Airbus lost €2.5 billion (£1.7 billion) on its much-delayed A380 superjumbo last year and, as more projects run into difficulties, the company has indicated that 2007 could be even worse.

EADS, the Airbus parent, confirmed yesterday that problems at the commercial aero-space division almost wiped out profits last year despite a boom in defence orders, and Louis Gallois, the joint chief executive of EADS, admitted that 2006 was “the worst year for Airbus in its life”.

The A380, a groundbreaking double-decker aircraft, is the source of most of the grief, costing the company €2.5 billion. This included €800 million paid in compensation to airlines that will take delivery two years late.

EADS also revealed that both the A350XWB and the A400M racked up big losses. The A350XWB will be the next Airbus passenger jet and is being introduced to compete with the popular Boeing 787 Dreamliner. The original A350 design was rejected by airlines last year because it was not sufficiently competitive, and upgrading the specifications cost €500 million.

The A400M is a military transport aircraft. There has been speculation that it was running into difficulties, and Airbus confirmed this for the first time yesterday.

The A400M, which will be larger than existing Hercules transporters, will be delayed by three months, and Airbus acknowledged that there would be “significant challenges until first delivery”, which is scheduled for next year. Costs have blown out on this project, too, and EADS took a provision of €352 million to cover the “risk and technical challenges” of developing the aircraft.

EADS reported that overall revenues were up 15 per cent to €39.4 billion last year but that earnings had fallen to €399 million from €2.8 billion in 2005.

However, this is unlikely to be the end of financial problems for EADS and Airbus, as the company admitted that its free cash flow, a measure of its operating profit, could fall to negative €1 billion this year.

EADS will have to absorb restructuring costs, the impact of a weak dollar and yet more costs associated with the launch of the A380, the A350 and the A400M.

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