Airbus faces cash headache, lengthy talks over A400M delays

Fri Mar 31, 2017 12:20pm EDT
 
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By Tim Hepher and Andrea Shalal

PARIS/BERLIN (Reuters) - Airbus (AIR.PA: Quote) faces a cash squeeze and months of uncertainty over its troubled A400M troop plane after buyer nations upheld penalty clauses for delays to Europe's largest defense project.

The Toulouse-based group has called for help on the 20 billion-euro ($21.4 billion) program as it continues to encounter technical problems, seven years after winning a 3.5 billion-euro bailout from seven NATO nations.

On Thursday Airbus defense boss Dirk Hoke met European buyers and a source with knowledge of the talks said nations maintained penalties, but agreed to keep talking.

Airbus has hinted at a broad shopping list of demands including a better share of liabilities on the A400M's engines, whose development has faced a series of problems.

However, people familiar with the project say Airbus's campaign chiefly boils down to concerns over a shortfall in cash payments, especially from the largest customer Germany. It is not this time asking for an injection of new public funds, they add.

Insiders say Germany is withholding some 15 percent of cash payments under financial retention clauses in the contract because some A400M systems are not working as planned.

That hurts Airbus when it faces volatility in cash planning due in part to choppy commercial markets.

It also risks inflaming prickly relations between Airbus and one of its government shareholders. Berlin owns 11 percent of Airbus and is the biggest A400M buyer with 53 planes on order.   Continued...

 
An Airbus A400m military aircraft participates in a flying display during the 51st Paris Air Show at Le Bourget airport near Paris, June 15, 2015. REUTERS/Pascal Rossignol