Airbus, Safran Making Progress on Joint Rocket Venture

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KOUROU, French Guiana — Airbus Group on July 30 said its Defence and Space division reported higher pretax profit on lower sales in the first six months of 2014 and that the company has reached an agreement with motor-builder Safran on the organization of a joint venture in launch vehicles.

In a conference call with investors, Airbus Chief Executive Tom Enders said he and Safran Chief Executive Jean-Paul Herteman had decided on a board structure and chief executive for the new joint venture, which was announced in mid-June and ultimately is expected to envelope the current Arianespace commercial launch company as well as other rocket component manufacturers.

Airbus and Safran on July 30 said Alain Charmeau would be the joint venture’s chief executive. Charmeau is a longtime manager at Airbus Defence and Space’s launch vehicle division in France.

Questions remain as to the eventual place in the new company of Finmeccanica of Italy, which is widely expected to purchase a majority stake in Avio SpA to give Finmeccanica the heft it needs to be a third pillar in the joint venture.

Italian Space Agency (ASI) President Roberto Battiston told journalists here attending the July 29 launch of Europe’s ATV freighter to the international space station that he expects an announcement soon about Finmeccanica and Avio.

Avio is the majority shareholder of ELV, the prime contractor for Europe’s Vega small-satellite launch vehicle. ASI is a 30 percent shareholder in ELV.

In the conference call, Enders said Airbus wants “to further invest” in launch vehicles through the joint venture, which is designed to permit Airbus and Safran to cut the cost of building the Ariane 5 heavy-lift rocket as part of a broad overhaul of Europe’s launch sector.

Enders said he and Herteman agreed July 29 on who would be the joint venture’s chief executive as well as on the structure of the company’s board of directors — “both important milestones as we enhance our launcher business.”

Airbus Defence and Space was created in January and has spent the past six months securing the approval of unions in the several countries in which it has production facilities — France, Germany, Britain and Spain chief among them — to commence job cuts totaling 5,800 over three years.

More than half of the job losses — 2,470 according to Airbus — are slated to occur in the company’s space division.

“After lengthy, complicated interactions and negotiations with the various national unions — that’s Europe, ladies and gentlemen, we know how to do that but it certainly takes time — we are there and the division is now running,” Enders said of the Defence and Space division. “The space business is running very well. We have booked several more contracts than we really thought we would for 2014 already.”

The space business of the Defence and Space division is located in two business units — Space Systems, which includes satellite and rocket manufacturing, and Communications, Intelligence and Security (CIS). CIS includes the large contracts with the British Defence Ministry and the NATO alliance to provide satellite telecommunications services, and the Earth observation geospatial imagery services business.

The Defence and Space division reported revenue of 5.5 billion euros ($7.5 billion) for the six months ending June 30, down 1 percent from the same period a year ago. Backlog was also down, by 2.7 percent, to 41.6 billion euros.

Pretax profit was up 3.2 percent and the pretax profit margin — the metric that Airbus management uses to judge performance — was 4 percent versus 3.9 percent a year ago.

Airbus Chief Financial Officer Harald Wilhelm said during the conference call that the goal for the division, announced when it was created, remains an 8 percent pretax profit margin by 2015.

The Space Systems business unit’s revenue for the first six months of 2014 was 2 billion euros, Airbus said. The CIS unit’s revenue was about 1 billion euros.