATUTORY AUDITORS’ FEES 91 2.4 INFORMATION REGARDING THE STATUTORY AUDITORS 91 4 EAD S R EG I S TR ATI O N DO CU ME N T 2 0 0 8


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    GENERAL TABLE OF CONTENTS | REGISTRATION DOCUMENT 2008 4 Corporate Governance 125 5.4 HUMAN RESOURCES: EMPLOYER — EMPLOYEE RELATIONSHIP 189 4.1 MANAGEMENT AND CONTROL 130 5.4.1 Workforce Information and Organisation of Work 189 4.1.1 Board of Directors, Chairman and Chief Executive Officer 131 5.4.2 Human Resources Organisation 191 4.1.2 Audit Committee 142 5.4.3 Human Resources Policies and Performance 191 4.1.3 Remuneration and Nomination Committee 142 5.5 CORPORATE CITIZENSHIP 198 4.1.4 Strategic Committee 143 5.5.1 Maintaining an Open Dialogue with EADS’ Stakeholders 198 4.1.5 Executive Committee 143 5.5.2 Encompassing Community Interests in EADS’ Global 4.1.6 Enterprise Risk Management System 145 Strategy 200 4.1.7 Compliance Organisation 150 4.2 INTERESTS OF DIRECTORS Entity Responsible 4.2.1 AND PRINCIPAL EXECUTIVE OFFICERS Compensation Granted to Directors 151 6 for the Registration Document 203 and Principal Executive Officers 151 6.1 ENTITY RESPONSIBLE 4.2.2 Long Term Incentives Granted to the Chief Executive Officer 155 FOR THE REGISTRATION DOCUMENT 204 4.2.3 Related Party Transactions 155 4.2.4 Loans and Guarantees Granted to Directors 155 6.2 STATEMENT OF THE ENTITY RESPONSIBLE FOR THE REGISTRATION DOCUMENT 204 4.3 EMPLOYEE PROFIT SHARING AND INCENTIVE PLANS 155 6.3 INFORMATION POLICY 204 4.3.1 Employee Profit Sharing and Incentive Agreements 155 6.4 UNDERTAKINGS OF THE COMPANY 4.3.2 Employee Share Ownership Plans 156 REGARDING INFORMATION 205 4.3.3 Long Term Incentive Plans 158 6.5 SIGNIFICANT CHANGES 205 Corporate Responsibility 5 & Sustainability 165 5.1 GOVERNANCE, ETHICS AND COMPLIANCE 168 5.1.1 EADS Code of Ethics 168 5.1.2 Ethics and compliance programme 169 5.2 SUSTAINABLE GROWTH 175 5.2.1 Product Quality and Customer Satisfaction 175 5.2.2 Sustaining and Protecting Innovation 177 5.2.3 Supplier Management: Fostering a Mutually Beneficial Relationship with EADS’ Suppliers 180 5.3 ENVIRONMENTAL CARE 184 5.3.1 Policy 184 5.3.2 Organisation 185 5.3.3 Performance and Best Practices 185 EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 5


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    1 2 3 4 5 6 Back to Contents 6 EAD S R EG I S TR ATI O N DO CU ME N T 2 0 0 8


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    1 2 3 4 5 6 Back to Contents Risk Factors 1. FINANCIAL MARKET RISKS 8 2. BUSINESS-RELATED RISKS 11 3. LEGAL RISKS 17 4. INDUSTRIAL AND ENVIRONMENTAL RISKS 19 EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 7


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    RISK FACTORS > 1. | Financial Market Risks 1 2 3 4 5 6 Back to Contents EADS is subject to many risks and uncertainties that may affect its financial performance. The business, financial condition or results of operations of EADS could be materially adversely affected by the risks described below. These are not the only risks EADS faces. Additional risks not presently known to EADS or that it currently deems immaterial may also impair its business operations. 1. FINANCIAL MARKET RISKS Impact of Ongoing Financial Crisis The current financial turmoil affecting the banking system and which may in turn reduce the availability of bank guarantees financial markets and ongoing concerns about the sustainability needed by EADS for its businesses; of the business model of investment banks and of other financial institutions have resulted in higher cost and lower > lower availability of credit by hedging counterparties, which availability of credit, a reduced level of liquidity in many could constrain EADS’ ability to implement desired foreign financial markets and extreme volatility across all asset classes. currency hedges; This has in turn negatively affected the global real economy. There could be a number of follow-on effects from the financial > changes in long-term interest rates, credit spreads or inflation, crisis on EADS’ business, including but not limited to: which may affect the discount rate applicable to the Group’s pension liabilities; > economic distress of customers, resulting in requests to postpone or cancel orders for aircraft due to the inability to > changes in short-term interest rates as well as potential obtain credit to finance aircraft purchases, or due to the broad illiquidity of certain asset classes, which may affect the economic downturn and weakening of passenger and cargo financial performance of the Group; demand for air travel more generally; > continued divestments across all risky asset classes, which > a significant increase in the amount of sales financing that may cause a further depreciation of asset values and lower EADS provides to its customers to support aircraft purchases, diversification benefits for the pension plan assets held to thereby increasing its exposure to the risk of defaults by match the pension liabilities, thereby resulting in an increase customers; in the Group’s provisions for retirement plans; > economic distress or insolvency of key suppliers, resulting > reduced access to capital markets and other sources of in product delays; financing, which, despite EADS’ net cash position of € 9.2 billion as of the end of 2008 and no immediate short- > the default of investment or derivative counterparties and term refinancing needs other than € 1.0 billion in notes other financial institutions, which could negatively impact maturing in March 2010, may limit EADS’ future ability to EADS’ treasury operations; make capital expenditures, fully carry out its research and development efforts and fund operations. > continued de-leveraging as well as mergers and bankruptcies of banks or other financial institutions, resulting in a smaller Uncertainty about current global economic conditions could universe of counterparties and lower availability of credit, also increase the volatility of EADS’ stock price. Exposure to Foreign Currencies A significant portion of EADS’ revenues is denominated in US to the extent that EADS does not use financial instruments to dollars, while a substantial portion of its costs is incurred in cover its exposure resulting from this foreign currency euro, and to a lesser extent, in pounds sterling. Consequently, mismatch, its profits will be affected by market changes in the 8 EAD S R EG I S TR ATI O N DO CU ME N T 2 0 0 8


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    RISK FACTORS > 1. | Financial Market Risks 1 2 3 4 5 6 Back to Contents exchange rate of the US dollar against these currencies, and to a statements. EADS’ exchange rate hedging strategy aims to cover lesser extent, by market changes in the exchange rate of pound its cash flows, and, to a large extent, earnings before interest and sterling against the euro. EADS has therefore implemented an taxes, pre-goodwill impairment and exceptionals (“EBIT*”). exchange rate strategy in order to manage and minimise such Changes in the value of these currencies relative to the euro will exposure. In order to secure the rates at which US dollar have an effect on the euro value of EADS’ reported revenues, revenues (arising primarily at Airbus and in the commercial other financial result, costs, assets and liabilities and EBIT*. satellite business) are converted into euro or pound sterling, EADS manages a long-term hedging portfolio. Currency exchange rate fluctuations in those currencies other than the US dollar in which EADS incurs its principal There are complexities inherent in determining whether and when manufacturing expenses (mainly the euro) may have the effect of foreign exchange rate exposure of EADS will materialise, in distorting competition between EADS and competitors whose particular given the possibility of unpredictable revenue variations costs are incurred in other currencies. This is particularly true arising from order cancellations and postponements. Furthermore, with respect to fluctuations relative to the US dollar, as many of as a significant portion of EADS’ foreign currency exposure is EADS’ products and those of its competitors (e.g., in the defence hedged through contractual arrangements with third parties, export market) are priced in US dollars. EADS’ ability to EADS is exposed to the risk of non-performance by its hedging compete with competitors may be eroded to the extent that any counterparties. EADS may also have difficulty in fully of EADS’ principal currencies appreciates in value against the implementing its hedging strategy depending on the willingness of principal currencies of such competitors. hedging counterparties to extend credit. Accordingly, no assurances may be given that EADS’ exchange rate hedging strategy will See “Management’s Discussion and Analysis of Financial protect it from significant changes in the exchange rate of the US Condition and Results of Operations — 2.1.8 Hedging dollar to the euro and the pound sterling and that such changes Activities” for a discussion of EADS’ foreign currency hedging will not affect its results of operation and financial condition. policy. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — 2.1.3.6 Accounting for EADS’ consolidated revenues, costs, assets and liabilities Hedged Foreign Exchange Transactions in the Financial denominated in currencies other than the euro are translated Statements” for a summary of EADS’ accounting treatment of into the euro for the purposes of compiling its financial foreign currency hedging transactions. Exposure to Sales Financing Risk In support of sales, EADS may agree to participate in the the purpose of securing customers’ performance of their financing of customers. As a result, EADS has a significant financial obligations to EADS, and because it guarantees part of portfolio of leases and other financing arrangements with the market value of certain aircraft during limited periods after airlines and other customers. The risks arising from EADS’ their delivery to customers. Under adverse market conditions, sales financing activities may be classified into two categories: the market for used aircraft could become illiquid and the (i) credit risk, which concerns the customer’s ability to perform market value of used aircraft could significantly decrease below its obligations under a financing arrangement, and (ii) aircraft projected amounts. In the event of a financing customer default value risk, which primarily relates to unexpected decreases in at a time when the market value for a used aircraft has the future value of aircraft. Measures taken by EADS to unexpectedly decreased, EADS would be exposed to the mitigate these risks include optimised financing and legal difference between the outstanding loan amount and the market structures, diversification over a number of aircraft and value of the aircraft, net of ancillary costs (such as maintenance customers, credit analysis of financing counterparties, and remarketing costs, etc.). Similarly, if an unexpected decrease provisioning for the credit and asset value exposure, and in the market value of a given aircraft coincided with the transfers of exposure to third parties. No assurances may be exercise window of an asset value guarantee (“AVG”) with given that these measures will protect EADS from defaults by respect to that aircraft, EADS would be exposed to losing as its customers or significant decreases in the value of the much as the difference between the market value of such aircraft financed aircraft in the resale market. and the AVG amount. No assurances may be given that the provisions taken by EADS will be sufficient to cover these EADS’ sales financing arrangements expose it to aircraft value potential shortfalls. Through the Airbus Asset Management risk, because it generally retains collateral interests in aircraft for department or as a result of past financing transactions, EADS is * EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals. EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 9


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    RISK FACTORS > 1. | Financial Market Risks 1 2 3 4 5 6 Back to Contents the owner of used aircraft, exposing it directly to fluctuations in Accordingly, such customers may seek to increase their the market value of these used aircraft. utilisation of backstop commitments provided by EADS. Depending on the agreement reached with customers, EADS’ Finally, EADS also has several outstanding backstop sales financing exposure could increase significantly in the commitments to provide financing related to orders on Airbus’ future. Despite the measures taken by EADS to mitigate and ATR’s backlog. While past experience suggests it is unlikely the risks arising from sales financing activities described above, that all such proposed financing actually will be implemented, EADS will be further exposed to the risk of defaults by its the ongoing financial crisis has resulted in a tightening in the customers or significant decreases in the value of the financed credit markets and eliminated or reduced the amount of outside aircraft in the resale market, which may have a negative effect financing available to customers to fund their aircraft purchases. on its future results of operation and financial condition. Counterparty Credit Risk EADS is exposed to credit risk to the extent of non-performance credit risk exposure. This limit system assigns maximum by its counterparties for financial instruments, such as hedging exposure lines to counterparties of financial transactions, instruments and cash investments. However, the Group has based at a minimum on their credit ratings as published by policies in place to avoid concentrations of credit risk and to Standard & Poor’s, Moody’s and Fitch Ratings. The respective ensure that credit risk is limited. limits are regularly monitored and updated, but there can be no assurances that despite these limits and the diversification of Cash transactions and derivative counterparties are contracted counterparties, EADS will not lose the benefit of certain with a large number of financial institutions worldwide, but derivatives, or cash investments, in case of a systemic extension only if they meet certain high credit quality criteria. EADS has of market disruptions. set up a credit limit system to actively manage and limit its Exposure on Equity Investment Portfolio EADS holds several equity investments for industrial or strategic Treasury shares held by EADS are not considered to be reasons, the business rationale for which may vary over the life of equity investments. Additionally, treasury shares are not the investment. Equity investments are either accounted for using regarded as being exposed to risk, as any change in value of the equity method (associated companies), if EADS has the ability treasury shares is recognised directly in equity only when to exercise significant influence, or at fair value. If fair value is not sold to the market and never affects net income. Treasury readily determinable, the investment is measured at cost. shares are primarily held to hedge the dilution risk arising from employee stock ownership plans and the exercise by EADS’ principal investment in associates is Dassault Aviation. employees of stock options. The net asset value of this investment was € 2.2 billion at 31 December 2008. EADS is exposed to the risk of unexpected For further information relating to financial market risks and the material adverse changes in the fair value of Dassault Aviation ways in which EADS attempts to manage these risks, see “Notes to and that of other associated companies. For equity investments Consolidated Financial Statements (IFRS) — Note 35A: other than associates, which make up only a fraction of EADS’ Information about Financial Instruments — Financial risk total assets, EADS regards the risk of negative changes in fair management”. value or impairments on these investments as non-significant. 10 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    RISK FACTORS > 2 . | Business-Related Risks 1 2 3 4 5 6 Back to Contents Pension Commitments EADS participates in several pension plans for both executive as its balance sheet for its share of the under funding based on well as non-executive employees, some of which are under current estimates, there can be no assurance that these estimates funded. For further information related to these plans, see will not be revised upward in the future, leading EADS to “Management’s Discussion and Analysis of Financial Condition record additional provisions in respect of such plans. These and Results of Operations” and “Notes to Consolidated additional provisions would in turn have a negative effect on Financial Statements (IFRS) — Note 26B: Provisions for EADS’ total equity (net of deferred taxes), which could have a retirement plans”. Although EADS has recorded a provision in negative effect on its future financial condition. 2. BUSINESS-RELATED RISKS Commercial Aircraft Market Cyclicality Historically, the market for commercial aircraft has shown In particular, the current volatility in the oil, financial and credit cyclical trends, due in part to changes in passenger and cargo markets and overall economic uncertainty — including the demand for air travel, which is itself primarily driven by official entry into recession of the US and the euro-zone and economic or gross domestic product (“GDP”) growth. Other recent declines in air passenger traffic — increase the risk that factors, however, play an important role in determining the customers will seek to postpone or cancel otherwise binding market for commercial aircraft, such as (i) the average age and contractual orders, to which EADS may agree. In addition, the technical obsolescence of the fleet relative to new aircraft, liquidation or bankruptcy of airline customers could lead to the (ii) the number and characteristics of aircraft taken out of service cancellation of their existing orders. If any of these events were and parked pending potential return into service, (iii) passenger to occur, it could significantly reduce EADS’ revenues and load factors, (iv) airline pricing policies, (v) airline financial ability to generate a profit. health and the availability of outside financing for aircraft purchases, (vi) deregulation and (vii) environmental constraints Moreover, EADS may be required to adopt significant changes to imposed upon aircraft operations. EADS expects that the market its business plan in response to market conditions, including for commercial aircraft, including to a certain extent the market production rate changes or the re-configuration of aircraft for civil helicopters, will continue to be cyclical, and that originally intended for customers whose orders have been downturns in broad economic trends, such as those currently postponed or cancelled. Failure to successfully implement such being experienced, may have a negative effect on its future changes could have a negative effect on EADS’ future results of results of operation and financial condition. operation and financial condition. Impact of Terrorism, Epidemics and Catastrophic Events on Commercial Aircraft Market As the terrorist attacks in New York and Madrid and the spread class of aircraft, form of design, or airline. As a consequence of of the Severe Acute Respiratory Syndrome (“SARS”) virus and terrorism, epidemics and other catastrophic events, an airline avian flu have demonstrated, terrorism and epidemics may may be confronted with sudden reduced demand for air travel negatively affect public perception of air travel safety and and be compelled to take costly security and safety measures. In comfort, which may in turn reduce demand for air travel and response to such events, and the resulting negative impact on commercial aircraft. The outbreak of war in a given region may the airline industry or particular airlines, EADS may suffer from also affect the willingness of the public to travel by air. a decline in demand for all or certain types of its aircraft, and Furthermore, major airplane crashes may have a negative effect EADS’ customers may postpone delivery of new aircraft or on the public’s or regulators’ perceptions of the safety of a given cancel orders. EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 11


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    RISK FACTORS > 2. | Business-Related Risks 1 2 3 4 5 6 Back to Contents Dependence on Public Spending and on Certain Markets In any single market, public spending (including defence spending) or budgetary constraints in any one of these countries may have depends on a complex mix of geopolitical considerations and a negative effect on the ability of EADS to enter into or perform budgetary constraints. Public spending may be subject to such contracts. significant fluctuations from year to year and country to country. Adverse economic and political conditions as well as downturns Further, a significant portion of EADS (including Airbus) in broad economic trends in EADS’ markets may reduce the backlog is concentrated in certain regions or countries, including amount of public spending and have a negative effect on EADS’ the United States of America, China, India and the United Arab future results of operations and financial condition. Emirates. Adverse economic and political conditions as well as downturns in broad economic trends in these countries or In the case where several countries undertake to enter together regions may have a negative effect on EADS’ and Airbus’future into defence or other procurement contracts, economic, political results of operations and financial condition. Availability of Government and Other Sources of Financing Since 1992, the EU and the US have operated under an research and development. For example, EADS received agreement that sets the terms and conditions of financial repayable financing from certain governments in relation to the support that governments may provide to civil aircraft A380 commercial aircraft programme, and is in discussions with manufacturers. In late 2004, however, the US sought to certain EU countries regarding financing for the development of unilaterally withdraw from this agreement, which eventually led the A350 XWB commercial aircraft programme. However, no to the US and the EU making formal claims against each other assurances can be given that government financing will continue before the World Trade Organization (“WTO”). While both to be made available in the future for these and other projects, sides have expressed a preference for a negotiated settlement that in part as a result of the proceedings mentioned above. provides for a level playing field when funding future aircraft developments, they have thus far failed to reach agreement on Moreover, the availability of other outside sources of financing key issues. The terms and conditions of any new agreement, will depend on a variety of factors such as market conditions, or the outcome of the formal WTO proceedings, may limit the general availability of credit, EADS’ credit ratings, as well as access by EADS to risk-sharing-funds for large projects, may the possibility that lenders or investors could develop a negative establish an unfavourable balance of access to government funds perception of EADS’ long- or short-term financial prospects by EADS as compared to its US competitors or may theoretically if it incurred large losses or if the level of its business activity cause the European Commission and the involved governments decreased due to an economic downturn. EADS may therefore to analyse possibilities for a change in the commercial terms of not be able to successfully obtain additional outside financing funds already advanced to EADS. on favorable terms, or at all, which, despite EADS’ currently strong net cash position, may limit EADS’ future ability to make In prior years, EADS and its principal competitors have each capital expenditures, fully carry out its research and received different types of government financing of product development efforts and fund operations. Emergence of Public-Private Partnerships and Private Finance Initiatives Defence customers, particularly in the UK, increasingly request defence equipment sales, as they often incorporate elements proposals and grant contracts under schemes known as public- such as: private partnerships (“PPPs”) or private finance initiatives (“PFIs”). PPPs and PFIs differ substantially from traditional > the provision of extensive operational services over the life of the equipment; 12 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    RISK FACTORS > 2 . | Business-Related Risks 1 2 3 4 5 6 Back to Contents > continued ownership and financing of the equipment by services, and involved in additional PFI proposals, such as the a party other than the customer, such as the equipment AirTanker (FSTA) project. One of the complexities presented by provider; PFIs lies in the allocation of risks and the timing thereof among different parties over the lifetime of the project. > mandatory compliance with specific customer requirements pertaining to public accounting or government procurement There can be no assurances of the extent to which EADS will regulations; and efficiently and effectively (i) compete for future PFI or PPP programmes, (ii) administer the services contemplated under the > provisions allowing for the service provider to seek out contracts, (iii) finance the acquisition of the equipment and the additional customers for unused capacity. ongoing provision of services related thereto, or (iv) access the markets for the commercialisation of excess capacity. EADS may also EADS is party to PPP and PFI contracts, for example through encounter unexpected political, budgetary, regulatory or competitive Paradigm with Skynet 5 and related telecommunications risks over the long duration of PPP and PFI programmes. Competition and Market Access Most of EADS’ businesses are subject to significant In addition, the contracts for many aerospace and defence competition, and Airbus in particular has been affected by products are awarded, implicitly or explicitly, on the basis of downward price pressure resulting from such competition. home country preference. Although EADS constitutes EADS believes that some of the underlying causes of such price a multinational combination which helps to broaden its domestic competition have been mitigated by restructuring in the market, it may remain at a competitive disadvantage in certain aerospace and defence industry. Nevertheless, certain customers countries, especially outside of Europe, relative to local have had greater leverage to encourage competition with respect contractors for certain products. The strategic importance and to a variety of issues, including price and payment terms. political sensitivity attached to the aerospace and defence No assurance can be given that competition may not intensify, industries means that political considerations will play a role in particularly in the context of a prolonged economic downturn. the choice of many products for the foreseeable future. Technologically Advanced Products and Services EADS offers its customers products and services that are often cancellations will not be imposed should EADS fail to meet technologically advanced, the design and manufacturing of delivery schedules or other measures of contract performance. which can be complex and require substantial integration and coordination along the supply chain. In addition, most of EADS’ For example, following the production difficulties that EADS products must function under demanding operating conditions. encountered in 2006 in connection with its A380 programme, Even though EADS believes it employs sophisticated design, certain customers decided to cancel their A380 freighter orders. manufacturing and testing practices, there can be no assurance In 2007 and 2008, EADS announced significant delivery delays that EADS’ products or services will be successfully developed, on its A400M programme. In each of these years, EBIT* at EADS manufactured or operated or that they will be developed or will was negatively affected as a result. See “Management’s perform as intended. Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to the Consolidated Financial Statements Certain of EADS’ contracts require it to forfeit part of its (IFRS) — Note 3: Accounting for the A400M programme”. expected profit, to receive reduced payments, to provide a replacement launch or other products or services, or to reduce There can be no assurances that similar problems will not occur the price of subsequent sales to the same customer if its products in the future. In addition to any costs resulting from product fail to be delivered on time or to perform adequately. No warranties, contract performance or required remedial action, assurances can be given that performance penalties or contract such problems may result in increased costs or loss of revenues * EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals. EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 13


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    RISK FACTORS > 2. | Business-Related Risks 1 2 3 4 5 6 Back to Contents — in particular as a result of contract cancellations — which may also have a significant adverse effect on the competitive could have a negative effect on EADS’ future results of reputation of EADS’ products. operation and financial condition. Any problems in this respect Major Research and Development Programmes The business environment in many of EADS’ principal Successful development of new programmes also depends on operating business segments is characterised by extensive EADS’ ability to attract and retain aerospace engineers and other research and development costs requiring significant up-front professionals with the technical skills and experience required to investments with a high level of complexity. The business plans meet its specific needs. Demand for such engineers may often underlying such investments often contemplate a long payback exceed supply depending on the market, resulting in intense period before these investments are recouped, and assume a competition for qualified professionals. There can be no certain level of return over the course of this period in order to assurances that EADS will attract and retain the personnel it justify the initial investment. There can be no assurances that requires to conduct its operations successfully. Failure to attract the commercial, technical and market assumptions underlying and retain such personnel or an increase in EADS’ employee such business plans will be met, and consequently, the payback turnover rate could negatively affect EADS’ future results of period or returns contemplated therein achieved. EADS expects operation and financial condition. that its consolidated research and development expenses may increase significantly in future years in connection with the ramp-up of new programmes across all Divisions, in particular development on the A350 XWB. “Power8”, “Power8 Plus” and “Future EADS” Restructuring and Cost Saving Programmes EADS has announced in 2007 the implementation of Finally, EADS is currently working on a further integration a significant cost reduction and restructuring programme at and cost savings programme referred to as “Future EADS”, Airbus, referred to as “Power8”. This programme looks at all with the goal of achieving a minimum EBIT* contribution of aspects of Airbus to make it leaner, more integrated, more € 200 million in 2011–2012. It aims at further integration, efficient and more productive. As part of Power8, Airbus improvement of decision making process and cost savings management is seeking to implement strong cost reduction and through the Headquarters, the Divisions and the interaction cash generating efforts with the goal of achieving EBIT* between Headquarters and the Divisions. As part of this contributions of € 2.1 billion from 2010 onwards and an initiative, the former Military Transport Aircraft division has additional € 5 billion of cumulative cash flow from 2007 to been integrated into Airbus under the name of “Airbus 2010. A large part of the cost savings is expected to be realised Military”. See “Information on EADS’ Activities — 1.1.2 Airbus through the reduction of Airbus’ headcount by — Airbus Military” below. 10,000 employees (with temporary and on-site subcontractors accounting for approximately 50% of such reduction). All of these anticipated cost savings are based on preliminary estimates, however, and actual savings may vary significantly. In addition, in 2008, EADS launched a Group-wide cost savings In particular, EADS’ cost reduction measures are based on programme referred to as “Power8 Plus”, with the goal of current conditions and do not take into account any future cost achieving EBIT* contributions of € 1 billion beginning in 2011- increases that could result from changes in its industry or 2012. Airbus is expected to contribute roughly two-thirds of the operations, including new business developments, wage and cost targeted cost savings, with the remaining portion to be increases or other factors. EADS’ failure to successfully contributed by the Eurocopter, Astrium and Defence & Security implement these planned cost reduction measures, or the divisions as well as by EADS headquarters. possibility that these efforts may not generate the level of cost savings it expects going forward, could negatively affect its future results of operation and financial condition. * EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals. 14 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    RISK FACTORS > 2 . | Business-Related Risks 1 2 3 4 5 6 Back to Contents In addition to the risk of not achieving the anticipated level of implementing the programmes above are otherwise higher than cost savings from the programmes above, EADS may also incur anticipated following such negotiations, EADS’ future results of higher than expected implementation costs, depending on the operation and financial condition may be negatively affected. outcome of its current negotiations with labour and other representatives. In many instances, there may be internal Finally, EADS may fail to fully realise the anticipated benefits of resistance to the various organisational restructuring and cost the programmes above. Divestitures may result in continued reduction measures contemplated, including site divestitures by financial involvement in the divested businesses, such as through Airbus and the integration of the Military Transport Aircraft guarantees or other financial arrangements, following the division into Airbus. Restructuring, closures, site divestitures transaction. They may also trigger the recording of an impairment and job reductions may also harm EADS’ labour relations and charge at or prior to closing, which would have a negative impact public relations, and have led and could lead to work stoppages on EADS’ future results of operation. Risk-sharing partners at and/or demonstrations. In the event that these work stoppages divested businesses may also fail to perform as expected. and/or demonstrations become prolonged, or the costs of Dependence on Certain Suppliers and Subcontractors EADS is dependent on numerous key suppliers and subcontractors EADS to find a replacement for certain suppliers without to provide it with the raw materials, parts and assemblies that it significant delay, which could negatively affect EADS’ future needs to manufacture its products. Certain of these suppliers have results of operation and financial condition. experienced severe financial difficulties recently in light of the ongoing financial crisis. If these difficulties were to intensify, EADS may also decide in the future to provide financial or some suppliers could be forced to reduce their output, shut down other assistance to certain suppliers to ensure an uninterrupted their operations or file for bankruptcy protection, which could supply of materials and parts, which could expose it to credit disrupt the delivery of supplies to EADS. It may be difficult for risk on the part of such suppliers. Programme-Specific Risks In addition to the risk factors mentioned above, EADS also faces > A350 XWB programme. In connection with the A350 XWB the following programme-specific risks (while this list does not programme, EADS faces the following main challenges: purport to be comprehensive, it highlights the current risks (i) meeting the technical performance targets for the aircraft, believed to be material by management): (ii) ensuring the ramp-up of key skilled personnel, e.g. for composite stress and design, (iii) securing the achievement > A380 programme. In connection with the A380 programme of recurring cost targets, (iv) ensuring that the new industrial and following the delivery delays announced in 2006, EADS organisation resulting from Power8 supports effective faces the following main challenges: (i) management of stress development, (v) ensuring the performance of the risk in the supply chain as a result of the steep ramp-up in sharing partners, including those selected for sites divested production in coming years, (ii) avoidance of production by Airbus, and (vi) achieving a second engine choice; disruptions and related costs, in particular in connection with the implementation of Power8 and its effect on labour > A400M programme. In connection with the A400M relations, (iii) successful implementation of a digital mock-up programme which represents a significant exposure for for future A380 production, and (iv) managing maturity in EADS, the Company faces the following main challenges: service. EADS’ ability to successfully meet these challenges (i) negotiating changes to the programme schedule along with will be critical in ensuring the smooth production of “Wave 2” changes to other areas of the contract with launch customers, aircraft, i.e. those beyond the initial 25 aircraft produced; (ii) working with the engine consortium and with major EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 15


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    RISK FACTORS > 2. | Business-Related Risks 1 2 3 4 5 6 Back to Contents suppliers of mission critical systems and system integration consequences of the shift in the delivery schedule have not to firm up a reliable programme schedule, including a reliable been taken into account when reassessing the A400M date for the first flight, (iii) managing a flight test programme provision in the 2008 financial statements. Therefore, that differs significantly from that of commercial Airbus significant negative income statement impacts may still have aircraft, (iv) integrating the civil systems (flight management, to be accounted for in future periods when such costs become navigation, etc.) with the complex military systems, estimable or triggering events lead to a return to the estimate (v) ensuring that the aircraft is both commercially certified at completion method of accounting. Potential benefits from and meets the range of military qualifications required by future discussions with customers, if any, might reduce such programme customers in each jurisdiction, and (vi) managing impacts, but would only be taken into account once agreed the anticipated difficulties on the ramp-up. upon by OCCAR and the launch customer nations. Further, in light of the ongoing delays on the A400M In conclusion, while EADS believes that the cost and revenue programme, the Organisation Conjointe en Matière d’Armement estimates currently incorporated in the financial statements (“OCCAR”) has the contractual right with unanimous under the early stage method of accounting reflect its most mandate of all launch customer nations to claim termination appropriate judgments under the current circumstances, the of the whole A400M launch contract as of 1 April 2009. In technical complexity of the A400M programme and the case of valid termination, Airbus Military SL (“AMSL”) uncertainty about the outcome of on-going technical would be obliged to repay to OCCAR all initial payments, developments imply that further financial risks may arise, pre-delivery payments and any other payments received from such as significant additional delays in delivery schedule, OCCAR. The total amount is approximately € 5.7 billion. additional contract completion costs as well as the ultimate Separately, each of the launch customer nations may claim amount of liquidated damages to be paid. Materialisation of cancellation of those individual aircraft ordered which would these risks could also trigger an additional significant financial be substantially delayed. This would trigger reimbursement of exposure to potential order cancellations or even a potential the initial payments and pre-delivery payments received from termination of the whole A400M programme. OCCAR in respect of such aircraft. Depending on the magnitude of these potential cancellations, there could be a For further information relating to the A400M programme, material negative effect on EADS’ future results of operation, see “Information on EADS’ Activities — 1.1.2 Airbus — financial condition and reputation. Airbus Military”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes Under the current scenario of a continuation of the A400M to the Consolidated Financial Statements (IFRS) — Note 3: programme, significant penalties based on contractual Accounting for the A400M programme”; and clauses could also be notified for a cumulative amount of € 1.4 billion, due in case each aircraft delivery would be > NH90 programme. In connection with the NH90 programme, delayed by more than 10 months from the original EADS faces the following main challenges: (i) meeting the contractual timetable. Based upon the current probable development schedule, the cost objectives and the technical minimum delivery delays, this penalty clause would apply at content (full operational configuration of the TTH (Tactical least to a significant number of aircraft, but would be subject Transport Helicopter) version and final configuration of the to future discussion with customers. The A400M provision NFH (Nato Frigate Helicopter) version) of ongoing as of 31 December 2008 includes EADS’ current assessment development programmes on the numerous versions, of the prorate amount of penalties to be finally paid. (ii) managing the industrial ramp-up on the programme, and (iii) assuring support readiness in connection with multiple As they cannot currently be estimated, various potential fleets entering into service. additional costs linked to the unquantifiable financial 16 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    RISK FACTORS > 3 . | Legal Risks 1 2 3 4 5 6 Back to Contents 3. LEGAL RISKS Dependence on Joint Ventures and Minority Holdings EADS generates a substantial proportion of its revenues through EADS exercises varying and evolving degrees of control in the various consortia, joint ventures and equity holdings. These consortia, joint ventures and equity holdings in which it arrangements include primarily: participates. While EADS seeks to participate only in ventures in which its interests are aligned with those of its partners, the > the Eurofighter and AirTanker consortia; risk of disagreement or deadlock is inherent in a jointly controlled entity, particularly in those entities that require the > three principal joint ventures: MBDA, ATR and Atlas unanimous consent of all members with regard to major Electronik; decisions and specify limited exit rights. The other parties in these entities may also be competitors of EADS, and thus may > majority interest: Dornier GmbH; and have interests that differ from those of EADS. > investment in associates: Dassault Aviation. In addition, in those holdings in which EADS is a minority partner or shareholder, EADS’ access to the entity’s books and The formation of partnerships and alliances with other market records, and as a consequence, EADS’ knowledge of the entity’s players is an integral strategy of EADS and the proportion of operations and results, is generally limited as compared to sales generated from consortia, joint ventures and equity entities in which EADS is a majority holder or is involved in the holdings may rise in future years. This strategy may from time day-to-day management. to time lead to changes in the organisational structure, or realignment in the control, of EADS’ existing joint ventures. Product Liability and Warranty Claims EADS designs, develops and produces a number of high profile products fails to perform as designed. While EADS believes that products of large individual value, particularly civil and military its insurance programmes are adequate to protect it from such aircraft and space equipment. EADS is subject to the risk of liabilities, no assurances can be given that claims will not arise product liability and warranty claims in the event that any of its in the future or that such insurance cover will be adequate. Intellectual Property EADS relies upon patent, copyright, trademark and trade secret jurisdictions EADS may be unable to protect its proprietary laws, and agreements with its employees, customers, suppliers technology adequately against unauthorised third-party copying and other parties, to establish and maintain its intellectual or use, which could adversely affect its competitive position. property rights in technology and products used in its operations. Despite these efforts to protect its intellectual In addition, although EADS believes that it lawfully complies property rights, any of EADS’ direct or indirect intellectual with the intellectual property rights granted to others, it could property rights could be challenged, invalidated or have claims asserted against it for infringement of the circumvented. Further, the laws of certain countries do not intellectual property rights of third parties. These claims could protect EADS’ proprietary rights to the same extent as the laws harm its reputation, cost it money and prevent it from offering in Europe and the United States. Therefore, in certain certain products or services. Any claims or litigation in this area, EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 17


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    RISK FACTORS > 3. | Legal Risks 1 2 3 4 5 6 Back to Contents whether EADS ultimately wins or loses, could be time- enter into these licensing arrangements on acceptable terms. If a consuming and costly, injure EADS’ reputation or require it to claim of infringement were successful against it, an injunction enter into licensing arrangements. EADS might not be able to might be ordered against EADS, causing further damages. Export Controls and Other Regulations The export market is a significant market for EADS. In addition, markets may have a material adverse effect on EADS’ business, many of the products EADS designs and manufactures for financial condition and results of operations. military use are considered to be of national strategic interest. Consequently, the export of such products outside of EADS’ EADS is also subject to a variety of other governmental domestic markets may be restricted or subject to licensing and regulations that may adversely affect its business and financial export controls, notably by the UK, France, Germany and Spain, condition, including among others, regulations relating to where EADS carries out its principal military activities as well commercial relationships (including the recent modifications to as by other countries where suppliers come from, notably, the French law in this regard), the use of its products, labour US. There can be no assurance (i) that the export controls to practices and dealings with foreign officials. In addition, EADS’ which EADS is subject will not become more restrictive, (ii) that ability to market new products and enter new markets may be new generations of EADS products will not also be subject to dependent on obtaining government certifications and approvals similar or more stringent controls or (iii) that geopolitical factors in a timely manner. Although EADS seeks to comply with all will not make it impossible to obtain export licenses for one or such regulations, even unintentional violations or a failure to more clients or constrain EADS’ ability to perform under comply could have a material adverse effect on EADS’ business, previously signed contracts. Reduced access to military export financial condition and results of operations. Securities Litigation Since 2006, several investigations and proceedings have been could result in the imposition of fines, damages or other initiated against EADS and certain of its executives for alleged remedies and sanctions. The conduct of these proceedings could breaches of market regulations and insider trading rules, negatively impact EADS’ stock price and reputation. In addition, respectively, with respect to, among other things, the A380 EADS expects to continue to incur time and expenses associated programme delays announced in 2006. See “Information on with its defence, regardless of the outcome, and this may divert EADS’ Activities — 1.1.9 Legal and Arbitration Proceedings”. the efforts and attention of management from normal business Although EADS is unable at this point to predict the outcome operations. of these investigations and proceedings, it is possible that they 18 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    RISK FACTORS > 4 . | Industrial and Environmental Risks 1 2 3 4 5 6 Back to Contents 4. INDUSTRIAL AND ENVIRONMENTAL RISKS Given the scope of its activities and the industries in which it for personal injury, property damage or damage to the operates, EADS is subject to stringent environmental, health environment (including natural resources). These potential and safety laws and regulations in numerous jurisdictions liabilities may not always be covered by insurance, or may be around the world. EADS therefore incurs, and expects to only partially covered. The obligation to compensate for such continue to incur, significant capital expenditure and other damages could have a negative effect on EADS’ results of operating costs to comply with increasingly complex laws and operation and financial condition. regulations covering the protection of the natural environment as well as occupational health and safety, including costs to In addition, the various products manufactured and sold by prevent, control, eliminate or reduce emissions into the EADS must comply with relevant environmental, health and environment, releases of air pollutants into the atmosphere, safety and substances/preparations related laws and regulations discharges to surface and subsurface water and soil, usage of in the jurisdictions in which they operate. Although EADS certain substances, the disposal and treatment of waste seeks to ensure that its products meet the highest quality materials, and costs to comply with reporting or warning standards, increasingly stringent and complex laws and regulations. Moreover, new laws and regulations, the regulations, new scientific discoveries, delivery of defective imposition of tougher licence requirements, increasingly strict products or the obligation to notify or provide regulatory enforcement or new interpretations of existing laws and authorities or others with required information (such as under regulations may cause EADS to incur increased capital the EU regulation known as “REACH”, which addresses the expenditure and operating costs in the future in relation to the production and use of chemical substances) may force EADS above, which could have a negative effect on its results of to adapt, redesign, redevelop, recertify and/or eliminate its operation and financial condition. products from the market. Seizures of defective products may be pronounced, and EADS may incur administrative, civil or If EADS fails to comply with these environmental, health and criminal liability. In the event of an accident or other serious safety laws and regulations, even if caused by factors beyond incident involving a product, EADS may be required to its control, that failure may result in the assessment of civil or conduct investigations and undertake remedial activities. criminal penalties and fines against it. Regulatory authorities Employees, customers and other third parties may also file may require EADS to conduct investigations and undertake claims for personal injury, property damage or damage to the remedial activities, curtail operations or close installations or environment (including natural resources). facilities temporarily, including to prevent imminent risks. In the event of an industrial accident or other serious incident, For more information, please see “Corporate Responsibility & employees, customers and other third parties may file claims Sustainability — 5.3 Environmental Care”. EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 19


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    1 2 3 4 5 6 Back to Contents 1 Information on EADS’ Activities 1.1 PRESENTATION OF THE EADS GROUP 22 1.1.1 Overview 22 1.1.2 Airbus 28 1.1.3 Eurocopter 38 1.1.4 Astrium 42 1.1.5 Defence & Security 47 1.1.6 Other Businesses 53 1.1.7 Investments 54 1.1.8 Insurance 55 1.1.9 Legal and Arbitration Proceedings 56 1.1.10 Incorporation by Reference 58 1.2 RECENT DEVELOPMENTS 58 EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 21


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents 1.1 PRESENTATION OF THE EADS GROUP 1.1.1 Overview Due to the nature of the markets in which EADS operates and to weather the financial crisis from a stronger position. Through the confidential nature of its businesses, any statements with respect a new organisational structure, leaner processes and stricter cash to EADS’ competitive position set out in paragraphs 1.1.1 through management, Power8 has significantly reduced Airbus’ cost base. 1.1.7 below have been based on EADS’ internal information In 2008, Power8 delivered cost savings of approximately sources, unless another source has been specified below. € 1.3 billion, which is more than half way to the € 2.1 billion objective for 2010. To complement Power8 launched in 2007, With consolidated revenues of € 43.3 billion in 2008, EADS is EADS initiated other measures to improve its global efficiency. Europe’s premier aerospace and defence company and the second Power8 Plus has been launched as a Group-wide initiative with largest aerospace and defence company in the world. In terms of the goal of achieving EBIT* contributions of € 1 billion market share, EADS is among the top two manufacturers of beginning in 2011–2012. Airbus is expected to contribute commercial aircraft, civil helicopters, commercial space launch roughly two-thirds of the targeted cost savings, with the vehicles and missiles, and a leading supplier of military aircraft, remaining portion to be contributed by the Eurocopter, Astrium satellites and defence electronics. In 2008, it generated and Defence & Security divisions as well as by EADS approximately 75% of its total revenues in the civil sector and headquarters. In addition, a programme called “Future EADS” 25% in the defence sector. aims at a leaner organisation at Group level and better integration mainly through shared services and targets cost 2008 HIGHLIGHTS savings at a minimum level of € 200 million in 2011–2012. EADS delivered satisfactory results in 2008, while continuing In 2008, EADS also made significant progress in focusing on its to face challenges in critical programmes. EADS recorded strong core business and successfully completed its aerostructures order intake across its product portfolio in 2008, receiving reorganisation strategy initiated under Power8. In the course of € 98.6 billion in orders for the year. In addition, Airbus aircraft 2008, the Laupheim site and part of the Filton site were sold, and helicopter deliveries were at historically high levels. For the while the German sites Nordenham, Varel and Augsburg were full year 2008, EADS delivered an EBIT* of € 2.8 billion. The merged into Premium AEROTEC and the French sites at Group benefited from its strong underlying performance and Meaulte and St. Nazaire Ville into Aerolia. These two companies foreign currency effects while dealing with challenges in critical became operational on 1 January 2009. Furthermore, EADS sold programmes. Revenues increased by 10.6% to € 43.3 billion. a 70% holding in Socata to Daher in early 2009, and has retained EADS’ order backlog increased to € 400.2 billion. Net cash the remaining 30% for the time being. In parallel, Airbus amounted to € 9.2 billion at the end of the year due to better continues to expand its industrial footprint. The new A320 than expected free cash flow generation. Final Assembly Line in Tianjin, China opened in September and will help to secure access to the fast-growing Chinese market. EADS has taken several proactive decisions to face the ongoing financial and economic crisis head on. With weaker air traffic At the same time, the year 2008 was characterised by challenges and more difficult financing conditions, the commercial aircraft on key development programmes. The A400M programme has market is expected to slow, with the risk of deferrals and been delayed and constitutes a significant risk, while Airbus cancellations. Accordingly, Airbus has adapted production rates continues to face a strong challenge in ramping up A380 of its A320 family programme from 36 to 34 aircraft per month production. With respect to the A400M programme in from October 2009 onwards. Production rates of the A330/A340 particular, it will have to be brought back on track, with a clear family will be paused at the current level of 8.5 aircraft per and visible time schedule. In order to simplify the management month, and not increased further as previously planned (see structure and to exploit synergies with the rest of Airbus, “— 1.2 Recent Developments”). Airbus is continuously EADS announced in December 2008 that it would integrate the monitoring the business environment and intends to adapt its Military Transport Aircraft division into Airbus under the name production policy as the economic environment changes. “Airbus Military”. In particular, the integration is intended to strengthen management of the challenging A400M military The transformation process initiated in 2006 in reaction to the transport programme. A380 delays and the US$ volatility is expected to allow EADS * EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals. 22 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents In the meantime, in January 2009, Airbus Military and EADS Following the ministerial conference of European Space Agency, announced that they had proposed a new programme approach or ESA, in November 2008, the council called for investments for the A400M to the European launch nations, through in innovation, including space technologies and services, despite OCCAR, with the aim to find an appropriate way forward for the financial crisis. this programme. Airbus Military and EADS wanted to initiate discussions around the programme schedule along with changes During 2008, Airbus delivered a record number of aircraft while to other areas of the contract including in particular certain addressing major industrial challenges. Airbus delivered technical characteristics of this military aircraft. In line with 483 aircraft, 30 more than compared to 2007. The revised target complex military development programmes, Airbus Military of delivering 12 A380 aircraft in 2008 was reached. In what was suggested to resume series production only once adequate a difficult year for the global economy, Airbus’ order intake was maturity is reached based on flight test results. With such new strong and above expectations. Airbus recorded 900 firm new approach, the first delivery of the A400M would then occur gross orders, increasing the order backlog to a new record of three years after its first flight. Airbus Military and EADS will 3,715 aircraft. Net orders, after accounting for cancellations, only be able to update all of the financial consequences of stood at 777 in 2008. The recently launched A350 XWB won a revised industrial plan, once the availability of the engines and 163 new firm orders increasing the total order count to 478 mission critical systems is firmly determined and once OCCAR´s from 29 customers. position on the proposal is known. See “Risk Factors”, “— 1.1.2 Airbus — Airbus Military”, “Management’s Discussion and Airbus Military (the former Military Transport Aircraft Analysis of Financial Condition and Results of Operations” and division) experienced delays in its flagship A400M heavy “Notes to the Consolidated Financial Statements (IFRS) — transport aircraft, which overshadowed its other activities and Note 3: Accounting for the A400M programme”. weighed on its financial results. In September 2008, EADS announced an undefined delay of the first flight of the A400M, The year 2008 started strongly for the commercial business with mainly due to the unavailability of the propulsion system. In the order backlog reaching new highs while the defence and the meantime, Airbus Military and EADS have proposed a new institutional activities showed a promising performance. programme approach for the A400M programme, as discussed However, the overall business environment became above. Otherwise, the first C-295 aircraft has been delivered to unpredictable and turbulent in the second half of the year, due Portugal. The A330 Multi-Role Tanker Transport (MRTT) to fluctuating oil prices and exchange rates. The financial aircraft won four out of the five competitive tenders worldwide, landscape was hit by a credit crisis that impacted general growth including the UK’s Future Strategic Tanker Aircraft programme prospects, household wealth and industry liquidity. Despite (14 orders), the United Arab Emirates’ order (3 orders) and Saudi downgraded air traffic growth forecasts and indications of Arabia’s order (1 order). The Northrop Grumman KC-30 Tanker consolidation in the airline industry, the civil business ended aircraft that is based on A330 MRTT was initially selected by the year with solid order backlogs. A weaker financing the US Air Force, even though the decision was later overturned environment will certainly put pressure on manufacturers to for legal reasons related to the management of the tender process find solutions for their customers’ financing needs. Historically, by the DoD (US Department of Defense). air traffic follows changes in annual global GDP and consequently this has had a slowdown effect on air transport Eurocopter met its 2008 objectives for helicopter sales and and passenger traffic. The fall in the oil price provides some deliveries and increased its revenues by 7.5%. Representing relief for airlines and commercial customers and the general a production ramp-up of 20% as compared to 2007, a total of easing of commodity prices may lead to lower costs for 588 helicopters have been delivered. At the end of 2008, the manufacturers in the mid-term. order backlog amounted to € 13.8 billion, or the equivalent of 1,515 helicopters. Eurocopter made technical progress during the Defence spending is expected to remain stable as it is closely year by fully qualifying the Tiger in its HAP and UHT variants, linked to geopolitical tensions and security needs as well as and by ramping up NH90 production with the first deliveries economic considerations. The long term nature of the from the Finnish and Australian assembly lines. After the investments in defence and space markets makes these segments delivery of the 50th UH-72A Lakota to the US Army, the US less impacted in the short term. In addition, defence related Navy became a Lakota customer. Meanwhile, production of the investments are an efficient means of sustaining a country’s first EC175 prototype that is being co-developed with Chinese industrial base and supporting high-technology jobs. Although partners was launched. precedents suggest that the new US Administration may alter the defence budget during 2009, there is also a possibility that Astrium reinforced its competitive position in 2008. As prime any significant change in this budget will be postponed due to contractor on Europe’s contribution to the International Space the Quadrennial Defence Review to be held at the end of 2010. Station (ISS), Astrium achieved a historic technical success as the It is also worth noting that there is a time lag of several months Columbus laboratory and Automated Transfer Vehicle (ATV) between the defence budget appropriations and outlays. docked with the ISS in early 2008. The Ariane 5 launcher won EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 23


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents 13 orders, more than half the open market. It has proven highly other divisions in future years while still maintaining long- reliable, performing 28 successful launches in a row since 2003. term parity with Boeing in the commercial aircraft segment. In Also within the Space Transportation business unit, France’s particular, EADS will seek to increase the proportion of new-generation M51 ballistic missile completed its final trial revenues emanating from its defence and security businesses, flight in 2008. While the telecommunications satellite market which tend to be less cyclical and more predictable in nature. slowed, the Satellites business unit maintained its market share, Within this area, EADS will focus on further strengthening winning two orders, and launching seven telecommunication its presence in platforms and systems (in particular platform- and two observation satellites. ESA awarded Astrium three related systems architecture and integration). The Group will major scientific satellites, while Chile and Spain each ordered an consider all options for achieving such growth, including observation satellite. The Services business unit reached targeted acquisitions or partnerships that enhance its overall maturity. The Paradigm secure communications system became competitive position and add capabilities to its portfolio, in fully operational and able to service the UK Ministry of particular in the US and Asia; Defence following delivery of the third and final satellite, Skynet 5c. Progress was satisfactory on similar communications > Increase profitability. Through better internal cost control, programmes for Germany and the United Arab Emirates. lightened capital intensity, enhanced programme and risk management and a more streamlined industrial organisation, Finally, within the Defence & Security division, the established EADS has taken the initial steps towards restoring its Eurofighter, missiles and radar programmes continue to support profitability. EADS intends to increasingly focus on its core growth, with increasingly competitive technologies in unmanned activities, which means moving towards a new business aerial vehicles (UAVs) and global security systems playing an model and reallocating resources away from certain non-core increasing role. For Eurofighter, delivery of the first tranche of legacy activities. Through more optimal resource allocation 148 aircraft was completed in 2008 and final assembly of the and stronger development of more profitable segments, second tranche of 236 aircraft is currently ramping up, with EADS will strive to establish a level of profitability that is 22 aircraft delivered in 2008. Regarding UAVs, the Defence & both attractive to its shareholders and sufficient to fund its Security division is the only European supplier able to provide future development initiatives; both large and small systems. Work on the risk reduction study for the Advanced UAV continued with the identification of > Expand its services offering. Historically, EADS’ growth has France, Germany and Spain’s capability requirements; for the been driven by the sale of technologically advanced products two French UAV programmes, DRAC and SIDM, delivery and solutions. At the same time, management is focused on milestones were achieved. Furthermore, aerial target drones were increasing EADS’ presence in the high value services market, delivered to the US Army. In line with Group strategy, the given its countercyclical nature and opportunities for sustained Defence & Security division continued to expand security growth. Factors supporting this market include the rapid capabilities. The acquisition of PlantCML brought access to the expansion of EADS’ in-service commercial and defence fleet US market. In Beijing, an EADS-supplied TETRA network — which will require support throughout its life cycle — as — the largest in Asia — played a vital role in securing the 2008 well as the increasing tendency on the part of defence and Olympic Games. governmental agencies to outsource various key functions. EADS will seek the provision of high value-added services related to both platforms and systems, including training, STRATEGY advanced in-service support and air traffic management In order to maximise value for its shareholders, management systems. Revenue from services activities is targeted to intends to reinforce EADS’ position as a leader in major global account for 25% of EADS’ consolidated revenues by 2020; aerospace and defence markets. Beyond addressing current operational challenges, EADS will continue to focus on > Become a truly global industrial group. A significant portion of providing superior value to its customers through innovative EADS’ suppliers, facilities and employees are based in Europe, product and service solutions. EADS has defined the following while the majority of its revenues originate outside of Europe. long-term objectives for the future pursuant to its “Vision In order to ensure continued access to certain markets and 2020” plan: technology, optimise its costs and hedge against future US dollar volatility, EADS will aim to implement a long-term > Improve portfolio balance between Airbus and other EADS industrial strategy that corrects this imbalance by expanding activities. In 2008, revenues at Airbus represented 63.5% of its industrial footprint and partnerships in key markets outside EADS’ consolidated revenues for the year. As a result, the of Europe, including the US, China, Russia and India. In the Group remains highly vulnerable to commercial aircraft cycles, US, the goal is to establish a firm industrial and commercial the financial burden and risk associated with aircraft presence in the world’s largest defence and homeland security programmes and US dollar exchange rate fluctuation. EADS market. By 2020, EADS is seeking to have 40% of its suppliers will therefore seek to increase the contribution to revenues by and 20% of its employees based outside of Europe; 24 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents > Continue to innovate. Innovation in product, technology, Airbus Military (former MTA division) manufacturing and customer offerings will define EADS’ Airbus Military produces and sells special mission aircraft, future. With development cycles shortening and new which are derived from existing aircraft platforms and are competitors emerging in all fields, EADS must maintain its dedicated to specialised military and security tasks such as technological edge and cover a broad spectrum of capabilities in-flight refuelling capabilities, maritime surveillance and in order to remain a market leader. To maintain its innovative antisubmarine warfare. Airbus Military also manufactures and edge, EADS will seek to systematically employ the latest sells medium and light military transport aircraft and is digital design and engineering tools in order to complete responsible for the European heavy military transport A400M major platform developments more quickly, and will seek to project. In 2008, the former MTA division recorded revenues of accelerate the pace at which it reviews its core technologies so € 2.8 billion, representing 6.4% of EADS’ total revenues. See as to close gaps against the competition. These core “— 1.1.2 Airbus — Airbus Military”. technologies are expected to include C4I, network centric operations and UAV technology, among others; Eurocopter > Focus on the environment. EADS will seek to anticipate and Eurocopter is a global leader in the civil and military helicopter address future environmental challenges as part of its market, offering one of the most complete and modern ranges of commitment to reconciling environmental responsibility with helicopters and related services. In 2008, Eurocopter maintained economic success. Being greener, cleaner, quieter and smarter, its leadership by capturing more than 50% of the civil helicopter the A380 has already set new standards for air transport and market in terms of deliveries and by achieving strong growth the environment. EADS will pursue additional initiatives in in its military order book. In 2008, Eurocopter recorded the future — including a comprehensive environmental revenues of € 4.5 billion, representing 10.4% of EADS’ total management system based on ISO 14001 to cover all EADS revenues. See “— 1.1.3 Eurocopter”. activities — in order to render eco-efficiency a competitive advantage over the long-term. Astrium Astrium designs, develops and manufactures satellites, orbital ORGANISATION OF EADS BUSINESSES infrastructures and launcher systems and provides space Following the integration of the former Military Transport services. It is the third largest space systems manufacturing Aircraft division (the “MTA division”) into Airbus as of company in the world after Boeing and Lockheed Martin and the 1 January 2009 under the name “Airbus Military”, EADS leading European supplier of satellites, orbital infrastructures, organises its businesses into the following four operating launchers and associated services. Astrium has three main divisions: (1) Airbus, (2) Eurocopter, (3) Astrium and (4) Defence business units: Astrium Satellites, Astrium Space Transportation & Security. The chart set out in “General Description of the and Astrium Services. These include the provision of launch Company and its Share Capital — 3.3.6 Simplified Group services through Astrium’s shareholdings in Arianespace Structure Chart” illustrates the allocation of activities among (Ariane 5 launcher), Starsem (Soyuz launcher) and Eurockot these four divisions. (Rockot launcher), as well as services related to telecommunications and Earth observation satellites through wholly or majority owned subsidiaries such as Paradigm Secure Airbus Communications, Infoterra and Spot Image. In 2008, Astrium Commercial Aircraft recorded revenues of € 4.3 billion, representing 9.9% of EADS’ Airbus is one of the world’s two leading suppliers of commercial total revenues. See “— 1.1.4 Astrium”. aircraft of more than 100 seats. Since it was founded in 1970 and up to the end of 2008, Airbus has received orders for Defence & Security 9,215 aircraft from approximately 306 customers around the The Defence & Security division (the “DS division”) serves as world. Its market share of annual deliveries worldwide has the main pillar of EADS’ defence and security activities. By grown from 15% in 1990 to 54% in 2008. At 31 December 2008, combining its Defence and Communications Systems, Defence Airbus’ backlog of orders (3,715 aircraft) stood at approximately Electronics, Military Air Systems and missile systems 86% of total EADS worldwide backlog. Gross order intake was (consisting of EADS’ 37.5% stake in MBDA) business units 900 aircraft and after accounting for cancellations, net order within one division, EADS has streamlined its defence and intake for 2008 was 777 aircraft. In 2008, Airbus recorded security business to better meet the needs of customers that revenues of € 27.5 billion, representing 63.5% of EADS’ total require integrated defence and security solutions. In 2008, the revenues. See “— 1.1.2 Airbus”. DS division recorded revenues of € 5.7 billion, representing 13.1% of EADS’ total revenues. See “— 1.1.5 Defence & Security”. EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 25


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents Investments SUMMARY FINANCIAL AND OPERATING DATA Among its significant investments, EADS holds a 46.3% stake in The following tables provide summary financial and operating Dassault Aviation, a major participant in the world market for data for EADS for the past three years. military jet aircraft and business jets. See “— 1.1.7 Investments”. CONSOLIDATED REVENUES BY DIVISION FOR THE YEARS ENDED 31 DECEMBER 2008, 2007 AND 2006 Year ended 31 December 2008 Year ended 31 December 2007 Year ended 31 December 2006 Amount in € bn In percentage* Amount in € bn In percentage* Amount in € bn In percentage* Airbus 27.4 61.5% 25.2 63.9% 25.2 62.5% Military Transport Aircraft 2.8 6.2% 1.1 2.9% 2.2 5.5% Eurocopter 4.5 10.0% 4.2 10.5% 3.8 9.4% Astrium 4.3 9.6% 3.6 9.0% 3.2 8.0% Defence & Security** 5.7 12.7% 5.4 13.7% 5.9 14.6% Total divisional Revenues 44.7 100% 39.5 100% 40.3 100% Other Businesses 1.5 1.4 1.2 Headquarters/Consolidation*** (2.9) (1.8) (2.1) Total 43.3 39.1 39.4 * Before “Other Businesses” and “Headquarters/Consolidation”. ** MBDA proportionally consolidated at 37.5% in 2007 and 2008, 50% in 2006. 2006 figures have not been restated. In addition, business activities at EADS North America have been reclassified from Defence & Security to Other Businesses in 2007 and 2008 and are not material. 2006 figures have not been restated. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. *** Includes inter-company eliminations and headquarters sales. CONSOLIDATED REVENUES BY GEOGRAPHICAL AREA FOR THE YEARS ENDED 31 DECEMBER 2008, 2007 AND 2006 Year ended 31 December 2008 Year ended 31 December 2007 Year ended 31 December 2006 Amount in € bn In percentage* Amount in € bn In percentage* Amount in € bn In percentage* Europe 18.9 43.6% 17.4 44.4% 17.1 43.6% North America 7.8 18.0% 7.9 20.3% 9.4 23.9% Asia/Pacific 10.8 24.9% 8.8 22.6% 7.9 19.9% Rest of the World** 5.8 13.5% 5.0 12.7% 5.0 12.6% Total 43.3 100% 39.1 100% 39.4 100% * Percentage of total revenues after eliminations. ** Including the Middle East. 26 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents CONSOLIDATED ORDERS BOOKED FOR THE YEARS ENDED 31 DECEMBER 2008, 2007 AND 2006 Year ended 31 December 2008 Year ended 31 December 2007 Year ended 31 December 2006 Amount in € bn In percentage* Amount in € bn In percentage* Amount in € bn In percentage* Orders booked** Airbus*** 82.0 82% 117.3 86% 53.4 77% Military Transport Aircraft 5.1 5% 0.8 1% 1.6 2% Eurocopter 4.9 5% 6.6 5% 4.9 7% Astrium 3.3 3% 4.5 3% 4.4 6% Defence & Security**** 5.3 5% 7.5 5% 5.2 8% Total divisional orders 100.6 100% 136.7 100% 69.5 100% Other Businesses 1.9 2.0 1.5 Headquarters/Consolidation (3.9) (1.9) (1.9) Total 98.6 136.8 69.1 * Before “Other Businesses” and “Headquarters/Consolidation”. ** Without options. *** Based on catalogue prices for commercial aircraft activities. **** MBDA proportionally consolidated at 37.5% in 2007 and 2008, 50% in 2006. 2006 figures have not been restated. In addition, business activities at EADS North America have been reclassified from Defence & Security to Other Businesses in 2007 and 2008 and are not material. 2006 figures have not been restated. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. CONSOLIDATED BACKLOG FOR THE YEARS ENDED 31 DECEMBER 2008, 2007 AND 2006* Year ended 31 December 2008 Year ended 31 December 2007 Year ended 31 December 2006 Amount in € bn In percentage** Amount in € bn In percentage** Amount in € bn In percentage** Backlog*** Airbus**** 344.8 84% 283.8 81% 210.1 77% Military Transport Aircraft 22.3 6% 19.9 6% 20.3 8% Eurocopter 13.8 3% 13.5 4% 11.0 4% Astrium 11.0 3% 12.9 4% 12.3 5% Defence & Security***** 17.0 4% 17.8 5% 17.6 6% Total divisional Backlog 408.9 100% 347.9 100% 271.3 100% Other Businesses***** 3.4 2.7 2.3 Headquarters/Consolidation (12.1) (11.1) (10.8) Total 400.2 339.5 262.8 * For a discussion on the calculation of backlog, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — 2 .1.4.1 Order Backlog”. ** Before “Other Businesses” and “Headquarters/Consolidation”. *** Without options. **** Based on catalogue prices for commercial aircraft activities. ***** MBDA proportionally consolidated at 37.5% in 2007 and 2008, 50% in 2006. 2006 figures have not been restated. In addition, business activities at EADS North America have been reclassified from Defence & Security to Other Businesses in 2007 and 2008 and are not material. 2006 figures have not been restated. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. RELATIONSHIP BETWEEN EADS N.V. integral part of the overall management of the Group. AND THE GROUP In particular, finance activities pursued by EADS N.V. are in support of the business activities and strategy of the Group. EADS N.V. itself does not engage in the core aerospace, defence In connection therewith, EADS N.V. provides or procures the or space business of its Group but coordinates related businesses, provision of services to the subsidiaries of the Group. General sets and controls objectives and approves major decisions for its management service agreements have been put in place with the Group. As the parent company, EADS N.V. conducts activities subsidiaries and services are invoiced on a cost plus basis. which are essential to the Group activities and which are an EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 27


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents For management purposes, EADS N.V. acts through its Board of Within the framework defined by EADS, each division, Directors, Executive Committee, and Chief Executive Officer in business unit and subsidiary is vested with full entrepreneurial accordance with its corporate rules and procedures detailed in responsibility. “Corporate Governance”. 1.1.2 Airbus COMMERCIAL AIRCRAFT Power8. As part of Power8, Airbus management is seeking to implement strong cost reduction and cash generating efforts Introduction and Overview with the goal of achieving EBIT* contributions of € 2.1 billion Airbus is one of the world’s two leading suppliers of commercial from 2010 onwards and an additional € 5 billion of cumulative aircraft of more than 100 seats. Since it was founded in 1970 cash flow from 2007 to 2010. Savings realised pursuant to and up to the end of 2008, Airbus has received orders for Power8 provided gross cost savings of € 1.3 billion in 2008 9,215 aircraft from approximately 306 customers around the compared to the projected cost baseline. See “Management’s world. Its market share of annual deliveries worldwide has Discussion and Analysis of Financial Condition and Results grown from 15% in 1990 to 54% in 2008. In 2008, Airbus of Operations”. recorded revenues of € 27.5 billion, representing 63.5% of EADS’ total revenues. In addition, a further cost savings programme referred to as “Power8 Plus” was launched in September 2008, with the goal With 483 aircraft deliveries in 2008 (453 in 2007), Airbus was of achieving EBIT* contributions of € 650 million beginning in for the sixth consecutive year the largest supplier of commercial 2011-2012. Airbus management intends to achieve the Power8 aircraft in the world. Airbus received 900 gross orders in 2008 Plus objectives by extending the Power8 initiatives up to 2012 (compared to 1,458 gross orders in 2007). After accounting for (€ 350 million) and through further globalisation of engineering cancellations, net order intake for 2008 was 777 aircraft and manufacturing work (€ 300 million). (compared to 1,341 aircraft in 2007). At 31 December 2008, Airbus’ backlog of orders was 3,715 aircraft, representing Developing the most comprehensive line of products in approximately 86% of total EADS worldwide backlog. response to customer needs Airbus continuously seeks to develop and deliver new products As of 1 January 2009, the former Military Transport Aircraft to meet customers’ evolving needs. In this regard, Airbus is division has been integrated into Airbus under the name of currently pursuing (i) implementation of the current A380 “Airbus Military”. This integration aims at reinforcing the delivery schedule, (ii) the development of the new A350 XWB management of the A400M programme and other Airbus family of highly advanced medium capacity long-range aircraft, military derivatives programmes while maximising synergies (iii) the gradual expansion of relevant freighter applications across with other Airbus functions and entities. For further information the range of Airbus aircraft, by developing the A330-200F and related to Airbus Military, see “Airbus Military” below. the A320 passenger-to-freighter, (iv) the continuous improvement of existing models’ competitive edge in their respective markets, Strategy (v) the entry into the military business through new aircraft such Airbus’ primary goal is to deliver strong results in a sustained as the A400M or the development of military derivatives manner, while commanding between 40% and 60% of the world products such as the Multi Role Tanker Aircraft based on the commercial aircraft market over the long-term and expanding its A330 airframe, and (vi) research on the development of new customer services offering. To achieve this goal, Airbus is aircraft in the short and medium range sector. actively: Focusing on key geographic markets Building a leaner, more fully integrated company Airbus is seeking to expand its global presence and to increase In order to address the challenges posed by persistent US dollar its market share in key emerging markets such as China, Russia weakness, increased competitive pressures and the financial and India. As part of this strategy, Airbus is developing a burden related to the A380 and A400M delays, and to meet its number of international industrial partnerships and is building future investment needs, Airbus launched a four-year strategic relationships with strong industry partners. restructuring programme at the beginning of 2007 referred to as * EBIT: earnings before interest and taxes, pre-goodwill impairment and exceptionals. 28 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents Expanding its customer services offering therefore expects passenger traffic, as measured in revenue Airbus seeks to remain at the forefront of its industry by passenger kilometres, to more than double in the next twenty expanding its customer services offering to meet customers’ years. evolving needs. As a result, Airbus has designed a comprehensive portfolio of services named Air+ by Airbus. Cyclicality. Despite the expected overall growth in the air travel See “— Products and Services — Customer Service”. It is market, the market for aircraft has proven to be cyclical, due to through this interface that Airbus aims to satisfy all of its the volatility of airline profitability and cyclicality of the world customers’ pre-delivery and in-service support requirements economy. Accordingly, following the peak in new orders reached through individually tailored packages. in 2007, Airbus recorded significantly fewer new orders in 2008 and expects this trend to continue in 2009. Isolated events — such as 9/11 and SARS — may also have an impact on aircraft Market demand and exacerbate the current downturn. Cyclicality and Market Drivers When cyclical downturns have occurred in the past, aircraft The main factors affecting the aircraft market include passenger manufacturers have typically experienced decreases in aircraft demand for air travel, cyclicality, national and international orders and have made fewer deliveries, with some customers regulation (and deregulation), the rate of replacement and seeking to postpone or cancel their existing orders. This has obsolescence of existing fleets and the availability of aircraft generally been followed by a period of sustained new order and financing sources. The performance, competitive posture and delivery activity. Accordingly, while total worldwide orders for strategy of aircraft manufacturers, airlines, cargo operators and aircraft of 100 seats or more reached a cyclical low of 524 in leasing companies as well as wars, political unrest and 2003, the number of new orders rebounded to an industry extraordinary events may also precipitate changes in demand and record of 2,881 in 2007. As with any macro-economic lead to short-term market imbalances. development, however, it is difficult to predict how the current downturn and the next cycle will develop. In recent years, China and India have emerged as significant new aircraft markets. According to internal estimates, they are Regulation/Deregulation. National and international regulation expected to constitute the second and fifth most important (and deregulation) of international air services and major markets for aircraft deliveries, respectively, in the next twenty domestic air travel markets affect demand for passenger aircraft years. As a result, Airbus has sought to strengthen its as well. In 1978, the United States deregulated its domestic air commercial and industrial ties in these countries. transportation system, followed by Europe in 1985. The recently negotiated “Open Skies Agreement” between the United States The no-frills/low-cost carriers also continue to emerge as a and Europe, which became effective in March 2008, allows any significant sector, and are expected to continue growing around European or US airline to fly any route between any city in the world, particularly in Asia. Airbus single aisle aircraft the EU and any city in the US. Other regions and countries are continue to be a popular choice for these carriers. As some of also progressively deregulating, particularly in Asia. This trend these carriers begin testing the market with new long-haul is expected to continue, facilitating and in some cases driving operations, demand for Airbus’ range of twin aisle aircraft may demand. In addition to providing greater market access (which also increase. may have formerly been limited), deregulation may allow for the creation and growth of new airlines or new airline models, as Overall Growth. The long-term market for passenger aircraft has been the case with the no-frills/low-cost airline model, depends primarily on passenger demand for air travel, which is which has increased in importance throughout major domestic itself primarily driven by economic or gross domestic product and intra regional markets since deregulation (e.g., in the US (“GDP”) growth, fare levels and demographic growth. Measured and Europe). in revenue passenger kilometres, air travel increased every year from 1967 to 2000, except for 1991 due to the Gulf War, Airline Network Development: “Hub” and “Point-to-Point” resulting in an average annual growth rate of 7.9% for the period. Networks. Following deregulation, major airlines have sought to Demand for air transportation also proved resilient in the years tailor their route networks and fleets to continuing changes in following 2001, when successive shocks, including 9/11 and customer demand. Accordingly, where origin and destination SARS in Asia, dampened demand. Nevertheless, the market demand prove sufficiently strong, airlines often employ direct, quickly recovered, with more than 38% traffic growth recorded or “point-to-point” route services. However, where demand over the past seven years (source: International Civil Aviation between two destinations proves insufficient, airlines have Organization (ICAO) world traffic data for 2001, Airbus internal developed highly efficient “hub and spoke” systems, which estimate for world traffic in 2008). provide passengers with access to a far greater number of air travel destinations through one or more flight connections. Based on internal estimates, Airbus believes that air travel will grow at 4.9% per annum during the period 2007-2026. Airbus EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 29


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents The chosen system of route networks in turn affects aircraft respectively, with the WTO. The EU and the US have demand, as hubs permit fleet standardisation around both conducted negotiations to seek a formal settlement of the issues smaller aircraft types for the short, high frequency and lower pending before the WTO. Absent agreement between the density routes that feed the hubs (between hubs and spokes) parties, the WTO tribunal hearing the dispute will issue reports and larger aircraft types for the longer and higher density routes evaluating the legality of any governmental funding provided to between hubs (hub-to-hub). As deregulation has led airlines to Boeing and Airbus. These reports and any associated diversify their route network strategies, it has at the same time recommendations will be addressed to the WTO members therefore encouraged the development of a wider range of (i.e. national governments), and not to Boeing, Airbus or EADS aircraft in order to implement such strategies. directly. Airbus, like others in the industry, believes that route networks Market Structure and Competition will continue to grow through expansion of capacity on existing routes and through the introduction of new routes, which will Market Segments. According to a study conducted by Airbus, a largely be typified by having a major hub city at least at one end total of 13,715 aircraft with more than 100 seats were in service of the route. These new route markets are expected to be well with airlines worldwide at the end of 2008 (as compared to served by Airbus’ latest product offering, the A350 XWB, 13,284 aircraft at the end of 2007). Currently, Airbus competes which has been designed with them in mind. The A380, now in each of the three principal market segments for aircraft with in revenue service, is designed primarily to meet the significant more than 100 seats. “Single aisle” aircraft, such as the A320 demand between the major hub cities, very often also the major family, have 100-210 seats, typically configured with two triple centres of population such as London, Paris, New York and seats per row divided by one aisle, and are used principally for Beijing for example. Airbus has identified 32 such cities in its short-range and medium-range routes. “Twin aisle” or “wide market analysis. Airbus believes that it is well positioned to meet body” aircraft, such as the A330/A340/A350 XWB families, current and future market requirements given its complete family have a wider fuselage with more than 210 seats, typically of products, from the 107-seat A318 to the 525-seat A380. configured with eight seats per row and with two aisles. The A330/A340/A350 XWB families are capable of serving all short Alliances. The development of world airline alliances has to long-range markets, with the A340-500/600 designed for reinforced the pattern of airline network development described ultra-long-range operations in particular. “Very large aircraft”, above. According to data from Ascend, a UK-based aviation such as the A380 family, are designed to carry more than industry consultancy, more than one third of the world’s jetliner 400 passengers, non-stop, over very long-range routes with fleet of over 100 seats was operated by just 20 airlines as of superior comfort standards and with significant cost-per-seat February 2009. In the 1990s, the major airlines began to enter benefits to airlines. Freight aircraft, which form a fourth, related into alliances that gave each alliance member access to the other segment, are often converted ex-passenger aircraft. See “— 1.1.6 alliance members’ hubs and routings, allowing airlines to Other Businesses — Aerostructures, Aircraft Conversion and concentrate their hub investments while extending their product Floor Panels”. offering and market access. Airlines have also begun to explore different merger possibilities in recent years. Examples include Airbus also competes in the corporate, VIP business jet market the merger of Air France and KLM, US Airways and America with the ACJ, an A319-based Corporate Jetliner, and the A318 West and Delta and Northwest, with talks between other Elite. It has also recently sold the A320, A340 and A380 to airlines currently ongoing. serve the business jet market in private, corporate shuttle and in government/VIP roles. Governmental Funding. A 1992 bilateral agreement between the EU and the US provided for ceilings on reimbursable launch Geographic differences. The high proportion of single aisle investments (typically used by European governments) of 33% aircraft in use in both North America and Europe reflects the of the total development costs of new large civil aircraft predominance of domestic short-range and medium-range programmes. It also set a ceiling at 3% of industry revenues for flights, particularly in North America due to the development indirect support in relation to the development or production of hubs following deregulation. In comparison with North of large civil aircraft (typically the Department of Defense and America and Europe, the Asia-Pacific region uses a greater National Aeronautics and Space Administration (“NASA”) proportion of twin aisle aircraft, as populations tend to be more mechanisms used in the US). This bilateral agreement provided a concentrated in fewer large urban centres. The tendency towards level playing field for government support, reflecting the needs use of twin aisle aircraft is also reinforced by the fact that many of both Europe and the US. of the region’s major airports limit the number of flights, due either to environmental concerns or to infrastructure constraints However, the unilateral withdrawal from the 1992 agreement that limit the ability to increase flight frequency. These by the US government in late 2004 eventually led to formal constraints necessitate higher average aircraft seating capacity per claims and counterclaims being made by the US and the EU, flight. However, Airbus believes that demand for single aisle aircraft in Asia will grow over the next 20 years, particularly as 30 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


  • Page 32

    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents domestic markets in China and India continue to develop. This Airbus family with minimal additional training. Cross-crew is expected to occur at the same time that Asian demand for qualification (CCQ) across families of aircraft provides airlines larger/long-range aircraft continues to increase. with significant operational flexibility. In addition, the emphasis on fleet commonality permits aircraft operators Competition. Airbus has been operating in a duopoly since to realise significant cost savings in crew training, spare parts, Lockheed’s withdrawal from the market in 1986 and Boeing’s maintenance and aircraft scheduling. acquisition of McDonnell Douglas in 1997. As a result, the market for passenger aircraft of more than 100 seats is now The extent of cockpit commonality within and across families effectively divided between Airbus and Boeing. According of aircraft is a unique feature of Airbus that, in management’s to the manufacturers’ published figures, in 2008 Airbus and opinion, constitutes a sustainable competitive advantage. Boeing, respectively, accounted for 56% and 44% of total deliveries, 57% and 43% of total gross orders, and 50% and In addition, technological innovation has been at the core of 50% of the total year-end backlog. Airbus’ strategy since its creation. Each product in the Airbus family is intended to set new standards in areas crucial The high technology and high value nature of the business to airlines’ success, such as cabin comfort, cargo capacity makes aircraft manufacturing an attractive industry in which to performance, economic performance, environmental impact and participate, with China recently expressing its interest in the operational commonality. Airbus innovations often provide long-term manufacturing of large commercial aircraft. However, distinct competitive advantages, with many becoming standard significant barriers to entry into the market for passenger aircraft in the aircraft industry. Key examples include fly-by-wire of more than 100 seats make it unlikely that a newcomer will be controls, aircraft commonality and the introduction of able to compete effectively with either of the established aircraft widebody twin-engine aircraft. manufacturers for a considerable number of years. In 2008, Airbus pursued its innovation drive and successfully Customers tested a fuel cells system in flight, for example. For the first time on a civil aircraft this innovative energy source powered As of 31 December 2008, Airbus had 306 customers, 5,500 the aircraft’s back-up hydraulic and electric power systems. The Airbus aircraft had been delivered to operators worldwide since test is part of Airbus’ overall plans for an eco-efficient aviation the creation of Airbus, and 3,715 aircraft were on order. The industry and supports on-going research to evaluate the table below shows Airbus’ largest commitments in terms of total potential use and environmental benefits of fuel cell technology gross firm orders by customer for the year 2008. and zero emissions power generation in civil aviation. Customer Firm Orders* A320 Family CASGC 110 Airbus’ family of single aisle aircraft, based on the A320 (which DAE Capital 100 entered service in 1988 following a development programme AWAS 75 launched in 1984), includes the A318, A319 and A321 Etihad 51 derivatives, as well as the A319-based Airbus Corporate Jetliner TAM 46 and A318 Elite business jet, which Airbus launched in 1997 Gulf Air 35 and 2005, respectively. Each aircraft in the A320 family shares Air One 34 the same systems, cockpit, operating procedures and cross- Vietnam Airlines 30 section. The A320 family covers the market from 100 to 220 CIT 30 seats, flying routes up to 3,000nm/5,700km. Asiana 30 At 3.96 metres diameter, the A320 family has the widest * Options are not included in orders booked or year-end backlog. fuselage cross-section of any competing single aisle aircraft. This provides a roomy passenger cabin, a high comfort level and a Products and Services more spacious underfloor cargo volume than its competitors. The A320 family incorporates digital fly-by-wire controls, an The Family Concept — Commonality across the Fleet ergonomic cockpit and a lightweight carbon fibre composite Airbus’ aircraft families promote fleet commonality. This horizontal stabiliser. The use of composite material has also philosophy takes a central aircraft and tailors it to create been extended to the vertical stabiliser. The A320 family’s derivatives to meet the needs of specific market segments. This competitor is the Boeing 737 series. approach means that all new-generation Airbus aircraft share the same cockpit design, fly-by-wire controls and handling With more than 6,300 aircraft sold and 3,683 currently in characteristics. Pilots can transfer among any aircraft within the service, the A320 family has proven extremely popular with EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 31


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents customers, offering high standards of cabin comfort, technology In 2008, Airbus received 472 firm orders for the A320 family and economic performance. Its success with low-cost airlines in of aircraft, and delivered 386 to customers. particular demonstrates the economic appeal of the A320 family. A320 FAMILY TECHNICAL FEATURES Model Entry into service Passenger capacity* Maximum range (km) Length (metres) Wingspan (metres) A318 2003 107 6,000 31.4 34.1 A319 1996 124 6,800 33.8 34.1 A320 1988 150 5,700 37.6 34.1 A321 1994 185 5,600 44.5 34.1 * Two-class layout. A330/A340 Family their networks. The A330/A340 family offers high levels of With approximately 1,400 aircraft sold and 940 currently in passenger comfort as well as large under-floor cargo areas. The service, the A330/A340 family is Airbus’ solution for regional, competitors of the A330/A340 family are the Boeing 767, 777 long-range and ultra long-range travel, designed to carry and 787 aircraft series. between 250 to 350 passengers. The A330/A340 family concept is unique: one airframe is powered by either two or four Development also continues on the A330-200F, Airbus’ new engines. The twin-engine A330 offers attractive economic freighter offering for mid-size markets. With a maximum performance for regional up to long-range routes, while the four- payload capability of up to 69 tonnes, the A330-200F will offer engine A340 can perform on the most demanding long-range airlines the opportunity to increase services in low frequency and ultra long-range routes, including non-stop flights such as long-haul markets currently served with much larger aircraft, Los Angeles — Singapore. develop new routes and respond to market growth. First flight of the initial aircraft is planned for 2009. The A330/A340 family is composed of six passenger versions. Each shares the same 222-inch fuselage cross-section, cockpit In 2008, Airbus received 138 firm orders for the A330/A340 and other advanced features, delivering the commonality that family of aircraft, and delivered 85 to customers. encourages airlines to adopt the most efficient mix of aircraft for A330/A340 FAMILY TECHNICAL FEATURES Model* Entry into service Passenger capacity* Maximum range (km) Length (metres) Wingspan (metres) A330-200 1998 253 12,500 59.0 60.3 A330-300 1994 295 10,500 63.7 60.3 A340-300 1992 295 13,700 63.7 60.3 A340-500 2002 313 16,700 67.8 63.6 A340-600 2002 380 14,600 75.3 63.6 * Three-class layout. A380 In 2008, Airbus announced changes to the A380 delivery The A380 is the most spacious aircraft ever conceived, and schedule as it transitioned from low rate “individual” aircraft represents Airbus’ offering in the very large aircraft market. production, so-called Wave 1, to the full serial design and Its cross-section provides flexible and innovative cabin space, manufacturing process, called Wave 2. Time and resources allowing passengers to benefit from wider seats, wider aisles needed for Wave 1 production aircraft have been higher than and more floor space, tailored to the needs of each airline. expected, which created some delay in the changeover to Wave 2 Seating 525 passengers in three classes and with a range with its new design and manufacturing process. In addition, the of 8,000nm/19,400km, the A380 offers superior economic ramp-up in production on Wave 2 has presented its own set of performance, lower fuel consumption, less noise and reduced challenges. emissions. The A380’s main competitor is the 400-seat Boeing 747-8. 32 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents Accordingly, Airbus delivered 12 aircraft in 2008 (instead of the meeting its delivery commitments for 2009. See also 13 previously announced). In 2009, Airbus currently targets “Management’s Discussion and Analysis of Financial Condition delivery of 18 aircraft (instead of the 21 announced in and Results of Operations”. May 2008). Airbus continues to face significant challenges as it seeks to ramp-up A380 production, and is currently focused on In 2008, Airbus received 9 firm orders for the A380, for a total of 198 firm orders from 16 customers at the end of the year. A380 TECHNICAL FEATURES Model* Entry into service Typical capacity* Maximum range (km) Length (metres) Wingspan (metres) A380-800 2007 525 15,000 73.0 79.8 * Three-class layout. New Product Development At the end of 2008, the A350 XWB passed the detailed A350 XWB Family definition freeze milestone, which assessed the maturity of the At the end of 2006, Airbus launched the A350 XWB Family, a programme. Airbus will now continue with further specific new extra-wide body medium capacity long-range family, which design work, in parallel with the development of associated will accommodate between 270 to 350 passengers and is tooling and building investments. expected to enter service in 2013. The A350 XWB features In 2008, Airbus received 163 firm orders from 16 customers for A380 technology, a wider fuselage than that of competing new the A350 XWB Family of aircraft, for a total of 478 firm orders generation aircraft and a greater use of composite material. The from 29 customers at the end of the year. A350 XWB’s main competitor is the Boeing 787 aircraft series. A350 XWB FAMILY TECHNICAL FEATURES Model* Entry into service Passenger capacity* Maximum range (km) Length (metres) Wingspan (metres) A350-800 2014 270 15,400 61.0 64.0 A350-900 2013 314 15,000 67.3 64.0 A350-1000 2015 350 14,800 74.3 64.0 * Three-class layout. A400M Management division also provides a full range of support For information related to the A400M programme, see “Airbus services, including assistance with entry into service, interior Military” below. reconfiguration and maintenance checks. Asset Management Sales Finance The Airbus Asset Management division was established in 1994 Airbus favours cash sales, and does not envisage customer to manage and re-market used aircraft acquired by Airbus, financing as an area of business development. However, Airbus originally as a result of customer bankruptcies, and subsequently recognises the commercial need for manufacturers to assist in the context of certain buy-back commitments. The Division customers in arranging financing of new aircraft purchases, and operates with a dedicated staff and manages a fleet comprised of in certain cases to participate in such financing itself. Airbus aircraft across the range of models. Through its activities, the Asset Management division helps Airbus respond more An extension of credit or assumption of exposure is subject to efficiently to the medium and long-term fleet requirements of corporate oversight and monitoring, and follows strict standards its customers. of discipline and caution. Airbus’ dedicated customer finance team has accumulated decades of expertise in aircraft finance. Its key roles comprise the commercial and risk management of When Airbus finances a customer, the financed aircraft the Airbus portfolio of used aircraft. Most of the aircraft are generally serve as collateral, with the engine manufacturer available to customers for cash sale, while some can only be participating in the financing. These elements assist in reducing offered on operating lease, depending on the financing attached the risk borne by Airbus. Airbus’ customer financing to such aircraft. At the end of 2008, the Airbus Asset transactions are designed to facilitate subsequent sell-down of Management portfolio contained 10 aircraft, a net reduction of the exposure to the financial markets, third party lenders or four aircraft compared to the end of 2007. The Asset lessors. EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 33


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents Airbus’ financing exposure is counter-cyclical and Airbus was The development of services is particularly important in the area therefore able to conclude significant sell-down of its exposure of integrated maintenance packages, where Airbus offers a suite in the 2005-2007 period. However, in light of the current of services, Flight Hours Services (FHS) and Tailored Support volatility in the financial and credit markets, Airbus expects to Package (TSP), to assist customers seeking to reduce their spare increase the amount of financing it provides to customers in the parts and maintenance investments. future. Management believes, in light of its experience, that the level of provisioning protecting Airbus from default costs is In 2008, Airbus launched several innovations in the area of adequate and consistent with standards and practice in the customer services, such as AirStart, a consulting service aircraft financing industry. See “Management’s Discussion and specifically designed for new operators which offers broad Analysis of Financial Condition and Results of Operations”. expertise in flight operations, maintenance and engineering, material and logistics and training. Airbus has also established Cape Town Convention. The Cape Town Convention on a comprehensive fuel efficiency service to optimise aircraft International Interests in Mobile Equipment (“CTC”) as applied performance and identify fuel-efficient maintenance tasks. to aircraft equipment through a protocol is an international Improvements have also been made in repair engineering treaty intended to standardise transactions involving movable support through development of a new tool (Repair Manager) property, particularly aircraft and aircraft engines, and has been to allow better and faster response times to repair needs. ratified so far by 26 countries including the US, India, Indonesia, United Arab Emirates (UAE) and Ireland. The CTC Finally, to accompany Airbus operators in all regions of the creates international standards for registration of ownership, world, Airbus opened a new Material and Logistics Centre security interests, leases and conditional sales contracts, and located next to the Dubai International Airport in 2008. The various legal remedies for default in financing agreements, 24-hour a day centre will stock more than 5,000 different parts including repossession and the effect of particular states’ with around 43,000 items in at any one time, offering customer bankruptcy laws. The goal of the CTC is to facilitate asset-based support and aircraft spares distribution to regional and financing and leasing transactions by creating the concept of an worldwide destinations 24-hours a day. “international interest” and setting out the rules and procedures that govern the registration, priority and remedies associated Production with such international interests. Industrial Organisation Customer Service Each task in the building of Airbus aircraft (from design, Airbus Customer Services provides a full range of support definition and production to product or operational support) is services to airlines so that they can operate their Airbus fleet allocated to a designated Centre of Excellence (“CoE”) according safely, efficiently and on schedule. The Airbus Customer to its specialised expertise. In connection with the Services directorate heads an engineering and technical support implementation of Power8, as discussed above, Airbus group, a flight operations support group, a technical underwent a major reorganisation and revised its CoEs to ensure documentation organisation, a network of training and spare that they were fully transnational. The current CoEs cover parts support centres, customer support teams and field services Fuselage and Cabin, Wing and Pylon, Aft Fuselage and teams that are based at customer airlines. Airbus thereby aims to Empennage and Aerostructures. The development of centres of satisfy all of its customers’ pre-delivery and in-service support excellence constitutes an essential feature of Airbus and services requirements. Airbus Customer Services currently manufacturing. supports approximately 5,200 Airbus aircraft, ranging from the smallest short range A318 to the large double deck A380. The CoEs are overseen by Airbus’ head of operations and his team, who are in charge of all industrial processes. This includes Airbus has packaged its customer service offering into a ensuring that the best tools, methods and processes are selected comprehensive portfolio of support and services named “Air+ by and implemented across the CoEs in order to increase efficiency Airbus”. Thanks to the Air+ by Airbus “à la carte” approach, and control costs. customers can select the products they need from the wide offering. Complemented by Airbus partners’ offerings, it covers Programmes, which is responsible for the work of the final all airline technical operations. With Air+ by Airbus, the assembly lines including cabin definition and installation as well support provided is adapted to different outsourcing policies and as overall management processes, works closely with the CoEs, business models, helping operators to significantly reduce their to secure firm commitments from them on what is delivered to operating costs, increase their aircraft availability and enhance the final assembly lines. the quality of their operations. 34 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents The CoEs also maintain close links with core functions such as In 2008, Airbus Engineering took significant steps towards procurement, human resources, engineering, quality and maturing the A350 design in terms of structural architecture customer services to develop and manage skills, manage policies and large-scale structural demonstrators, tuning of aerodynamic and ensure that Airbus employees share knowledge and ideas performance, systems architecture design, major system supplier with colleagues in other CoEs. selection and propulsion integration studies. Airbus Engineering also signed on to the European CleanSky Research & Technology In 2008, EADS and Airbus completed the aerostructures programme, in which Airbus is involved with all major reorganisation strategy initiated under Power8. This initiative European aeronautics companies. combines the divestment of non-core activities and sites in order to establish a network of strong tier one suppliers, allowing Manufacturing Facilities and Production Flow Airbus to concentrate on its core business as an aircraft architect and integrator. Accordingly, GKN Aerospace acquired the The CoEs are responsible for the design and manufacturing of Airbus wing component and sub-assembly manufacturing fully equipped and tested deliverables, ranging from specific facility in Filton, UK, and Diehl/Thales acquired Airbus’ site in parts to major aircraft components. Aircraft components are Laupheim, Germany. Prior to this, the carve-out process for the transferred between the network of sites and the final assembly former German Airbus sites in Nordenham and Varel and the lines using Airbus’ five custom built A300-600 “Beluga” Super former EADS site in Augsburg to create the new Premium Transporters. To support the A380 production flow, Airbus has AEROTEC GmbH was also accomplished. A similar process was integrated road, river and sea transport. Typical lead times undertaken in France, where Meaulte and St. Nazaire Ville are between customer definition freeze and industrial delivery for now the foundation of Aerolia S.A. Both Premium AEROTEC single aisle aircraft are 7–8 months, and 9–12 months for and Aerolia commenced full operations on 1 January 2009 long-range twin aisle aircraft. under EADS ownership, and are well positioned to become major players on the global aerostructure market. Not only will Targeted Deliveries in 2009 all companies be significantly involved in the A350 XWB Airbus delivered 483 aircraft in 2008 (compared to 453 in 2007) programme, they will also commit to the EADS/Airbus and is targeting delivery of approximately the same number of Power8 targets. aircraft in 2009. Any major production, market disruption or economic downturn could lead to revision of these figures. See Engineering also “— 1.2 Recent Developments”. Engineering innovation at Airbus is driven by Centres of Competence (“CoCs”), which develop general aircraft technologies and provide functional design leadership for specific aircraft components. The CoCs operate transnationally with engineers from each of the CoCs present at all Airbus AIRBUS MILITARY sites. Airbus engineers work on specific and non-specific aircraft Introduction and Overview designs to create solutions that meet airline customer needs. As discussed above, the former Military Transport Aircraft An important part of the Airbus engineering organisation is the division has been integrated into Airbus under the name of Architect and Integration centre, which ensures, together with a “Airbus Military”. team of senior aircraft architects and the programme chief engineers, that a consistent and multi-disciplinary approach is Airbus Military produces and sells special mission aircraft, applied during aircraft development. which are derived from existing aircraft platforms and are dedicated to specialised military and security tasks such as The Airbus Engineering testing centre gathers all major systems in-flight refuelling capabilities, maritime surveillance and and integration laboratories as well as the flight test centre in antisubmarine warfare. Airbus Military also manufactures and order to have a common approach towards testing of the critical sells medium and light military transport aircraft and is aircraft systems. responsible for the European heavy military transport A400M project. Over the course of the last seven years, Airbus has opened engineering centres in Wichita (Kansas, US), in Mobile In 2008, the former MTA division recorded revenues of (Alabama, US), in Moscow (Russia), in Bangalore (India) and in € 2.8 billion, representing 6.4% of EADS’ total revenues. Beijing (China), through which it has gained access to a large pool of experienced aerospace engineers. Strategy Airbus Military’s strategy is to further develop its core businesses and increase market share by leveraging EADS’ EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 35


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents technology know-how, while at the same time enhancing Heavy Military Transport. This market segment has been driven profitability. Accordingly, Airbus Military is actively: historically by US policy and budget decisions, and therefore has been dominated by US manufacturers, in particular Lockheed Consolidating its position as a major supplier of special Martin’s C-130 Hercules. The A400M represents Airbus mission aircraft Military’s entry into this market, at a time when the US and Europe are expected to begin upgrading and replacing their As a supplier of special mission aircraft, Airbus Military existing fleets. In the upper part of the segment, the A400M satisfies customers’ mission-specific requirements by relying on could compete against the C-17 from Boeing. its own specialised technologies as well as those of EADS’ wide range of platforms. Airbus Military will seek further Medium Military Transport. Management believes that this consolidation of its position in this market in the future, in market will continue to grow at a moderate rate. EADS aircraft particular through its offering of the A330 Multi-Role Tanker are leaders in this segment, specifically the CN-235 and Transport (MRTT) aircraft. C-295 aircraft, which have a combined average market share of 64% over the last ten years. Their competitors are the C-27J Maintaining its leadership for military transport aircraft Spartan, manufactured by the joint venture LMATTS (Lockheed Airbus Military is a global leader in the market segments for Martin Alenia Tactical Transport System), and the An-32, medium and light military transport aircraft. Through the manufactured by Antonov. Recently, the C-27J has been addition of the A400M heavy transport aircraft, Airbus Military promoted by Global Military Aircraft Systems (GMAS), a group expects to offer a full range of tactical military transport aircraft. of companies consisting of Alenia, L-3 and Boeing. Light Military Transport. This is a mature market that is Market diminishing in size as countries develop economically and are Special Mission Aircraft able to afford medium military transport aircraft. The C-212 has historically led this market segment, with an average market Special mission aircraft are derived from existing aircraft share of 26% over the last ten years. The C-212’s main platforms and adapted to particular missions, in general for competitors are the M-28, manufactured by Polskie Zaklady military and security customers. Adaptations to the platform Lotnice, Mielec and the Do-228 manufactured by HAL require thorough knowledge of the basic airframe, which (Hindustan Aeronautics Limited). generally only the aircraft manufacturer possesses. The skills necessary for the overall systems integration into the aircraft are extensive and the number of participants in the world market is Products and Services very limited. Special Mission Aircraft Moreover, modern defence and warfare require independent Strategic Tanker Aircraft — A330 MRTT. The A330 MRTT, access to complex forms of information in various operational a derivative of the successful Airbus A330/A340 family, is the theatres, and customers are therefore increasingly demanding world’s leading air-to-air refuelling aircraft. Its huge basic fuel comprehensive systems tailored to their specific operational capacity means that no auxiliary tanks are needed to give requirements. This development and European defence and air-to-air refuelling performance that far exceeds its nearest security needs are expected to boost demand for special mission competitors. Fuel is passed through an innovative fly-by-wire aircraft in the near term. Airbus Military believes that it is well refuelling boom that delivers a larger refuelling envelope and positioned in this market based on the range of customised better control than other systems. As the A330 MRTT does not solutions that it offers. need auxiliary fuel tanks, the entire cargo bay is available for freight, with the possibility of incorporating LD3 or LD6 containers, military pallets and/or any other type of load device Military Transport Aircraft in use today. Governments and national organisations constitute the main customers in the market for military transport aircraft. This The A330 MRTT is being considered for multi-role tanker market consists of three segments: (i) light transport aircraft, transport mission requirements throughout the world. To date, with a payload of one to three tonnes, (ii) medium transport Airbus Military has won contracts for the A330 MRTT with aircraft, with a payload of four to fourteen tonnes, and the governments of Australia, Saudi Arabia and the UAE, which (iii) heavy transport aircraft, with a payload of fifteen tonnes or have ordered five, three and three aircraft, respectively. In more. According to an analysis by the Teal Group — an addition, in early 2008, AirTanker (the EADS-led consortium) independent aerospace and defence industry consulting firm signed a 27-year contract with the UK Ministry of Defence in — the global market for military transport aircraft during the connection with the latter’s Future Strategic Tanker Aircraft next ten years is expected to amount to approximately (“FSTA”) programme. The FSTA programme includes the US$ 52 billion. provision of a fleet of 14 new tanker aircraft, based on the latest 36 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents generation Airbus A330-200 to enter service from 2011, Military Transport Aircraft replacing the previous fleet of VC-10 and Tristar refuelling Airbus A400M. The A400M is designed to meet the future aircraft. The contract also includes provision for all necessary large aircraft requirements of seven European nations seeking to infrastructure, training, maintenance, flight management, fleet replace their ageing C-130 Hercules and C-160 Transall fleets. In management and ground services to enable the Royal Air Force addition to fast and flexible intercontinental force projection, to fly air-to-air refuelling and transport missions worldwide. the new aircraft is intended to respond to changing geopolitical requirements (including increased humanitarian and In the US, the Air Force had also been conducting a programme peacekeeping missions). to replace its ageing fleet of air-to-air refuelling aircraft, pursuant to which EADS had teamed up with Northrop In May 2003, OCCAR signed a contract with Airbus Military Grumman (as prime contractor) in preparing a proposal to satisfy to order 180 A400M aircraft on behalf of seven nations: the US Air Force’s requirements. In early 2008, the US Air Germany committed to 60 aircraft, France to 50, Spain to 27, the Force announced that it had awarded the initial contract to UK to 25, Turkey to 10 and Belgium to 8 (including one on Northrop Grumman, which was later challenged by Boeing behalf of Luxembourg). In addition to the initial 180 aircraft, before the Government Accountability Office (GAO). Following export orders (8 for South Africa and 4 for Malaysia) bring the the upholding of this challenge by the GAO, the US total order book for the A400M aircraft to 192 at the end of Department of Defense has announced the termination of the 2008. current tanker competition for the time being. On 25 September 2008, EADS announced an undefined delay Finally, Airbus Military is leading a technological programme of the first flight of the A400M, mainly due to the aimed at developing a new “air-to-air refuelling boom system” unavailability of the propulsion system. This undefined delay (“ARBS”). The new ARBS is designed to provide a refuelling was primarily due to an official notice from the engine performance that is substantially faster than that of the manufacturers’ consortium as to their inability to specify a new competition — a considerable advantage given the vulnerability delivery date for the A400M engines. Moreover, other major of the aircraft during the refuelling procedure. During 2008, suppliers of mission critical systems and of system integration Airbus Military conducted multiple wet and dry contacts and a indicated that they were severely struggling with the flight test, while finalising development of a prototype. The challenging technical requirements of this aircraft. industrial planning for serial production of the new ARBS has been fixed for 2009. On 9 January 2009, Airbus Military and EADS announced that they had proposed a new programme approach for the A400M Maritime Patrol Aircraft. Airbus Military provides different to the European launch nations, through OCCAR, with the aim solutions ranging from maritime surveillance to anti-submarine to find an appropriate way forward for this programme. Airbus warfare missions through aircraft based on the C-212, CN-235, Military and EADS wanted to initiate discussions around the C-295 or P-3 Orion platforms. The accomplishment of these programme schedule along with changes to other areas of the missions is achieved by means of a Fully Integrated Tactical contract including in particular certain technical characteristics System (FITS), a new generation, open architecture, proven, of this military aircraft. In line with complex military reliable and cost efficient solution. In 2008, the US Coast Guard development programmes, Airbus Military suggested to resume ordered three additional CN-235 aircraft as part of the series production only once adequate maturity is reached based “Deepwater” programme, bringing its total to 11 firm orders on flight test results. With such new approach, the first from a plan to purchase a total of 36 aircraft. The Mexican Navy delivery of the A400M would then occur three years after its ordered two CN-235 aircraft in 2008 for maritime patrol first flight. Airbus Military and EADS will only be able to missions. In terms of deliveries, Airbus Military delivered five update all of the financial consequences of a revised industrial CN-235 aircraft (military patrol version) in 2008, to the Guardia plan, once the availability of the engines and mission critical Civil and US Coast Guard. systems is firmly determined and once OCCAR´s position on the proposal is known. See “Risk Factors” and “Management’s The modernisation of two CN-235 aircraft on behalf of the Discussion and Analysis of Financial Condition and Results of Irish Air Corps and the conversion of six CN-235 military Operations” for further detail. transport aircraft into maritime patrol aircraft on behalf of the Spanish MoD are also progressing on schedule. In both cases, CN-235 — Medium Military Transport. The first version in the the first deliveries took place at the end of 2007 and the CN-235 family, the S-10, entered into service in 1987. The latest following ones in 2008. one, the Series 300, is a new-generation, twin turboprop, pressurised aircraft. The CN-235-300 is capable of transporting a payload of up to 6,000 kg, accommodating (i) 36 paratroopers, EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 37


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents (ii) 18 stretchers plus three medical attendants, (iii) four of the L3 for two, one of which as already been delivered. During most widely used types of freight pallets, or (iv) oversized loads 2008, Airbus Military delivered two CN-235s to L3, a US such as aircraft engines or helicopter blades. Paratrooper company, as well as four C-295 aircraft to Brazil as part of a operations can be performed through the two lateral doors in contract for twelve C-295 aircraft signed in 2005. In addition, the rear part of the aircraft or over the rear ramp. Variants of the two C-295 aircraft were delivered to Poland. CN-235-300 are used for other missions such as maritime patrol or pollution control, among others. C-212 — Light Military Transport. The C-212 was designed as a simple and reliable unpressurised aircraft able to operate from C-295 — Medium Military Transport. Certified in 1999, the makeshift airstrips in order to perform both civilian and military C-295 has a basic configuration similar to the CN-235, with a tasks. The first version, the S-100, entered into service in 1974. stretched cabin to airlift a 50% heavier payload at greater speed The latest version, the S-400, incorporates several improvements over longer distances. The C-295 is equipped with integrated such as new avionics and engines for enhanced performance in avionics incorporating digital cockpit displays and a flight hot climates and high altitudes, as well as improved short take- management system, enabling tactical navigation, planning and off and landing performance. In addition, the C-212’s rear cargo the integration of signals from several sensors. door provides multi-mission capability with a configuration that can be changed quickly and easily, thereby reducing turnaround Both the CN-235 and the C-295 have been designed as times. In 2008, three C-212 aircraft were ordered by Vietnam, complements or replacements for the ageing C-130 Hercules, and one C-212 aircraft was delivered to Korea. accomplishing most of their missions at a much lower operating cost. Production In 2008, Airbus Military signed a contract with Botswana for The C-212, CN-235 and C-295 are manufactured at a facility the supply of one CN-235 aircraft and with the US Company located at the San Pablo airport in Seville. In 2007, the assembly of the A400M started in a new facility in Seville. 1.1.3 Eurocopter INTRODUCTION AND OVERVIEW developing its presence in potential growth markets such as Eurocopter is a global leader in the civil and military helicopter China, India, South America and Eastern Europe. Part of its market, offering one of the most complete and modern ranges of strategy relies on the offering of leading edge technology helicopters and related services. In 2008, Eurocopter maintained products in all its markets, such as the first successful sale of its leadership by capturing more than 50% of the civil helicopter large quantities of helicopter systems to the US Army by a market in terms of deliveries and by achieving strong growth in non-US manufacturer. Eurocopter will seek to pursue this its military order book. expansion through both organic and external growth, with a focus on services. Eurocopter will also seek to capitalise on its In 2008, Eurocopter recorded revenues of € 4.5 billion, experience of cooperation with local industries for programme representing 10.4% of EADS’ total revenues. development and joint production projects. STRATEGY Implementing an ambitious product and services policy Eurocopter aims at strengthening its market position by further In order to maintain market leadership and technological balancing its portfolio of military and civil business, and superiority, Eurocopter must continuously invest in and renew increasing its share of revenue generated by services activities in its comprehensive product line of civil and military helicopters. order to achieve sustained profitable growth. To this end, Accordingly, management is currently focused on Eurocopter is actively: (i) strengthening the market position of key products such as the Ecureuil family, the Dauphin, the EC135, the EC145 and the EC225/725, (ii) promoting Eurocopter’s most recent products Pursuing internal growth and international expansion (Tiger and NH90), and (iii) enhancing its product line Management is focused on strengthening Eurocopter’s position (e.g. co-development of the civil medium lift EC175 with China in the markets where it has traditionally held a strong position, and partnership with Korean industry to develop the military such as the US civil and homeland security market, and further utility Korean Helicopter Programme (“KHP”)). Through the 38 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents combination of core technological solutions with high-value Russian manufacturers have reappeared after a complete customisation capabilities, Eurocopter seeks to offer a cost reorganisation on commercial and industrial fronts. Recently efficient solution to multi mission needs, for both civil and they have been more aggressive particularly in the Asian and military customers throughout all segments of the helicopter Latin American markets. Military sales accounted for 46% of market. Eurocopter’s revenues in 2008. In addition, Eurocopter will seek a significant expansion in its Helicopters sold in the civil sector provide transport for service offering in order to enhance aircraft availability as well corporate executives, offshore oil operations, diverse commercial as mission performance and cost effectiveness for its customers, applications and state agencies, including coast guard, police, while increasing margins on longer-term contracts through the medical and fire-fighting services. Management expects that the provision of higher value added services. Eurocopter is also value of global civil deliveries will stabilise and possibly considering further development on training and software decrease if the financial crisis deepens and lasts beyond 2010. maintenance activities, which have been identified as key drivers Market data indicates that in 2008, worldwide deliveries of civil for the future. turbine helicopters stood at approximately 945 units. Eurocopter’s main worldwide civil competitors are Bell MARKET Helicopter, Agusta-Westland and Sikorsky. The civil helicopter Market Drivers market has grown more competitive in recent years, with Sikorsky and Agusta-Westland having increased their market In 2008, the value of helicopters delivered worldwide was share in the heavy and medium helicopter classes. estimated at over € 8.8 billion, a figure that management believes may grow to € 11.5 billion in 2009. According to market forecasts published by The Teal Group, Honeywell and Rolls Customers and Marketing Royce, between 7,500 to 9,000 civil helicopters and 5,000 to Approximately 2,800 operators worldwide currently operate 5,500 military helicopters are expected to be built globally Eurocopter helicopters in 142 countries, forming a broad base for between 2008 and 2016. This forecast, particularly with respect Eurocopter’s customer support activities. Eighty-five percent of to the military segment, relies to a large extent on the large US Eurocopter’s customers have fleets of between one and four development programmes. helicopters. Eurocopter’s principal military clients are European Ministries of Defence (MoDs), as well as MoDs in Asia and the Demand for military helicopters, which are usually larger and US In the civil and parapublic market, Eurocopter has a leading have more sophisticated systems than civil helicopters, is mainly market share in Europe, the US and Canada. driven by budgetary and strategic considerations, and the need to replace ageing fleets. Management believes that the advanced The versatility and reliability of Eurocopter products have made age of current fleets, the emergence of a new generation of them the preferred choice of the most prominent customers. helicopters equipped with integrated systems and the ongoing The world’s largest offshore operators (Bristow, CHC, Era, PHI, introduction of combat helicopters into many national armed etc.) use Eurocopter helicopters for passenger transport and forces will contribute to increased military helicopter offshore oil industry support. In the emergency medical services procurement over the next years. Recent large-scale military market segment, Eurocopter helicopters dominate the fleets of programmes, such as those conducted by Australia, Brazil, large operators such as Air Methods in the US and ADAC in Spain, UK, Korea and the Nordics Standard Helicopter Project, Germany. Agencies with high serviceability requirements, have confirmed this trend. Demand from the military segment including police and armed forces, also rely on Eurocopter has historically been subject to large year-to-year variations, due products. to evolving strategic considerations. Eurocopter’s global marketing strategy is reflected in the scale of The military segment is highly competitive and is characterised its large international network. Eurocopter’s network currently by competitive restrictions on foreign manufacturers’ access to encompasses 18 foreign subsidiaries, complemented by the domestic defence bidding process, sometimes to the virtual a network of authorised distributors and service centres aimed exclusion of imports. Nevertheless, with the introduction of the at a large number of existing and potential clients. Eurocopter Tiger, NH90 and EC725 and with a more aggressive approach to strengthened its subsidiary network in 2008 through the international industrial cooperation, Eurocopter’s share of the creation of a wholly owned subsidiary in Indonesia and the global market for military helicopters has increased, and the acquisition of Mortorflug in Germany. In addition, Eurocopter market in 2008 was nearly balanced between competitors. has developed expertise in production licensing, joint production Eurocopter’s main competitors in this segment are Agusta- and subcontracting agreements, and has been developing links Westland in Europe, and in the United States Bell Helicopter (a with industrial partners and suppliers in more than 35 countries. division of Textron Inc.), Boeing and Sikorsky. In addition, the EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 39


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents PRODUCTS AND SERVICES product range includes light single-engine, light twin-engine, medium and medium-heavy helicopters, and is based on a series Existing Products of new-generation platforms designed to be adaptable to both Eurocopter offers a complete range of helicopters that covers military and civil applications. In addition, products share nearly the entire civil and military market spectrum, which it multiple technical features as part of a family concept approach. updates continuously with leading-edge technologies. This The following table sets forth Eurocopter’s existing product line, consisting of optimised products for different mission types: Helicopter Type Primary Missions Light Single Engine EC120 “Colibri” Corporate/Private, Civil & Military Training Single Engine (“Ecureuil” Family) AS350 “Ecureuil”/AS550 “Fennec” Parapublic*, Civil & Military Utility**, Corporate/Private EC130 Tourism, Oil & Gas, Corporate/Private Light Twin Engine AS355NP/AS555 Parapublic*, Utility, Corporate/Private EC135/EC635 Emergency Medical, Parapublic*, Oil & Gas, Corporate/Private EC145/UH145 Civil & Military Utility**, Emergency Medical, Parapublic*, Shuttle Medium (“Dauphin” Family) AS365 “Dauphin”/AS565 “Panther” Parapublic* (in particular Coast Guard & SAR), Oil & Gas EC155 Corporate/Private, VIP, Oil & Gas, Parapublic*, Shuttle Medium Heavy AS332 “Super Puma”/AS532 “Cougar” Military Transport, Oil & Gas, Shuttle EC225/EC725 SAR, Combat-SAR, Military Transport, Oil & Gas, VIP * Parapublic includes homeland security, law enforcement, fire fighting, border patrol, coast guard and public agency emergency medical services. ** Civil Utility includes different kinds of commercial activities such as aerial works, ENG (Electrical New Gathering), passenger and cargo transport. Civil range. Eurocopter has consistently made strong efforts to Products in Development update and renew its civil product line in order to enhance and Current product development programmes in the military and maintain its competitive edge in the civil segment. Over the civil segment include (i) the NH90, a military transport years Eurocopter has successfully introduced internationally new helicopter with more than 20 versions for tactical, naval and products such as the light single-engine EC120 and the light combat-search and rescue applications, (ii) the HAD version of twin-engine EC135, and major product upgrades such as the the Tiger helicopter, (iii) the KHP for civil and military EC155 latest evolution of the medium-class Dauphin, as well as applications, and (iv) the EC175, as described below. the EC145. The latest addition to the heavy-class family is the EC225. It is designed for passenger transport, in particular Oil NH90. Designed for modern multi-mission capabilities and cost & Gas and VIP, but also for public service missions, such as effectiveness throughout its lifecycle, the NH90 has been search and rescue (SAR). developed as a multi-role helicopter for both tactical transport (TTH) and naval (NFH) applications. The programme, mainly In 2008, Eurocopter received 703 firm orders for its civil range financed by the governments of France, Germany, Italy and the of helicopters, and delivered 559 to customers. Netherlands, has been jointly developed by Eurocopter, Agusta- Westland of Italy and Fokker Services of the Netherlands as Light Utility Helicopter (LUH) programme. The US Army has joint partners in Nato Helicopter Industries (“NHI”) in direct selected the UH-72A Lakota (a military derivative of the proportion to their countries’ expressed procurement commercial EC145) as its next-generation LUH, with a commitments. Eurocopter’s share of NHI is 62.5%. Production requirement for up to 345 aircraft over a 10-year span with a of the first lot of 243 helicopters and 55 optional helicopters to total life-cycle value of more than $ 2 billion. The US Army be delivered to the four partner countries started in 2000, with ordered 42 aircraft in 2006, followed by additional orders for 14 deliveries in 2008 (2 to Germany, 4 to Italy, 5 to Finland and 43 aircraft in 2007 and 39 aircraft in 2008. There were 38 LUH 3 to Australia) for a total of 25 deliveries as of the end of 2008. deliveries in 2008, for a total of 51 deliveries as of the end of 2008. All deliveries were made from American Eurocopter’s new facility in Columbus, Mississippi. 40 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents Following the contract signed in December 2007 with the the first prototype began at the end of 2008 in Marignane French Defence Procurement Agency (DGA) for 68 NH90, following the delivery of the first airframe structure from the Eurocopter received an order in 2008 for a first batch of Chinese partner. The new civil helicopter is due to make its 12 aircraft. At the end of 2008 the NH90’s backlog stood at first flight in 2009, with delivery of the first EC175 helicopter 482 firm orders. expected to occur in 2012. The NH90 has rapidly become the reference military tactical Customer Support helicopter for armed forces worldwide, with orders for 23 different versions from 14 countries. The strong commercial As of 31 December 2008, Eurocopter products constituted the success of the NH90, combined with the complexity of such a world’s second largest manufacturer fleet, with more than modern aircraft and the management of relationships between 10,600 helicopters in service worldwide. As a result, customer industry and customers has generated a significant increase in support activities to service this large fleet generated 33% of programme management challenges. In order to better manage Eurocopter’s revenues for 2008. Eurocopter’s customer support these challenges, Eurocopter launched an action plan in 2008 to activities consist primarily of training, technical support, revisit programme governance (including industry maintenance, repairs and spare parts supply. To provide efficient re-organisation), reframe contract management, and restructure worldwide service, Eurocopter has established an international industry processes (with a focus on simplification, clearer network of subsidiaries, authorised distributors and service allocation of responsibility and increased responsiveness). centres. Furthermore, in order to meet globalising customer demand, Eurocopter is extending the range of services it Tiger. The Tiger combat attack helicopter programme includes provides to its customers. four variants based on the same airframe: the HAP (turreted gun, rockets and air-to-air missile), 40 of which have been In 2008, Eurocopter launched an EC225 Flight Training Device ordered by France; the UHT (antitank missile, air-to-air missile, project in Aberdeen (UK) to reinforce local support to Oil & Gas axial gun and rockets), 80 of which have been ordered by customers, and inaugurated the first EC225 full flight simulator Germany; the ARH (antitank missile, turreted gun and rockets), to reinforce training capacities for customers. In addition, the 22 of which have been ordered by Australia; and the HAD RFT (Ready For Training) declaration of the first NH90 Full (antitank missile, air-to-air missile, turreted gun, rockets and Mission Flight Simulator was signed in Germany. upgraded avionics and engines), 24 and 40 of which have been ordered by Spain and France, respectively. In 2008, Eurocopter Eurocopter seeks to continuously improve the quality of its received final qualification of the HAP and UHT versions, and service offering, such as spares delivery performance, which in made continued progress on the HAD version. 2008 recorded an on-time delivery ratio of approximately 90%. There were 15 Tiger deliveries in 2008 (4 to France, 2 to Spain, PRODUCTION 4 to Germany and 5 to Australia), for a total of 48 deliveries as Eurocopter’s industrial activities are conducted in five primary of the end of 2008. locations, two in France, two in Germany and one in Spain. KHP. The Korean government chose Eurocopter as the prime The French sites are Marignane, in southern France, and partner of Korea Aerospace Industries (“KAI”) in the new KHP La Courneuve, near Paris. The German sites are located in programme for the development of Korea’s first military Donauwörth and Ottobrunn, near Munich. The Spanish site transport helicopter in the 8 metric ton class. The 6-year KHP is located in Albacete. development phase will run from 2006 to 2011. In the following Inaugurated in 2007, the new Eurocopter España plant in 10-year production phase, 245 helicopters are to be Albacete is responsible for the production of the rear fuselages manufactured. As the primary partner of KAI, Eurocopter has of the EC135 and Tiger as well as the front fuselage of the a stake of 30% in the development phase and 20% in the NH90. The plant houses the final assembly lines for the EC135 production phase. Eurocopter and KAI have agreed to establish intended for the Spanish market, the Spanish HAD version of a 49% EC/51% KAI subsidiary to market the export version of the Tiger from 2008 and the NH90 in TTH version for the the KHP. Spanish Ministry of Defence. EC175. Eurocopter and Chinese AVIC II Corporation launched The Columbus plant of American Eurocopter in Mississippi the joint development and production (on a 50/50 basis) of the continued to undergo major expansion in 2008 to support LUH EC175, a civil helicopter in the 6-ton category, which will production, assembly and delivery. Industrial activity broaden both partners’ product ranges. The 5-year development commenced in 2006 with LUH assembly and delivery and is phase began in 2006. In 2008, the EC175 was unveiled at the now at full-scale production following the production US-based Heli-Expo, which led to the signature of letters of authorisation granted by the Federal Aviation Administration in intent with 13 operators for a total of 111 aircraft. Assembly of 2007. Activities at the Columbus plant also include production EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 41


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents and assembly of the AS350 and EC120 for US Customs and partnerships with HAL (India) for the manufacturing of Border Patrol as well as the support of the US Coast Guard’s Ecureuil airframes, transferred the NH90 front fuselage programme of modernisation of its Dolphin helicopter fleet. manufacturing to Spain and the EC145 tailboom to AE (Mississippi, US), started the serial production in HAI (Greece) Overall, serial helicopter deliveries increased by approximately of new composite elements and completed a composite facility 21% in 2008 and are expected to stabilise in 2009. Eurocopter in Australia (Brisbane) within the framework of a joint venture will continue to pursue international expansion of its global with Daher (production to start in early 2009). It is also actively supply chain with an emphasis on dollar-based and low-cost seeking to rationalise its supply network and streamline its sourcing in particular. For example, in 2008, Eurocopter signed internal industrial organisation. 1.1.4 Astrium INTRODUCTION AND OVERVIEW 2008. Within this difficult market context, Astrium is pursuing Astrium designs, develops and manufactures satellites, orbital the following strategy: infrastructures and launcher systems and provides space > with respect to the Ariane launcher and M51 missile systems, services. It is the third largest space systems manufacturing Astrium Space Transportation has sought to rationalise and company in the world after Boeing and Lockheed Martin and streamline its activities by assuming the role of prime the leading European supplier of satellites, orbital contractor (as opposed to a main supplier and industrial infrastructures, launchers and associated services. In 2008, architect only). This has strongly contributed to increasing Astrium recorded revenues of € 4.3 billion, representing 9.9% of the reliability and cost effectiveness of these products. In EADS’ total revenues. addition, Astrium is currently the second largest shareholder Astrium has three main business units: Astrium Satellites, of Arianespace with a 30.5% stake. Astrium Space Astrium Space Transportation and Astrium Services. These Transportation will seek to build on this leadership to better include the provision of launch services through Astrium’s serve its customers; shareholdings in Arianespace (Ariane 5 launcher), Starsem > with respect to satellites and services, Astrium has sought in (Soyuz launcher) and Eurockot (Rockot launcher), as well as recent years to move from being solely a systems supplier to a services related to telecommunications and Earth observation leader of satellite service provision in secure communications satellites through wholly or majority owned subsidiaries such as and navigation. The successful deployment of a secure global Paradigm Secure Communications, Infoterra and Spot Image. military satellite communications system to primarily serve the UK Ministry of Defence in 2008 and the planned launch STRATEGY of a similar system on behalf of the German Armed Forces With an established presence in five European countries with (Bundeswehr) in 2009 represent important steps forward. In active space programmes (France, Germany, United Kingdom, the future, Astrium will seek to expand its offering of Spain and the Netherlands), Astrium is the only European innovative, highly competitive end-to-end tailored solutions company to offer comprehensive expertise in all areas of the in the field of secure communications. It will also seek to space industry (satellites, launchers, orbital infrastructure and enhance its presence in the satellite navigation field, in services). Astrium’s strategy is to build on these key strategic particular following the reorganisation of development of assets and to strengthen its position in the market. In particular, a European global satellite navigation system, “Galileo”, as with the launchers and satellites markets being flat, Astrium has discussed below, and to leverage its leading position in earth successfully built a services activity which is expected to provide observation services. the largest part of its development in the coming years. Attain European benchmark profitability Generate profitable growth in a flat market Management is committed to the implementation of additional Institutional and military spending on space activities is flat in measures to enhance profitability and innovation (“Innovex” for Europe due to existing budget constraints. There is also intense Astrium Satellites, “Boost+” for Astrium Space Transportation competition in commercial markets for launchers and and “Impact” for Astrium Services). These measures target telecommunication satellites, in particular given the historical continued margin improvement between now and the end of the lows reached by the US dollar against the euro during most of decade. 42 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents ASTRIUM SATELLITES In the market for observation, scientific and navigation satellites, Astrium Satellites is a world leader in the design and competition in Europe is organised either on a national or manufacture of satellite systems, payloads, ground infrastructure multinational (European Space Agency (ESA), Eumetsat) level. and space equipment for a wide range of civil and military In the latter instance, a fair return principle pursuant to which applications. Prime contractor for over 80 communications contracts are awarded to national suppliers in proportion to the satellites, Astrium Satellites is a partner of choice for many respective financial contribution made by their governments is of the world’s most prestigious operators. Astrium Satellites’ often employed. There is also sizable export demand for Earth business covers the four categories of satellite systems observation systems, for which EADS is currently the sole described below: significant European provider. Furthermore, civil state agencies, including ESA, have displayed increased needs for Earth > telecommunications satellites, which have multiple observation satellites in the framework of European applications, such as long-distance and mobile telephone environmental programmes. Management expects this market links, television and radio broadcasting, data transmission, to remain stable over the medium term. multimedia and Internet trunking. They may be used for civil or military applications; Finally, in the market for military satellites, demand for telecommunications and observation satellites has strengthened. > observation satellites, which allow the collection of In recent conflicts, the shortcomings of European military information for various fields, such as cartography, weather capabilities in these areas has become apparent, while the need forecasting, climate monitoring, agricultural and forestry for preparedness in the face of elusive threats has only grown. management, mineral, energy and water resource management The Skynet 5/Paradigm contract in the United Kingdom, the and military surveillance applications; Satcom BW contract in Germany, the Yahsat contract in the UAE and other development contracts in France demonstrate the > scientific satellites, which are tailor-made products adapted to growth trend in this market. the specific requirements of the mission assigned to them. They have applications such as astronomical observation of Products radiation sources within the universe, planetary exploration Astrium offers turnkey satellite systems to its customers and Earth sciences; and through an array of wholly owned subsidiaries such as (i) Astrium Spain, which supplies platforms, space-borne > navigation satellite systems, which deliver signals that enable antennas, deployment mechanisms and harness subsystems for users to determine their geographic position with high telecommunication satellites, (ii) Tesat (Germany), which is in accuracy, and are increasingly significant in many sectors of charge of telecommunication electronic equipment and commercial activity, such as airlines, transport operators on subsystems, (iii) EADS Sodern (France), which provides satellites land, sea and air, emergency services, agriculture and sensors, and (iv) Dutch Space (Netherlands), which provides fisheries, tourism and telecommunications networks. solar arrays and other specialised items. At the end of 2008, Astrium acquired Surrey Satellite Telecommunications Satellites. Astrium Satellites produces Technology Limited (SSTL), the innovative University of Surrey telecommunication satellites for fixed and mobile applications spin-out company, expanding its product range to the small and direct-to-home broadcast services. EADS’ geostationary satellites and subsystems end of the market. telecommunications satellites are based on the EUROSTAR family platforms (56 ordered to date), the latest version of which Market is EUROSTAR 3000. The commercial telecommunications satellite market is extremely competitive, with customer decisions based on price, Astrium Satellites won two commercial satellite orders in 2008 technical expertise and track record. Astrium Satellites has a (for an 18% worldwide market share), all based on the worldwide market share of approximately 20% according to EUROSTAR platform (Express AM 4 for RSCC and Astra 1N internal estimates, and its main competitors are Boeing, for SES). Six commercial telecommunication satellites were Lockheed Martin and Loral of the United States and Thales successfully launched in 2008: Arabsat 4 AR for Arabsat, Alenia Space (TAS) of France and Italy. Management views the Inmarsat IV F3 for Inmarsat (August 2008); Nimiq for Telesat telecommunications satellite market as one of slow but sustained (September 2008); Astra 1M for SES (November 2008); HB9 and growth, supported by factors such as (i) increased W2M for Eutelsat in December 2008). telecommunications demand, including Internet, multimedia and military needs, and (ii) greater demand to replace aging Observation and Science Satellites. Astrium Satellites is the products. In the face of continued strong competition, Astrium leading European supplier of Earth observation satellite systems Satellites will seek to consolidate its position in this market. for both civil and military applications. In this field, Astrium EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 43


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents Satellites derives significant benefits from the common elements Orbital Infrastructure of its civil and military programmes. The orbital infrastructure segment in which Astrium Space Transportation operates comprises manned and unmanned Astrium Satellites designs and manufactures a wide range of space systems. The ISS, together with related vehicle and highly versatile platforms, optical and radar instruments, and equipment development programmes and services, constitutes ground segment equipment for the complete scope of remote- the predominant field of activity in this segment. Astrium sensing applications, operations and services. Astrium Satellites Space Transportation is the prime contractor under an ESA is the prime contractor for many of ESA’s and French Space contract relating to two key elements of the ISS: the Columbus Agency’s (CNES) principal observation programmes. In Orbital Facility laboratory (COF) and the ATV cargo carrier. particular, it is the prime contractor for (i) the Spot multi- mission platform series, in use in 15 European Earth observation satellites and recognised as an industry standard, (ii) Metop, a Market next-generation polar-orbiting meteorological satellite, with the Demand for orbital infrastructure systems originates solely from first one out of three having been launched in 2006, publicly funded space agencies, in particular from ESA, NASA, (iii) Pleiades, two small and highly agile earth observation Roscosmos (Russia) and NASDA (Japan). Such systems are satellites for civil and military applications, expected to be usually built in cooperation with international partners. In launched in 2009, (iv) Swarm, a climatology satellite monitoring addition to the COF and ATV projects, ESA is responsible for the evolution of the earth’s magnetic fields, (v) Cryosat 2, a additional ISS components for the station’s construction and radar satellite designed to monitor the thickness of polar ice operational phases. National space agencies, such as DLR and caps, (vi) Tandem X, an imagery satellite, (vii) Bepi Colombo, an CNES, are also involved in the development of experimental observation mission to Mercury, and (viii) Seosat and Seosar, a facilities to be used on the ISS. radar earth observation system for the Spanish government. Products An observation satellite was sold to Chile in 2008. Theos, an Astrium Space Transportation is the prime contractor for the observation satellite for Thailand, was launched in development and integration of the COF. The COF is a October 2008. pressurised module with an independent life-support system. The COF was lifted to the ISS on the shuttle flight of Navigation Satellites. Following the decision reached by the 7 February 2008. It provides a full-scale research environment European Union at the end of 2007 to move ahead with the under microgravity conditions (material science, medicine, development of a European global satellite navigation system, human physiology, biology, Earth observation, fluid physics and “Galileo”, ESA has been placed in charge of direct procurement astronomy) and serves as a test-bed for new technologies. of the various necessary components (space segment, ground segment, system support, launchers, etc.). With respect to the Astrium Space Transportation is also the prime contractor for satellites needed for the validation phase of the programme, the development and construction of the ATV, designed to Astrium successfully launched the Giove B satellite in carry fuel and supplies to the ISS and to provide reboost April 2008. capability and a waste disposal solution. The first ATV, Jules Vernes, was launched on 9 March 2008, and docked to the ISS. Military Satellites. In addition to military Earth observation After six months in orbit, it was de-docked from the ISS and activity, Astrium Satellites is active in the market for various burned when re-entering the atmosphere. Additional ATV other advanced applications. These systems demonstrate missions are scheduled through 2013. Astrium’s leading role in complex systems offers, reflecting the efficient use of synergies between Astrium’s space and defence activities. Launchers & Launch Services Space systems (including satellites, orbital infrastructure ASTRIUM SPACE TRANSPORTATION elements and interplanetary probes) depend on rocket propelled multi-stage launchers, which are consumed during the launch Astrium Space Transportation is the European space process, to place them into orbit. Astrium Space Transportation infrastructure and space transportation specialist. It designs, is active in two distinct businesses: (i) designing and develops and produces Ariane 5 launchers, the Columbus manufacturing launchers for both civil and military purposes, laboratory and the ATV cargo carrier for the International Space and (ii) providing launch services through its interests in Station (ISS), ballistic missiles for France’s deterrence forces, Arianespace, Starsem and Eurockot. propulsion systems and space equipment. 44 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents Astrium Space Transportation is the sole prime contractor for In 2008, Arianespace won twelve new commercial contracts, the Ariane 5 system, with responsibility for the delivery to representing more than 70% of the available market, and one Arianespace of a complete and fully tested vehicle. Astrium institutional contract. Arianespace conducted six Ariane Space Transportation also supplies all Ariane 5 stages, the launches, which placed eight commercial satellites, two equipment bay, the flight software, as well as numerous sub- institutional satellites and the ATV into orbit. Since 1999, assemblies. Additionally, Astrium Space Transportation is the when the first Ariane 5 commercial launch occurred, prime contractor for ballistic missile systems to the French State. 37 Ariane 5 rockets have been successfully launched. It is responsible for the development, manufacturing and maintenance of the M45 and M51 submarine-launched missiles > Starsem. Astrium Space Transportation directly owns 35% of and related operating systems. Starsem, a French corporation, along with Arianespace (15%), the Russian space agency (25%) and the Russian state-owned Market Central Specialised Design Bureau “Progress” (25%). Through Arianespace, Starsem markets launch services by Soyuz The commercial market for launch services has changed launchers for medium-weight spacecrafts into low or sun- significantly in recent years. Russian companies and state synchronous orbits as well as for interplanetary missions. agencies have increased their prices dramatically, thereby making One new contract was signed in 2008, and Starsem other launchers more competitive in the market. Management successfully launched the Giove B satellite for ESA in believes that the commercial market for launch services will April 2008. Work is progressing on the Kourou launch pad, likely remain stable at 20/25 payloads per year, relating primarily with the first launch (to be operated by Arianespace) to the launch of geostationary telecommunications satellites. scheduled in 2009. However, due to various factors (e.g., technology advances and consolidation of customers), this figure remains highly volatile. > Eurockot. Astrium Space Transportation (51%) and This market does not include institutional launch services for Khrunichev (49%) jointly control Eurockot Launch Services, the US, Russian and Chinese military and governmental which provides launch services for small, low-Earth orbit agencies. satellites with Rockot launchers derived from SS-19 ballistic missiles. In the area of national defence, Astrium Space Transportation has been the exclusive supplier of ballistic missiles to the French Commercial Launchers. Astrium Space Transportation State since the early 1960s. In addition to conducting production manufactures launchers and performs research and development and state-financed development work, Astrium Space for the Ariane programmes. Member states, through ESA, fund Transportation performs substantial maintenance work on the the development cost for Ariane launchers and associated ballistic missile arsenal to ensure system readiness over the life technology. span of the equipment, which may stretch over several decades. Astrium Space Transportation also provides on-site support to Astrium Space Transportation has been the sole prime contractor the French military. Finally, Astrium Space Transportation is for the Ariane 5 system since 2004. Given the commercial working in partnership with others on a NATO contract relating success of Ariane 5, Astrium Space Transportation signed to theatre missile defence architecture. a memorandum of understanding with Arianespace in 2008 to produce 35 Ariane 5 launchers, in addition to the batch of Products and Services 30 Ariane 5 launchers ordered in 2004. Launch Services. Astrium Space Transportation is active in the field of launch services through its shareholdings in Arianespace Ballistic Missiles. Astrium Space Transportation is the only (for heavy-lift launchers), Starsem (for medium-lift launchers) company in Europe which designs, manufactures, tests and and Eurockot (for small-lift launchers). maintains ballistic missiles. Under its contracts with the French State, Astrium Space Transportation has produced the > Arianespace. Astrium Space Transportation is Arianespace’s submarine launched MSBS family (M1, M2, M20, M4 and M45) second largest shareholder (after CNES) with a 30.5% stake and developed the launch facilities at the Brest naval base. The (direct and indirect), and its largest industrial shareholder. M45 is deployed onboard France’s new-generation nuclear- Arianespace is the world’s largest commercial launch service powered ballistic missile submarine. Astrium Space provider in terms of total order book. At the end of 2008, Transportation manages the operational maintenance of the M45 Ariane had launched a total of 265 satellites. Arianespace missile system, assisting the French armed forces until the end markets and sells the Ariane launcher worldwide and carries of its operational service. out launches from the Kourou space centre in French Guyana. 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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents increased technical and operational capabilities. The third and 75%, ND Satcom: 25%) will operate the system on a long-term last test flight of this new missile was conducted in basis and provide additional capacity from commercial operators. November 2008 and was fully successful. At the end of 2004, the French MoD awarded Astrium Space Transportation a In 2007, Astrium Services (together with Thales Alenia Space) contract for the M51 production phase and test range facilities signed a contract with Mubadala Development Company in Abu with a frame-contract in excess of € 3 billion. At the end of Dhabi for the construction of a secure satellite communications 2006 a contract for an enhanced upper-stage was awarded by the system. Astrium Services will manage the programme, supply French MoD for an amount of more than € 200 million, helping the space segment (except for the payload) and 50% of the ground to secure Astrium Space Transportation’s technical capabilities in segment. Work is ongoing and full delivery is expected in 2011. this field for the long term. Navigation. Following extensive negotiation and discussion, the EU decided at the end of 2007 to move ahead with development ASTRIUM SERVICES of the Galileo programme. The ESA has been placed in charge of Astrium Services offers innovative, highly competitive end-to-end direct procurement of the various necessary components (space tailored solutions in the fields of secure communications and segment, ground segment, system support, launchers, etc.) with satellite navigation. The European “one-stop-shop” provider for full deployment targeted for 2013. This process has begun, military satellite communications services, Astrium Services Astrium Services being a major player in the reorganised delivers secure military satellite services to a number of countries. programme. The Galileo programme is a major step forward for It also intends to be a major player in the satellite navigation field Europe, representing the first major European-level through work on “Galileo”, following the renewed commitment infrastructure procurement programme with a global dimension to the programme made by the EU. that will bring numerous benefits to the continent and the rest of the world. The market potential is promising, as global Products and Services demand for satellite navigation services and derivative products is growing at approximately 25% a year according to internal Military Communications. In 2003, the UK MoD selected estimates. Paradigm to deliver a global military satellite communications service for its next-generation Skynet 5 programme. This Earth Observation Services. Infoterra provides geoinformation groundbreaking contract, pursuant to which Paradigm currently products and services to customers including international owns and operates the UK military satellite communications corporations, governments and authorities around the world. infrastructure, allows the UK MoD to place orders and to pay The successful launch of TerraSAR-X in 2007 — a new radar- for services as required. Offering a catalogue of services, based Earth observation satellite that provides high-quality Paradigm delivers tailored in-theatre and back-to-base topographic information — enabled Infoterra to significantly communication solutions for voice, data and video services, expand its capabilities by proposing new kinds of images based ranging from a single voice channel to a complete turnkey on radar. In 2008, Astrium, Infoterra’s parent company, system incorporating terminals and network management. increased its shareholding in Spot Image, a provider of satellite- Paradigm also provides welfare services, ensuring that deployed based geographic information and services, from 40% to 81%. troops can call home and can use the Internet. The first two In addition, Infoterra acquired Imass Ltd in the UK, a company Skynet 5 satellites were launched in 2007 and the third was specialising in precise-positioning solutions. lifted in June 2008, enabling the UK MoD to pronounce full operational service (limited acceptance). PRODUCTION In Germany, a team led by Astrium Services will be providing Astrium currently operates production facilities located in Germany’s first dedicated satellites for a secure France (Vélizy, Les Mureaux, Bordeaux, Toulouse, Limeil- communications network, due to be operational from 2009. Brévannes, Orléans, les Ulis), Germany (Backnang, Bremen, Two military-frequency satellites and a comprehensive user Friedrichshafen, Lampoldshausen, Ottobrunn, Rostock, Trauen), ground terminal segment will give the German Armed Forces Spain (Madrid), the United Kingdom (Portsmouth, Stevenage, (Bundeswehr) a secure information resource for use by units on Leicester, Newcastle), the Netherlands (Leiden) and French deployed missions, with voice, fax, data, video and multimedia Guyana (Kourou). applications. The programme is well on track, with the delivery of the first ground station in 2007. Astrium Services, through a joint venture with ND Satcom (Astrium Services: 46 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents 1.1.5 Defence & Security INTRODUCTION AND OVERVIEW UK. Within these markets, further efforts in the platform, The Defence & Security division (the “DS division”) serves as missiles, and security businesses will remain a strategic goal the main pillar of EADS’ defence and security activities. By towards profitable growth. At the same time, the DS division combining its Defence and Communications Systems, Defence will seek to expand its presence in developing markets, including Electronics, Military Air Systems and missile systems the Middle East, India and Asia. (consisting of EADS’ 37.5% stake in MBDA) business units Increasing its market share in the US defence and security within one division, EADS has streamlined its defence and market is also a major priority for the DS division, in security business to better meet the needs of customers that coordination with EADS North America Defense Company (NA require integrated defence and security solutions. DefCo), which seeks contracts with the US Department of In 2008, the DS division recorded revenues of € 5.7 billion, Defense and large US industrial companies. Accordingly, the DS representing 13.1% of EADS’ total revenues. division is currently: > pursuing specific market segments in the US in which it can STRATEGY offer superior products and technologies, such as the The DS division seeks to provide its customers with a complete HELLAS obstacle avoidance system for helicopters and the portfolio of platforms, systems and services, in support of fire control radar electronics of the air defence system EADS’ stated objective to improve portfolio balance between MEADS. The DS division has also made headway in the Airbus and other EADS activities in the future. DS will market for professional mobile radio by demonstrating its P25 therefore focus on maintaining its leadership in core areas (such technology to US states like Wisconsin; as combat aircraft, defence electronics, defence and security equipment and systems or missiles) and simultaneously pursue > building strong transatlantic industrial partnerships with US future growth areas (such as unmanned aerial vehicles, prime contractors to explore new opportunities driven by integrated systems for global security or comprehensive security military transformation, including Northrop Grumman (Euro and communications solutions). In addition, the DS division Hawk®), Lockheed Martin (MEADS, Deepwater, Littoral will seek to enhance its offering of comprehensive packages of Combat Ship, COBRA, Missile Defence) and Raytheon mission-critical services — ranging from consultancy, concept (Missile Defence); and development and simulation to operations and outsourcing solutions. At the same time, it continues to pursue new ways in > seeking acquisitions and new partnerships to expand the DS which to generate internal synergies and cost savings. To this division’s industrial presence in the US across several market end, the DS division is actively: sectors, including platform, systems, operational support, defence electronics and security solutions — similar to the acquisition of the US company PlantCML (a leading provider Supporting the transformation process of customers of emergency response solutions) in 2008. Through already existing programmes with NATO and the Defence Ministries of its home countries France, the UK, DEFENCE AND COMMUNICATIONS SYSTEMS (DCS) Germany and Spain, among others, the DS division is actively promoting European and NATO transformation. The DS DCS is the EADS “Systems House”. Its mission is to develop division also participates in the Network Centric Operations complete communication and information system solutions Industry Consortium (NCOIC), an industry-based collaborative (including platforms) and provide the means for their forum formed to recommend an architectural approach for implementation. DCS offers its customers comprehensive and system and platform developers within a global network tailored solutions, including the ability to design, develop and environment. In the future, the DS division will continue to implement Lead Systems Integration (LSI) and link the widest work closely with industry and customer working groups to possible range of individual platforms and subsystems into a help define and deliver system solutions geared towards single effective network. Systems integration has become customers’ capacity requirements and transformation needs. increasingly important for customers engaged in border control and coastal surveillance, as well as for non-military customers in areas such as homeland security, all of which are areas of major Consolidating its position in home markets focus for DCS. and targeting selective expansion globally The DS division will seek to sustain growth by consolidating its In 2008, DCS generated 25% of the DS division’s total revenues. position in its home markets of France, Germany, Spain and the EA DS REGIS T RAT ION DOCUME NT 2 0 0 8 47


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    1 INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 2 3 4 5 6 Back to Contents Market In 2008, DCS reinforced its capabilities in this area through the DCS faces competition from large US and European companies acquisition of California-based PlantCML, a leading provider of that also specialise in its markets. Major competitors are emergency response solutions. PlantCML provides call Lockheed Martin, Thales, Motorola and General Dynamics. Key management and radio dispatch products for emergency call customers for DCS’ business primarily include governmental centres, among other things. customers, such as MoDs and Ministries of Interior in its home markets of France, Germany and the UK, with an increasing APSYS: Safety Engineering focus on other European countries, the Middle East, South APSYS is a DS division subsidiary and is managed by the DCS Africa, Asia and the US. business unit. In 2008, APSYS strengthened its position in the French market for consulting, training and studies services in Products and Services technical risk management. New expertise was developed to Defence. DCS offers comprehensive mission systems and address specific markets and maintain the competitive edge of solutions in the areas of air dominance, battle space systems, APSYS, such as software quality insurance, communication intelligence solutions and naval systems, as well as overall systems security, 3D phenomena modeling and transportation systems support. It is a leading provider for full systems design scheme performance analysis. architecture and systems integration responsibility for military land-, sea-, air- and space-based systems. DCS delivers airspace Dornier Consulting GmbH dominance systems for defensive, offensive and support Dornier Consulting GmbH is a DS division subsidiary and is operations in a combined, joint environment, thereby realising managed by the DCS business unit. Dornier Consulting is a flexible, network enabled capabilities. DCS designs, integrates company for future-oriented transportation and technology and implements secure fixed, tactical, theatre and mobile consulting with a focus on traffic, transportation and logistic information infrastructure solutions, including all of the concepts, system specification and integration, modern services needed to support integrated mission systems and technologies for the management of natural resources as well as solutions. DCS is also a major designer and supplier of C3I professional full-service project management. It is an systems to the armed forces in France and Germany, and the independent consulting and engineering company with clients Joint Staffs in France, Germany and NATO. in the public and private sector in Germany, Central and Eastern Europe, Central Asia and the Middle East. Major clients include The business unit is focused on customers’ need for information national and international institutions (World Bank, UNDP, EU, infrastructure solutions. Its expertise includes a detailed KfW, GTZ), governments, authorities, the German Railways understanding of the technology necessary to achieve this, (Deutsche Bundesbahn), Daimler and EADS as well as a including interfaces, gateways and the use of open system spectrum of private companies. As part of its future strategy, architectures. Dornier Consulting will seek to develop additional opportunities for other EADS units while also focusing on Global security. DCS provides fully integrated global security international growth. solutions and services in the areas of border security, maritime security, crisis and emergency management, critical infrastructure protection and large event protection, such as the Sofrelog Asian Games in Qatar. Due to the increased connections Sofrelog is a DS division subsidiary and is managed by the DCS between different areas of threat and in light of the growing business unit. Sofrelog provides integrated mission critical interdependence of internal and external security in particular, real-time systems using radar and other wide area sensors, the seamless collaboration of different security organisations has mostly for maritime applications, typically vessel traffic services become increasingly important. The DS division seeks to and costal surveillance. These systems are based on Sofrelog’s maximise efficiencies through the optimised use of data and unique SYTAR™ product, which has set the technical standard information together and across these different security in the maritime world: more than 450 radars have been organisations. connected, with Sofrelog having design responsibility on more than 50 control centres in 30 different countries around the Professional Mobile Radio. DCS is a leading provider of digital world. Sofrelog is well positioned for growth in its core markets: professional mobile radio (PMR) and secure networks. DCS building on the award of Qatar and Tanger Med port security in solutions for PMR enable professional organisations in various 2007, Sofrelog plans to further contribute to DS’ global security areas — such as public safety, civil defence, transport and growth. industry — to communicate effectively, reliably and securely. DCS offers its customers specialised PMR solutions based on TETRAPOL, TETRA and P25 technologies, amongst others. 48 EAD S R EG I S TR ATI O N DO C U ME N T 2 0 0 8


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    INFORMATION ON EADS’ ACTIVITIES > 1.1 | Presentation of the EADS Group 1 1 2 3 4 5 6 Back to Contents ATLAS ELEKTRONIK solutions to counter threats posed by infrared-guided missiles in ATLAS ELEKTRONIK GmbH, headquartered in Bremen particular. To date, DE has sold approximately 5,600 units of its (Germany), is a joint venture of ThyssenKrupp (51%) and EADS missile warning sensor (MILDS), which is deployed on a variety (49%). In 2008, ATLAS ELEKTRONIK achieved important of helicopters and transport aircraft. successes, including orders for the command and weapon control system as well as the tactical data link for the new German Avionics. As a major partner in the field of military mission frigate F125, the delivery of submarine command systems for avionics for the A400M, DE assumes subsystem responsibility the Indian Navy, orders by the Finnish Navy in the field of for mission management and defensive aids. The DE portfolio mine hunting and orders by international customers within the also comprises avionics equipment, such as digital map units sector of maritime safety and security. The company took (EuroGrid), flight data recording units and obstacle warning important steps to assert itself firmly in a market that — systems for helicopters. In addition, DE is developing multi- although growing — is characterised by increasing competition sensor integration and data fusion technology, which is a key and cost pressures. future technology for network-enabled capabilities. For example, DE is in charge of sensor fusion software on the NATO AWACS E3A and the similar Australian “Wedgetail” and the DEFENCE ELECTRONICS (DE) Turkish “Peace Eagle” programmes. Additional products offered As the “Electronics House” of the DS division, DE provides by DE in the field of communication and identification include mission-critical elements for data gathering, data processing and wide-band modular data links. distribution for defence and civil security systems. Its dominant business is based on high-end security electronic equipment and Sensors. DE is a principal partner in the development of airborne subsystems addressing the market for surveillance and multi-mode radars such as the Captor radar in the Eurofighter reconnaissance, military mission management, protection of own programme, and also provides integrated logistics support, forces and critical infrastructures, as well as testing systems and maintenance and upgrades. DE is also heavily involved in the services. technological development and application of next-generation active electronically scanning (AESA) radars for air, naval and In 2008, DE generated 16% of the DS division’s total revenues. ground applications. In the field of fighter radars, an AESA radar demonstrator demonstrated its capabilities in flight on Eurofighter, and in 2008 DE finalised a demonstrator for the Market land-based application of this new technology. In the area of air DE’s main competitors in defence electronics are large and defence, DE produces mid-range radars for ship (TRS-3D) and medium-sized US and European companies (i.e., Raytheon, land (TRML-3D) applications. DE also takes a lead role in Northrop Grumman, Thales, BAE Systems, Galileo Avionica, developing and manufacturing synthetic aperture radars (SAR), Indra and Saab) as well as competitors from Israel. DE’s key which are considered essential for future reconnaissance and customers include MoDs, interior ministries, military services, surveillance operations. In this field, DE has developed the security forces, the in-house EADS systems suppliers and other European stand-off SAR sensor for wide-area surveillance LSI’s worldwide. Through various joint ventures, participations (SOSTAR-X) and provides the Tandem-X space-borne Earth and partnerships, DE has access to customers in every NATO observation satellites with unique radar components. country, in particular in Germany, France, the UK, Spain and Italy, and to important export markets, such as the US, Turkey, Test & Services. The Test & Services product range covers the India and South Africa. entire life cycle of equipment and systems and includes comprehensive solutions that rely on test services and systems. Products and Services The solutions are either integrated or sold as stand-alone elements: instrumentation, system software and application Electronic Warfare and Self Defence. Growth in electronic software. The versatility of Test & Services systems means that a warfare (EW) and self-defence is a key strategic goal for DE. multitude of equipment and systems can be tested. Accordingly, DE supplies electronic self-protection systems for aircraft, ships the same airline can use a single model test bench for and armoured vehicles, such as laser warning, missile warning maintaining both its Airbus and Boeing fleets, while the French and active electronic countermeasure units, including directed Army uses the same test system for numerous weapon systems. infrared countermeasures, self-protection jammers and towed Already present worldwide with its civil and military equipment decoys. For example, DE delivers jammers to counter the testers, Test & Services is consolidating its development strategy increasing threat by roadside bombs. It has subsystem on the international stage with new locations in France, responsibility for the A400M’s self-protection system, also Germany, Spain, the UK and the United States, as well as a supplying core EW equipment such as the infrared missile global distribution network. warning system MIRAS. For military mission aircraft, helicopters (NH90, Tiger) and VIP aircraft, DE is developing EA DS REGIS T RAT ION DOCU ME NT 2 0 0 8 49

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