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UPDATE 
Week ending April 8, 2001
+++ Swissair finances in disarray +++ Reusable space transport demonstrator launched +++ Northrop Grumman completes Litton takeover +++ Greece not sure on Eurofighter +++ P&W Canada tests geared turbofan +++ News in brief +++

Swissair finances in disarray
Hohe Verluste bei der SAirGroup

The SAirGroup's operating revenue rose 25% to CHF 16 229 million in 2000 but the aviation group recorded a substantial consolidated net loss for the year. A key factor in this far-from-favourable result was the strongly adverse impact of the Group's airline investments, which required exceptional depreciation and provisions to be effected for the year. Results from the Group's airline-related divisions were encouraging, but could not offset the adverse influences on the airline side. Thus, earnings before interest and taxes (EBIT) before equity-accounted investments amounted to CHF 603 million (1999: CHF 674 million), corresponding to an operating profit margin of 3.7% (1999: 5.2%). EBIT including equity-accounted investments produced a CHF 2 592 million negative result (1999: plus CHF 643 million). The Group thus incurred a net loss for the year of CHF 2 885 million (which compares to a CHF 273 million net profit recorded for 1999). The Group intends to realign its overall business strategy to lay a sound foundation on which to substantially enhance its revenue and earnings performance.
In financial terms, 2000 was the worst year in the history of Swissair/SAirGroup. Operating revenue was increased by 25%, largely through acquisitions and organic growth. But the earnings targets in the airline sector fell far short of objectives, and the sizable losses incurred by its airline investments, particularly in France, Belgium and Germany, resulted in a substantial net Group loss for the year. The losses incurred by its airline investments, value adjustments to loans and provisions established for restructuring costs, asset impairments and contractual obligations had a combined negative impact of CHF 3 725 million on the Group's net consolidated result. The problems were exacerbated by the steep rise in the price of aviation fuel in a market that was already suffering from surplus capacity, making it difficult at best to pass on these costs.
Sabena, while achieving an 11% increase in total traffic volume, incurred a net loss of EUR 325 million for the year. Results for the French airlines AOM, Air Liberté and Air Littoral also fell far short of their objectives: the three carriers reported a combined loss of CHF 600 million before restructuring costs and value adjustments. The LTU group made further progress in its own restructuring activities and, through its strategic partnership with the Rewe trading group, eliminated its previous competitive disadvantage in the distribution field. Despite these actions, however, LTU incurred a net loss of EUR 224 million for the year. On a positive note, LOT Polish Airlines and South African Airways also recorded black-ink results. Despite increasing their operating revenue by between 10 and 15%, the three Swiss airlines all had poor years. Swissair recorded an EBIT loss of CHF 195 million on operating revenue of CHF 5 791 million; Crossair incurred an EBIT near the break-even point (loss of CHF 20 million) on operating revenue of CHF 1 275 million; and Balair recorded a loss of CHF 25 million (EBIT) on operating revenue of CHF 33 million. The steep increase in kerosene prices played a major role in these results: at Swissair alone, fuel costs were CHF 270 million or 56% higher than in 1999. Crossair saw an even higher increase in percentage terms: the CHF 85 million rise was a 75% increase on the prior year.
Including the activities of Flightlease, the Group company that primary serves to finance the aircraft fleets of the Group, the entire SAirLines division concluded the year with an EBIT of CHF 35 million (1999: CHF 188 million). Operating revenue was CHF 7 166 million (1999: CHF 6 414 million).
In stark contrast to the airline business discussed above, the Group's airline-related divisions recorded encouraging results for the year. SAirLogistics posted record results: its operating revenue of CHF 1 712 million was a 27% improvement on prior-year levels, while EBIT reached CHF 99 million (1999: CHF 6 million). Swisscargo, with an EBIT of CHF 69 million, made the biggest
contribution to these results. SAirServices increased operating revenue by 32% to CHF 3 183 million. The division's EBIT stagnated somewhat due to the expansion of SR Technics' activities in the USA and because of additional acquisition-related costs incurred by Swissport. EBIT amounted to CHF 162 million (2% less than the prior year figure). The prime contributor was SR Technics, with an EBIT of CHF 74 million. Operating revenue for the SAirRelations division amounted to CHF 6 218 million, a 28% increase on 1999. The division's CHF 300 million EBIT result was also a 12% improvement on the prior year. The favourable results were primarily attributable to strong EBIT performances from Gate Gourmet (CHF 187 million), the Nuance Group (CHF 74 million) and Swissôtel (CHF 34 million).
The CHF 2 885 million net loss for the year reduced the Group's shareholders' equity to CHF 1 160 million. Suitable measures are therefore being initiated. Group Chairman and CEO Dr. Mario A. Corti emphasises several points that need urgent attention. The company must and will correct the problems it is currently experiencing. The matter of most urgent concern is reducing the risks to which the Group's airline investments are currently exposed as quickly and as substantially as possible. The Group's earnings power must be improved by using all available means. These two priorities will be supported by efforts that are already underway to rapidly improve the balance sheet quality through suitable measures.

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Reusable space transport demonstrator launched
Astrium-Studien für wiederverwendbaren Raumtransporter

With a total of DM 32 million, the Federal Government, the Land of Bremen, the German Aerospace Center (DLR, Cologne), OHB System GmbH (Bremen) and Astrium are involved in the development of a demonstrator for reusable space transport systems to be carried out within the framework of the national technology program ASTRA. "Development of PHOENIX will be the first step towards the realization of a European, reusable space transport system ", said Josef Kind, member of the board of management of Astrium N.V. with responsibility for the Space Infrastructure division, on the occasion of the official go-ahead for the development of a new space transport system in Bremen on Wednesday.
The demonstrator PHOENIX is intended to prove the feasibility of a future, reusable space transport system. The use of such a "small" prototype is required as due to physical influences in the atmosphere not all the design features can be demonstrated with the help of computer simulations and wind tunnel tests. A demonstrator will also help to cut costs in the development phase of the future space transport system. Out of own funds, Astrium will invest about DM 14 million and the medium-sized Bremen company OHB System almost DM 1 million in the development of the flight demonstrator. The Land of Bremen is contributing DM 10.5 million out of its technology fund. The remaining costs will be jointly covered by the Federal Government and DLR. Development, construction and testing are scheduled for completion by the end of the year 2003. The demonstrator will be just under seven meters long. It will have a wingspan of 3.8 meters, a weight of 1,200 kilograms and will be similar in appearance tothe US Space Shuttle.
PHOENIX forms an essential part of the national program ASTRA (Selected systems and technologies for future space transport system applications). In addition to Astrium and DLR, companies such as MAN-Technologie, OHB-System and Kayser-Threde, ZARM as well as three DFG special research departments of the Technical Universities of Aachen, Munich and Stuttgart are involved in ASTRA. Prof. Dr. Walter Kröll, Chairman of the German Aerospace Center: "The ASTRA program will help to promote German system and technical competence in the industry, at universities and DLR institutes in order to provide a basis for the development of future-oriented concepts and state-of-the-art technologies for a new space transport system that will enable Germany and Europe to face severe competition in the international markets. Technology development will particularly focus on structures, construction, materials, propulsion systems, flight guidance and control".

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Northrop Grumman completes Litton takeover
Neuer Rüstungsriese entsteht

On April 3 Northrop Grumman Corporation announced today that it has completed the purchase of all tendered shares of Litton Industries Inc. common and Series B preferred stock, after receiving all required U.S. and international governmental and regulatory approvals. "Today marks an exciting new chapter in Northrop Grumman's 60-year history," said Kent Kresa, Northrop Grumman's chairman, president and chief executive officer. "The Litton acquisition creates a $15 billion, top-tier global defense enterprise with 80,000 employees worldwide. Without question, the global military environment has changed. So, too, has Northrop Grumman," Mr. Kresa added. "With Litton, we have solidified our position in major growth segments of the 21st century defense marketplace." Mr. Kresa said Litton is a superb strategic fit that offers tremendous synergies with existing Northrop Grumman businesses. "Together, we form an extraordinary team of men and women who share a proud history of achievement and the promise of future accomplishments," he noted. "Litton elevates Northrop Grumman to a defense electronics powerhouse and one of the largest providers of information technology for the federal government," Mr. Kresa said. "It also gives us the new prime capability of shipbuilding, making us the largest supplier of non-nuclear surface ships for the U.S. Navy. Litton also adds world-class capabilities in the commercial electronics arena."

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Greece not sure on Eurofighter
Bleibt Griechenland beim Eurofighter?

Greece's defence minister has refused to say whether Greece would stick to its original choice to buy the Eurofighter. Asked whether Greece would now consider different fighters, Tsohatzopoulos said: "We are not discussing anything (now). We are standing where we are. We will specify closer to the date." An initial deal for Greece to buy 60 Eurofighter Typhoon aircraft with an option for another 30 was put on hold last week until after 2004. The government said it wanted to funnel the five billion euro ($4.43 billion) expenditure to fund the Olympic Games, job creation and anti-poverty programmes.
EADS has meanwhile statet: "We regret that the Greek Eurofighter programme has been deferred along with other defence procurement projects as a result of the reorientation in the government's budget policy. Nevertheless, we are confident that Greece will stand by the decision it has already taken to order the Eurofighter for the Hellenic Air Force. For this reason we are maintaining our offer of a partnership in the Eurofighter programme and will remain in close contact with the Greek authorities," stated Rainer Hertrich, Chief Executive Officer of EADS. The postponement will have no effect on the profitability of the ongoing Eurofighter programme. Also, the three-year planning of EADS will not be effected. EADS will still achieve its 10 percent EBIT margin in 2004.

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P&W Canada tests geared turbofan
Neues Triebwerk von Pratt & Whitney Canada

Pratt & Whitney Canada Corp. has successfully completed the first run of its revolutionary geared turbofan engine demonstrator, the Advanced Technology Fan Integrator (ATFI), designed for the regional airline and corporate jet markets. "With the completion of this first run and with test activities now in full motion, we are looking forward to initiating the flight test program for the ATFI on our flying test bed in the coming year," said Gilles Ouimet, President and Chief Executive Officer of P&WC. Mr. Ouimet noted that the first run of the ATFI demonstrator on March 17 was ahead of schedule. "The engine has since exceeded its maximum thrust target of 12,500 lbs and has performed flawlessly," he said. "This shows that the technology is working just as expected and that geared fan technology can bring exceptional performance, economics, and environmental improvements to aircraft operators."
The ATFI is being developed in close collaboration with Pratt & Whitney's Large Commercial Engines division in Hartford, Connecticut, which has been developing geared-fan system technology for more than 10 years. Also participating as partners are MTU Aero Engines from Germany, which has been selected to supply the low-pressure turbine for the engine, and FiatAvio from Italy, responsible for the fan drive gearbox assembly, intermediate case and accessory gearbox. The ATFI demonstrator program was formally launched at the Farnborough Air Show in England in July, 2000. This great achievement in the ATFI demonstration program sets the stage for the new PW800 engine family of advanced geared turbofans in the 10,000-19,000-pound thrust range to be available within 36 months from a formal program launch. The new PW800 family will complete the Pratt & Whitney product line by bridging the gap between the PW300 series for small regional and business jets and the PW6000 family for the 100-passenger market and above.

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NEWS IN BRIEF / KURZMELDUNGEN

The General Secretariat for Maritime Fishing of the Spanish Ministry of Agriculture, Fishing and Food (M.A.P.A.), has received a new CASA C-212 PATRULLERO aircraft. The Chairman and CEO of EADS CASA, Alberto Fernández, has delivered the aircraft at the EADS CASA factory in Getafe to the Minister of Agriculture, Fishing and Food, Miguel Arias Cañete. This event was attended by the General Manager of Fishing Resources, Arturo Abelló Díez del Corral, General Secretary of Maritime Fishing, Samuel Juárez Casado, and the General Manager, Subdepartment of fishing Inspection, José Luís Puig. This aircraft is the second CASA C-212 Patrullero in service for inspection, surveillance and support to the Spanish fishing fleet, within the Spanish territorial waters and international fishing-grounds such as the Gran Sol area to the north or the Canary Islands area to the south of the peninsula.
+++
Mitsubishi Heavy Industries (MHI), the prime contractor for Japan's new F-2 support fighter, has awarded a fifth annual contract to Lockheed Martin Aeronautics Co. for tasks in the manufacture of an additional nine F-2 production aircraft. Lockheed Martin already is producing components for the first 36 aircraft under four previous annual contracts. This fifth contract, which began April 1 and is valued at over $180 million, brings the total to 45 aircraft. Under this contract, Lockheed Martin will continue to provide all the aft fuselages, wing leading-edge flaps and stores management systems; 80 percent of all left-hand wing boxes; and other avionics and avionics support equipment.
+++
All Nippon Airways (ANA), one of Japan's largest airlines, announced an order for nine Boeing 767-300ER (extended range) jetliners. The order is valued at more than $1 billion at list prices. The General Electric-powered 767s will be delivered between during ANA's 2002 fiscal year, which ends in March 2003. The order was recently acknowledged on the Boeing orders and deliveries Web site, attributed to an unidentified customer. All Nippon operates the largest 767 fleet in Asia, numbering 53 airplanes, including 11 767-200s, 34 767-300s and eight 767-300ERs. The carrier has operated the 767 since its first 767-200 delivery in April 1983.
+++
Boeing announced it has signed a contract with FedEx Express to modify three additional MD-11 passenger airplanes to freighters. Aeronavali, a Finmeccanica company coordinated by Alenia Aerospazio in Italy, will perform the modifications. This order brings the total number of MD-11 conversions that Boeing will perform for FedEx Express to 41 firm and 47 options. Of the 41 firm orders, Boeing has completed 11 modifications for FedEx. A final decision has not been made on where the remaining airplanes will be converted.
+++
CAE announced that it has been awarded a contract from the Brazilian manufacturer Embraer to produce the first Full Flight Simulator (FFS) and MAXVUE Plus visual system for the ERJ-170 aircraft. The contract is valued at approximately $15 million (Cdn) at list prices. Embraer is purchasing this simulator on behalf of its ERJ-170 aircraft launch customer Crossair. The simulator's initial design will meet the European JAR 1A Level C standard, with an upgrade to Level D, the highest in FFS equipment, once the final aircraft performance data becomes available. The simulator will become operational in Basel, Switzerland, in November 2002.
+++
The shareholders of LFK-Lenkflugkörpersysteme GmbH, EADS European Aeronautic Defence and Space Company and Matra BAe Dynamics, have with immediate effect nominated Werner Kaltenegger to succeed Peter Ibbeken as Managing director of LFK. Kaltenegger, who up till now has been Managing Director of the LFK subsidiary TDW Gesellschaft für verteidigungstechnische Wirksysteme mbH located in Schrobenhausen, is to assume the additional responsibility of heading the business unit EADS/LFK. Peter Ibbeken will take up a new task within the EADS Group. "Peter Ibbeken took over control of LFK in turbulent times a year ago. Since then, he has initiated important steps on the way to an economic recovery and the strategic repositioning of LFK. For this reason he is owed our thanks," said Dr. Thomas Enders, Member of the EADS Board of Management and Head of the Defence and Civil Systems division. "The helm at EADS/LFK now passes to Werner Kaltenegger, an experienced turnaround manager who will receive the full support of the LFK shareholders EADS and Matra BAe Dynamics (MBD) for the tough task that lies ahead of him," Enders continued. "The market conditions have become even worse for LFK in the past year, above all in the German market. Important programmes have been either stopped or postponed. The future of EADS/LFK therefore lies in close integration and worksharing with the Number 1 in the European missile industry, Matra BAe Dynamics." Werner Kaltenegger will retain his position as Managing director of TDW as an additional responsibility until his successor is named.
+++
More than half of the EUR 60 million synergies, EADS European Aeronautic Defence and Space Company is to achieve in 2001 will be provided by a harmonised sourcing strategy. The new sourcing strategy was implemented at the beginning of the year. "This new strategy goes far beyond a traditional procurement policy and redefines the relationship with the EADS suppliers," EADS Chief Executive Officer Rainer Hertrich explained to 125 managers attending a procurement conference. "We need a new framework of cooperation between the suppliers and EADS to successfully implement demanding projects such as the A380. EADS' harmonised sourcing strategy is essential to achieving cost-effectivness, while still ensuring highest quality and innovation."
+++
Lufthansa considers VC's decision to brake off the talks to be beyond comprehension and deplores the union's attitude. The Company is still willing to negotiate and calls on the VC union to return to the negotiating table to avoid damaging the Company, its staff and its customers. At the fourth round of collective bargaining last night for 4 200 pilots employed by airlines in the Group (Passenger airline, Condor, Condor Berlin and Lufthansa Cargo) the Vereinigung Cockpit (VC) pilots' union broke off the talks after Lufthansa had put forward its announced offer complete with figures to fill in the details of the future-oriented and performance-related remuneration system it proposed at the last round of pay negotiations. The offer entailed an overall pay rise for cockpit crews this year ranging between 10 and 16.7 per cent: Included in that figure is a pay increase averaging 3.5 per cent resulting from salary-scale adjustments plus a variable performance-related payment amounting to a month's salary. This variable component, which is subject to a four-year agreement, envisages additional, performance-related yearly payments of up to two monthly salaries, depending on company results.
+++
The European Commission has approved the proposed creation of a joint venture between French company Thales (previously Thomson-CSF) and US-based Raytheon Company. The joint company will combine Thales's and Raytheon's respective activities in the field of air defense systems, comprising air operations command and control systems, battlefield systems and weapon locating radars. In view of the presence of other largeand experienced competitors, the Commission has concluded that the operation would not raise competition issues in those sectors.
+++
The U.S. Navy and U.S. Air Force have ordered 59 T-6A Texan II aircraft and technical support from Raytheon Aircraft Company worth $148.3 million for the Joint Primary Aircraft Training System (JPATS) program. The Navy will receive 24 aircraft and the Air Force will receive 35 aircraft. The JPATS program calls for the Navy to receive 328 aircraft through the year 2017, and the Air Force 454 aircraft.
+++
The Algerian airline Khalifa Airways, based in Algiers, has placed an order for 10 additional ATR 72-500s. Deliveries of these aircraft will take place in 2001 and 2002. These 10 ATR 72-500s will complement the 4 ATR 42-320s and 3 ATR 72-500s already in operation in Khalifa Airways' network.They will be used by Khalifa Airways to grow significantly its regional and domestic network. To date, ATR has sold 651 ATRs (366 ATR 42 and 285 ATR 72) to 103 airlines in 65 countries.
+++
Another ERJ 170 / ERJ 190 program milestone is about to be accomplished with the arrival of a major assembly manufactured by one of the 16 risk-sharing partners. Developed and produced by Kawasaki Heavy Industries (KHI), one of Japan's leading aerospace manufacturers, the first wing stub has been airfreighted to Brazil after being approved by Japan's airworthiness certification authority (JCAB) in coordination with Brazilian authorities (CTA). Machined at Gifu, one of KHI Aerospace Division's installations, this wing stub will arrive at Embraer's headquarters in the beginning of April. Serving as an attachment point for the aircraft's wings, the box-like wing stub is a key structural component of the ERJ 170 / ERJ 190 jetliner. Once inspected, it will be ventrally fitted to center fuselage II, thus registering the first major mating event of risk-sharing partner furnished assemblies.
+++
JAS39 Gripen's advanced planning and evaluation system together with the training system for the Viggen fighter aircraft are to be further developed by AerotechTelub. Modern, complex fighter aircraft demand advanced computer-based ground systems for the planning and evaluation of every air sortie. These systems are an important part of the training of new pilots and for the Air Force's tactical development. For the planning of air sorties, a system called PLA, Planning and Analysis is used, that has primarily been developed by AerotechTelub. For the evaluation and analysis of air sorties with JAS39 Gripen, a very advanced system called UTA is used for the purpose. UTA stands for Utbildning Taktisk Analys (Training Tactical Analysis) developed by AerotechTelub. The order is for SEK 18M with an option of a further SEK 13M.
+++

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Previous updates are still available:
Die News der letzten Wochen sind weiter abrufbar:

*April 1, 2001

*March 25, 2001 *March 18, 2001 *March 11, 2001 *March 4, 2001

*February 25, 2001 *February 18, 2001 *February 4, 2001

*January 28, 2001 *January 21, 2001 *January 14, 2001 *January 7, 2001

*January to December 2000 *January to December 1999 *January to December 1998 *January to December 1997 *September to December 1996

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