Airbus
(AIR.PA) called for new talks with European governments to ease "heavy
penalties" for delays to its A400M military aircraft, after taking a fresh
1.2 billion euro
($1.3 billion) charge for Europe's largest defense project.
Chief
Executive Tom Enders told reporters Airbus was paying for the "original
sin" of striking an unrealistic deal when the plane was launched in 2003.
Airbus said
fresh problems with engine gearboxes and delays in supplying the troop and
armored vehicle carrier's defensive capabilities had led to further severe
penalties and cash being held back by governments.
"We
cannot go on like that. This is unacceptable and puts a huge burden on Airbus
and we need to do something about it," Enders said.
The agency
representing seven NATO buyers - Belgium, France, Germany, Luxembourg, Spain,
UK and Turkey - was not available for comment. But officials in Germany, the
largest A400M buyer which has been most critical of the project, expressed little
immediate appetite to help Airbus cope with the new problems.
"That's
entirely their own doing," said one military official who asked not to be
named.
The appeal
comes seven years after Airbus won a 3.5 billion euro($3.7 billion) bailout for
the project, having argued that politicians had forced it to choose problematic
new European engines over a more viable Canadian alternative.
Hailed at the
time as an innovative, fixed-price deal, the contract foundered over problems
with the West's largest turboprop engines and an over-ambitious schedule for
ground-hugging navigation and other military capabilities.
Tobias
Lindner, a Green lawmaker and member of the German parliament’s budget
committee, urged the government to press for "a new and resilient"
agreement but without reducing penalties for Airbus.
Enders, who is
said to privately regret not cancelling the project before the bailout in 2010,
declined to say if Airbus would threaten to stop building the plane. He
described the new penalties as "inappropriate" given that the A400M
was already deployed in Africa and elsewhere.
'HANDS IN
POCKETS'
Airbus shares
fell about 1 percent. The latest penalties bring total A400M writedowns towards
7 billion euros.
Raymond James
analyst Harry Breach wrote that Airbus needed to reassure investors the stream
of charges was nearing an end.
Several others
questioned how easily Airbus would be able to strike a new A400M deal in the
midst of budget austerity, French and German elections and political
distractions in a group of nations dealing with Brexit and Europe's border with
Syria.
"I am not
sure that the states will agree to put their hands in their pockets once
again," said Chloe Lemarie, director of aerospace and defense research at
Mainfirst Bank in Paris.
The A400M
overshadowed a narrower-than-expected drop in 2016 core earnings as Airbus
delivered a record 688 jetliners.
Core operating
income fell 4 percent to 3.955 billion euros on revenues up 3 percent. Analysts
had expected a 7 percent drop in core profit due to weaker pricing of old
models.
Airbus said
bottlenecks in the supply chain for its A350 jet had improved, but called for a
"huge effort" from engine maker Pratt & Whitney (UTX.N) to ease
delays in A320neo output.
It predicted
more than 700 jetliner deliveries in 2017.
It did not
give a formal target for orders but executives say they will lag deliveries for
the first time since 2009 as the aircraft market slows.
($1 = 0.9515
euros)
*REUTERS*
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