Sept. 27 (Bloomberg) -- Airbus SAS, the world's largest commercial airplane maker, may fall short on promises to revive its business, causing profit to fall further behind that of its competitor, Boeing Co.

Airbus and parent European Aeronautic, Defence and Space Co. in February announced a plan to sell six of its 16 plants to companies that could help bear the expense of developing and building new aircraft. Airbus, which lost 572 million euros last year, said the sale and 10,000 job cuts would help reduce annual costs by 2.1 billion euros ($3 billion) by 2010.

The French and German governments, which own or have purchase options on 22.5 percent of EADS shares, may limit Airbus to choosing domestic buyers for its factories to protect jobs and technology. Those companies may lack the capital and experience to make the plan work.

``Airbus is handicapped because its main shareholders have a political agenda, making it very difficult for the company to undertake any kind of radical restructuring,'' said Zafar Khan, an analyst at SG Securities in London who rates EADS shares ``sell.''

Toulouse, France-based Airbus, created in 1970 as a partnership between French and German state-controlled aerospace companies, surpassed Boeing to become the dominant supplier of airline fleets in 2003.

A380 Delay

In June 2006, Airbus disclosed that its 525-seat A380, the world's largest passenger plane, was running a year late because a lack of uniform design tools left workers incapable of properly wiring the plane. A projected $12 billion in development costs ballooned to $18 billion, and the plane is now two years behind schedule.

At the same time, oil prices that had more than doubled in three years to about $70 a barrel were prompting airlines to order Boeing's new 787 Dreamliner, whose carbon-fiber technology made the plane 20 percent more fuel-efficient than predecessors.

EADS shares have dropped 19 percent since the beginning of this year, while Boeing's stock is up 18 percent.

Airbus reported its first loss last year and is predicting another this year. The company had sales of 26 billion euros in 2006, while parent EADS had sales of 39.4 billion euros and net income of 99 million euros, giving it a 0.76 percent return on equity.

Boeing's commercial aircraft sales totaled $28.5 billion last year, contributing to a profit of $2.2 billion and a 28 percent return on equity.

Plant Sales

Airbus's restructuring plan calls for selling plants in the U.K., France and Germany. The company needs 11.6 billion euros to develop its A350 XWB, a competitor to Boeing's 787, and wants suppliers, including the plants' buyers, to contribute 50 percent of the costs.

Boeing made a similar move in 2005 by selling its Wichita, Kansas site, which became Spirit AeroSystems Holdings Inc.

Airbus needs buyers with strong track records and healthy balance sheets, said analysts including Richard Aboulafia, vice president at the Teal Group, a Fairfax, Virginia aerospace and defense consulting company. Bidders include Spirit, Toulouse-based Latecoere SA, GKN Plc in the U.K., the MT Aerospace unit of Germany's OHB Technology AG, and closely held Voith AG in Heidenheim, Germany.

``Airbus needs free and open access to the best combination of money and experience,'' Aboulafia said.

`Economic Patriotism'

The French and German governments may have different priorities. Political pressure will likely lead to a domestic buyer of the French plants, said Yan Derocles, an analyst at Oddo Securities in Paris.

That would mean Latecoere, whose net debt of 321 million euros exceeds its market value of 175 million euros. ``Latecoere's main asset is simply that it's French,'' said Derocles, who rates EADS ``reduce.''

Germany, too, aiming to protect jobs and technology, favors a ``German solution,'' Deputy Minister of the Economy Peter Hintze said on Sept. 11. Neither of the German bidders, Voith and MT Aerospace, has experience building large aerostructures, which are airplane parts such as fuselages and wings.

``It's a bad move for governments to try to interfere, and it'll be bad for Airbus's competitiveness,'' said Hans Weber, chief executive of Tecop International Inc., a consulting company in San Diego.

Augsburg Decision

Airbus originally said it would choose among the bidders this month. The selection has now been delayed, largely because EADS has now decided to sell as well a plant in Augsburg, Germany, that is part of EADS's defense business but gets 70 percent of sales from building big structures for Airbus.

Gallois said today that the Augsburg plant would be offered for sale. He spoke today at a briefing in Elancourt, outside Paris.

In offering Augsburg for sale along with plants in Varel and Nordenham, ``we create an important ensemble that's stable, more durable,'' Gallois said. Buying Augsburg will give bidders more of a chance of gaining work on the A350, he said.

Derocles projects that Airbus will fall about 500 million euros short of its 2010 savings goal under the plan. Deutsche Bank AG analyst Ben Fidler in London, who has a ``hold'' rating on the shares, estimates Airbus will achieve 70 percent of the target, and Exane BNP Paribas's Olivier Esnou in Paris, with a ``neutral'' rating, estimates 80 percent.

Airbus faces other challenges as well. It is still making design changes to the A350 XWB, which is five years behind Boeing's 787. The 787 is set for entry into service in 2008 and had 684 orders as of the end of August; the A350, with 228 orders, is set for 2013.

Airbus's first military plane, the A400M, is also ``several months'' late, France's defense minister said on Sept. 10.

Declining Dollar

A declining U.S. currency against the euro is also squeezing returns at Airbus, because customers pay for aircraft in dollars. The company's plan is based on an exchange rate of $1.35 to the euro.

The dollar fell 0.2 percent to $1.4149 per euro at 10:36 a.m. in New York after touching a record of $1.4189.

Airbus's No. 2 executive, Fabrice Bregier, said on a radio broadcast Sept. 23 that if the exchange rate remains around the current level, Airbus will need to save another 1 billion euros annually to survive.

Strong demand from airlines is softening the impact of Airbus's challenges as orders keep coming, particularly for its A320 series and the 300-seat A330. Factories are booked through 2010, and A380 deliveries will also boost cash.

BA Boost

Airbus won a vote of confidence for its A380 today when British Airways Plc, which has traditionally favored Boeing for widebody planes, ordered 12 superjumbos and took seven options, with the total package worth as much as $6 billion.

Airbus may also benefit from any delays on Boeing's 787, which is three months behind on its first flight.

For now, Boeing says it'll stick to the May 2007 first- delivery date for the aircraft.

Airbus's best hope may be that its customers want the company to survive, because they like choice.

``Airlines don't want to be at the mercy of Boeing,'' said Andre Chassagnol, an analyst at HPC Paresco in Paris. For the short term, he's still bearish. ``I think the bad news will continue before we get good news.''

To contact the reporter on this story: Andrea Rothman in Toulouse, France, at aerothman@bloomberg.net

Last Updated: September 27, 2007 13:04 EDT