MUNICH (AP):

The parent company of plane-maker Airbus yesterday reported an 89 per cent gain in fourth-quarter net profit, but warned of "very challenging" years ahead.

European Aeronautics Defense and Space Co said it expects a decline in profitability this year as it cuts aircraft prices and helps customers finance deliveries to cope with the darkening outlook for the global economy.

As demand for air travel falls and amid tight credit conditions, airlines may seek to defer or cancel orders at Airbus, which accounts for two-thirds of EADS's revenue. The plane-maker's plan to get between 300 and 400 new orders this year "is challenging," its parent company said.

Cut production

EADS CEO Louis Gallois said on a conference call that the company is watching airlines closely in case Airbus needs to cut production rates further, which could entail job losses. It has already reduced production of its A320 family of short and medium-range commercial passenger aircraft to 34 a month, from 36.

"2009 will be a very challenging year for our industry," Gallois said.

But worse could be still to come.

Most crucial

"2010 will be the most crucial year for us," he told reporters. "It's then we will see how the airlines are coping with the length of the crisis."

On top of the recession, EADS is also struggling to regain control of its delayed A400M military transport jet programme, which the company said could lead to a "significant charge" this year.

In September, EADS indefinitely postponed the first flight of the military jet and it is now nego-tiating a "new approach" with the seven European NATO countries that first ordered the plane.

The Paris and Munich-based company said that, excluding the financial impact of the A400M, it expects earnings before interest and tax (EBIT) to remain "significantly positive" but fall from last year's €2.83 billion (US$3.56 billion). The 2008 profit figure beat its own €1.8-billion target and compared with €52 million in 2007.