Airbus seeks new talks with European nations over A400M costs
February 22 2017 12:26 PM
Airbus  A400M military aircraft
A400M military aircraft


* Airbus takes 1.2 billion fourth-quarter charge on A400M
* Requests new talks with European buyers to ease cash problems
* Airbus posts stronger-than-expected 2016 profit
* Shares fall 1 percent as market seeks reassurance on A400M

Airbus called for new talks with European governments to ease "heavy penalties" for delays to its A400M military aircraft on Wednesday, after taking a fresh 1.2-billion-euro ($1.3 billion) charge in the latest blow to Europe's largest defence project.
Chief Executive Tom Enders told reporters the aerospace group was still paying for the "original sin" of striking an unrealistic procurement deal when the plane was launched in 2003.
Airbus won a 3.5 billion euro bailout from seven European NATO nations in 2010 after being saddled with liability for wild cost overruns on its engines.
The company said on Wednesday it needed more relief following fresh problems in supplying the troop and armoured vehicle carrier's advanced defensive capabilities, which have led to new penalties and cash being held back by governments.
Hailed at the time as an innovative, fixed-price commercial-style deal, the contract foundered over the problems with the West's largest turboprop engines and an ambitious schedule for innovations such as ground-hugging technology to avoid radar.
The 2010 bailout included 1.5 billion euros to be repaid from exports that Airbus says are now looking more challenging. So far, the only non-European buyer is Malaysia.
Enders, who is said to privately regret not cancelling the project in 2010, declined to say whether Airbus would threaten to stop building the plane but denied that the project found itself in the same dire financial straits as seven years ago.
Nonetheless, he described the penalties as "inappropriate" given the fact that the aircraft was playing a key operational role in Africa and elsewhere.
The comments came as Airbus wrote to the core buyers - Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey - formally requesting discussions over the contract revisions.

'Reassure investors'

Airbus shares fell more than one percent on the fourth-quarter A400M charge, which was about twice as large as expected and pushed total writedowns on the programme above 6 billion euros.
"It is likely to be important for Airbus to reassure investors that the company is close to the end for this stream of significant charges," said Raymond James analyst Harry Breach in a note to investors.
The charge overshadowed stronger than expected full-year earnings buoyed by record commercial jet deliveries.
The company, reporting for the first time as plain Airbus after ditching the Airbus Group brand in a reorganisation that recognises the dominance of its civil business, said "adjusted" operating income fell 4 percent to 3.955 billion euros on revenues which rose 3 percent to 66.581 billion.
Analysts were on average expecting a 7.3 percent drop in full-year operating earnings before one-offs to 3.83 billion euros on sales up 0.7 percent to 64.919 billion.
On two broadly successful civil projects which have seen delays creep into the schedule in the past year, Airbus said the production ramp-up of A350 and A320neo jets remained "challenging". But bottlenecks in the A350 supply chain had improved and its output targets remained on track.
Airbus confirmed a projection of more than 700 jetliner deliveries in 2017, up from a record 688 in 2016.
It did not give a target for orders but executives have said they will trail behind deliveries for the first time since 2009 as the aircraft market slows, following a multi-year order boom.

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