European aerospace group EADS forecast higher revenue and stable core operating profit as it boosts development spending this year, after bouncing back to profit with a record cash pile in 2010.

Europe's largest aerospace group cheered a stronger than expected rebound in the economy and in demand at subsidiary Airbus, but is bracing for higher spending on its new A350 airliner, defense cuts and poorer currency hedges this year.

EADS posted higher than expected 2010 revenue of 45.8 billion euros ($63.7 billion), up 7 percent, and operating profit of 1.23 billion euros, in line with market forecasts.

The Franco-German-led group restored a dividend of 22 euro cents after posting a net profit of 553 million euros.

Analysts were expecting EADS operating profit of 1.24 billion euros on revenue of 44.68 billion and net profit of 500 million, a Reuters poll found.

In 2009, EADS sank to a net loss of 800 million euros after taking provisions on delays to the A400M military plane.

Wednesday's results were overshadowed by a $29 billion slew of plane orders in the previous 24 hours, about half of which will benefit Airbus, the EADS planemaking subsidiary, with the rest scooped up by arch-rival Boeing .

REVENUE GROWTH

After big spending from Chinese airlines and insurer AIG's leasing arm on Tuesday, Cathay Pacific <0293.HK> became the latest airline to renew its fleet with a $6 billion order for Airbus and Boeing jets on Wednesday.

After a severe downturn in 2009, commercial aviation is recovering faster than expected, driven by demand for transport to move people and goods as emerging markets expand.

But there have been warnings that turmoil in Libya and rising oil prices could pinch the recovery.

EADS said it would need to monitor developments in North Africa, oil prices and currencies.

For 2011, EADS predicted unspecified growth in revenue and said operating profit before one-off items would be stable, compared with 1.3 billion euros in 2010, before rising significantly the following year.

Increasing volume and prices at Airbus will be offset by increasing research and development spending, poorer currency hedge rates and weakness in defense, it said.

EADS reiterated it would deliver its first A350 in the second half of 2013 but said the time schedule remained challenging. It reported progress in paring cost overruns on the A380 superjumbo and said gross margins were improving.

EADS's outlook for 2011 has been seen as a key test of the company's faith in the strength of the civil recovery but few industry analysts are left talking about a double-dip recession.

Europe's top aerospace group, however, faces potential embarrassment over its cash surplus as it wraps up a deal with European governments to rescue its A400M military plane with 3.5 billion euros of extra public money, some of which is repayable.

EADS said its net cash surplus had risen by more than 2 billion euros to a record 11.9 billion. Analysts expect the company to give more details on acquisition plans.

Boeing recently offered a weaker-than-expected 2011 earnings outlook as higher pension costs exacerbated defense spending cuts and delays to the 787 Dreamliner.

EADS shares closed at 19.84 euros on Tuesday.

(Editing by James Regan and David Holmes)

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