EADS-BAE Merger Would Create Very Diverse Aerospace Company

By Angelo Young | September 13 2012 1:37 PM

Photo: airliners.net / Gordon Zammit

Eurofighter Typhoon (Mostly) By BAE

First flown in 1994, this twin-engine fighter jet is one of the world's most advanced and BAE’s primary defense product. The jet is used by the British, Austrian, Spanish, Italian, German and Saudi air forces. The aircraft is in fact a product of cooperation between BAE and EADS, which manufactures many of the components through subsidiaries in various European countries. A true multinational project, it is assembled in several nations.

Photo: Airbus

A400M By EADS

Manufactured by Airbus and assembled in Spain, the A400M first took to the air in December 2009 and has been ordered by the French, British, Spanish and German air forces. Turkey and Malaysia also have orders pending. The distinct scimitar propeller blades and the wings are made from carbon fiber. This cargo transport plane has been plagued by a long, difficult development process but is considered far more advanced than the C-130 Hercules manufactured by Bethesda, Md.-based Lockheed Martin Corporation (NYSE:LMT).

Photo: Reuters

A380 By Airbus

Airbus put a lot of hopes in its double-decker superjumbo, betting on Asian growth and an increase in long-haul flights to global hubs, but so far sales have not met expectations. Dubai-based Emirates Airlines has been by far the biggest customer. The aircraft, which first took flight in 2005 and was introduced to the market two years later, has also been wracked with wing cracking that has had to be rectified, as well as order cancellations in the current economic slowdown.

Photo: Ajai Shukla

Hawk Jet Trainer By BAE

BAE’s Hawk military trainer jets are popular because they’re cheap, an important characteristic for jets that are not meant for combat and are most likely to be crashed. It’s also commonly used in airshows for the public. The first flight took place in 1974. The most recent model is the T-45 Goshawk, built for the U.S. Navy to train its pilots in the very difficult art of landing a jet plane on a moving aircraft carrier. Different versions of the Hawk are in service in 14 countries, according to Flight International.

Photo: Creative Commons

Astute-Class Submarine By BAE

While EADS is primarily devoted to the sky, BAE builds things for the air, ground and sea, including the Astute-class nuclear submarine used by the British Royal Navy. The first sub was launched in 2007, while the second of seven vessels took its first dive last year. Naval Technology reported when the first sub was launched that the program employs 5,900 British workers.

Photo: Astrium / I. Wagner

ATV-4 Satellite By EADS

Through its Astrium subsidiary, EADS manufactured satellite and space systems, such as its Automatic Transfer Vehicle, or ATV, an unmanned cargo transport vehicle devoted to sending materials to the International Space Station. In March, the Edoardo Amaldi, an ATV 3, was launched by the European Space Agency and is expected to deorbit -- return back to Earth and crash into the Pacific Ocean -- later this month. The satellite delivered supplies to the crew, and its rockets were used to increase the altitude of the station. The Albert Einstein, an ATV 4, is on its way to a spaceport in French Guyana and is scheduled to send a payload to the station in the spring.

Two European aerospace giants are once again talking of a possible merger that if realized would create a $45 billion company with more than 200,000 employees. And it seems like nobody buying and selling stocks in either company thinks it's a good idea.

Leiden, Netherlands-based European Aeronautic, Defence & Space Co., better known as EADS (EPA: EAD), is the more diverse of the two companies. It's involved in commercial and military aircraft and is the parent of Airbus, which shares pretty much all of the world's market for large jetliners with U.S.-based Boeing (NYSE: BA). It also provides civilian and military space systems support. The company's stock price closed down 10.2 percent to €25.16 ($32.53) on Thursday, its lowest price since mid-January.

London-based BAE Systems Plc (LON:BA) is focused primarily on defense as one of the world's top military contractors. It builds military aircraft, munitions, naval vessels and armored vehicles, including the Bradley that has been used by the U.S. since 1981. The company closed down 7.32 percent to €337, higher than prior to Thursday's afternoon's announcement that initially pumped up the stock price of both.

Analysts say the company that would come out such a merger would be very difficult to manage.

"This will be a very complex organization, and there is a risk of synergies coming only much later," Yan Derocles, an analyst at Oddo Securities in Paris, told Bloomberg.