Airbus seeks new talks with European nations over A400M costs

Record ID: 276067

  • Title: Airbus seeks new talks with European nations over A400M costs
  • Date: 22nd February 2017
  • Summary: FARNBOROUGH, ENGLAND, UNITED KINGDOM (JULY 2014) (REUTERS) VARIOUS OF AIRBUS A350 ON TARMAC
  • Embargoed: 8th March 2017 15:28
  • Keywords: Airbus A400M defence aviation charges profits
  • Location: VARIOUS
  • City: VARIOUS
  • Country: France
  • Topics: Company News Markets,Economic Events
  • Reuters ID: LVA00964LO8ZX
  • Aspect Ratio: 16:9
  • Story Text: Airbus called for new talks with European governments to ease "heavy penalties" for delays to its A400M military aircraft on Wednesday (February 22), after taking a fresh 1.2-billion-euro ($1.3 billion) charge in the latest blow to Europe's largest defense project.
    "We need to continue to work hard on the A400M and make sure that remaining risks are addressed, and hence we call here today to engage with customers to manage that exposure moving forward, to cap it, to ring-fence it, so that it doesn't dilute the profits moving forward. On the cash side, we also had a significant impact on the A400M. Again, in the years to come, we'll still see that. But we need to limit and ring-fence remaining exposure," Airbus Chief Finance Officer Harald Wilhelm told Reuters.
    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.
    "Clearly when the whole project was set up. And also the contract framed, even maybe including the renegotiation done in 2009, we did not, altogether - customers as well as ourselves, really understand the full dimension and complexity. So therefore, I think we need to find a constructive way forward, I mean together, to address it, as it will be the backbone of air forces moving forward and I think this is in the mutual interest of all parties," Wilhelm said.
    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.
    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 program above 6 billion euros.
    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 reorganization that recognizes 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.
    "There are spots we're watching carefully. The geographical presence allows us to balance some risk here and there. But globally I'd say the market is well intact," Wilhelm said.
    Although he didn't mention Brexit and Trump by name, Wilhelm did acknowledge the trend towards more protectionist policies posed uncertainties for the company.
    "We like free trade, we like exchange of people, goods, and we like to be where the business is, i.e. put our footprint over there, but allow flows to happen between countries. What's going to happen in Europe and other places, I cannot predict today. I think there are too many uncertainties. But clearly, we go where the business is, we put our investments over there, and we just enjoy being that international taking the business opportunities from there," he said.
    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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