Thursday, July 28, 2005

The great divide

A story in The Times today announces that Europe's largest aerospace manufacturer EADS raised its profit growth target to 18 percent, on the back of its main subsidiary Airbus. which is doing particularly well at the moment. It turned in 7 percent jump in interim earnings before interest and tax of €1.54 billion. Its net profit has more than doubled to €816 million.

Before the Europeans start preening themselves, however, The Times also reports that shares in Boeing, which is being heavily challenged by Airbus in the civil aircraft market, hit a four-year intraday high despite the company reporting a 7 per cent drop in quarterly profits yesterday. This was because of a unexpected increase in Boeing's second-quarter net profit, which reached $566 million (£325 million), ahead of expectations.

What is not generally realised though is that Boeing – long famous for its airliners – is no longer just – or even mainly – an airline builder. Ranking number two in the world's listings of defence contractors, its defence sales account for nearly 60 percent of its $52 billion turnover. One of its biggest money-spinners is the $120 billion Future Combat System project, aimed at re-equipping the US Army - for which it is the "systems integrator".

That is the scale of the divide. EADS, trailing in seventh place in the rankings, is nowhere near the might of the US giant. The Europeans have a long way to go.

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