November 14, 2014 / 6:39 AM / 3 years ago

Airbus profits rise but A400M problems resurface

A flight supervisor leads an Airbus A400M into position for the ILA Berlin Air Show in Selchow near Schoenefeld south of Berlin, September 10, 2012.Tobias Schwarz

PARIS (Reuters) - Airbus Group (AIR.PA) posted stronger-than-expected nine-month earnings on Friday, muted by a resurgence of potentially costly delays for Europe's A400M troop carrier.

Europe's largest aerospace group said nine-month operating earnings before one-off items rose 12 percent to 2.6 billion euros ($3.2 billion), sending its shares up more than 3 percent initially.

Finance Director Harald Wilhelm said the civil aerospace industry continued to weather economic uncertainty as airlines order more efficient new jets, bringing in a slew of deposits that contributed to surprisingly strong cashflow.

"We are not concerned about the market, as was very much talked about earlier this year," he told Reuters Insider TV. "There is a very healthy booking situation and very healthy backlog." (reut.rs/1v7wU3w)

Airbus reaffirmed forecasts for the year but introduced a caveat over the possible impact of new production and delivery delays on Europe's largest defence project, the A400M.

It cost 20 billion euros to develop the manouverable cargo and troop carrier for seven European NATO nations but delays and cost overruns led to a 3.5 billion euro public bailout in 2010.

The A400M has been deployed by French forces in Mali, but Airbus said there had been delays in adding advanced tactical features and refuelling on later aircraft, some of which will have to be retrofitted.

"Given our past history on it, the objective remains to avoid any incremental charge, but we are on the way to assessing it. If you ask me whether I can exclude it, I cannot say that this is the case, so it's work in progress," he said.

Airbus has taken a total of 4.2 billion euros of provisions over the life of the stormy programme (reut.rs/oo0j1l).

CANCELLATION CLAUSE

Airbus said the delays had triggered a clause allowing buyers to cancel from Nov. 1, but called this "highly unlikely" as it would need the support of all core A400M nations -- Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey.

On another project that once had significant birth pangs, the A380 superjumbo, Airbus said costs were under control and the world's largest jetliner was on track to break even in 2015.

Airbus also said it was on track to deliver the first of its new A350 jetliner in the fourth quarter, a wide-bodied plane designed to compete with the Boeing 787 Dreamliner.

Airbus recently trimmed production of its best-selling current wide-bodied model, the A330, to 9 from 10 a month, and holding that output rate remains dependent on winning further sales in markets such as China, Wilhelm said.

Analysts said the results reflected continued growth in air traffic and demand for fuel savings, which lifted U.S. rival Boeing's (BA.N) profit forecasts last month.

However, Airbus said it had been forced to hold off plans to sell part of its stake in planemaker Dassault Aviation (AVMD.PA) due to wider market volatility and may now wait until 2015.

(1 US dollar = 0.8033 euro)

Additional reporting by Axel Threlfall; editing by David Clarke

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