Airbus seeks new European help over A400M costs

Wed Feb 22, 2017 1:13pm EST
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By Tim Hepher and Cyril Altmeyer

PARIS (Reuters) - Airbus (AIR.PA: Quote) called on Wednesday 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.

The appeal comes seven years after Airbus won what at the time was regarded as a definitive 3.5 billion euro bailout for the delayed project, plagued from the start by political wrangling over the choice of new European engines.

Airbus said recent problems with engine gearboxes and delays in supplying defensive aids had led to severe penalties, bureaucratic arguments 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," Chief Executive Tom Enders said.

The A400M was ordered in 2003 by seven NATO nations -- Belgium, France, Germany, Luxembourg, Spain, Britain and Turkey -- to grant Europe an independent military transport capability.

An unusual fixed-price contract worth 20 billion euros reflected efforts by Airbus at the time to win a major military contract to add to its growing jetliner business.

But it foundered over problems with the West's largest turboprop engines, which were to be supplied by a European consortium instead of Airbus's preference for a Canadian supplier, as well as tight deadlines for military hardware.

Speaking after reporting lower 2016 profits, Enders argued Airbus was still paying for the "original sin" of striking an unrealistic deal 14 years ago, despite having reset the program with the 2010 bailout deal.   Continued...

A waiter walks past an Airbus A400M military transport plane is parked at the Airbus assembly plant during an event in the Andalusian capital of Seville, southern Spain, December 1, 2016. REUTERS/Marcelo del Pozo