February 7, 2018 / 6:12 PM / a year ago

Airbus says may increase A400M provision

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 - RC1BE48638D0

PARIS (Reuters) - Airbus (AIR.PA) said on Wednesday it was considering increasing a provision for losses on its contract for the troubled A400M military transporter after its European NATO buyers agreed to negotiate a new delivery schedule and contract terms.

The A400M - ordered by Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey - has been hit by engine gearbox problems and delays in fitting parachuting capacity and advanced defenses.

“An increase to the Loss Making Contract provision on the program, which may be material, is under assessment for the Full Year 2017 results which will be disclosed on 15 February 2018,” Airbus said in a statement.

Airbus has been urging the seven nations to cap its exposure to fines and payment delays triggered by technical delays on the program. The company had been keen to reach a deal before it reports earnings on Feb. 15.

The company said the buyers had agreed on Wednesday “to work

on a number of contractual elements including a revamped delivery plan as well as a roadmap for the development and completion of military capabilities for the A400M.”

Airbus last year cited “huge losses” on the project and warned of “significant risks” ahead. The program was initially valued at 20 billion euros but its cost has ballooned to well over 30 billion, sources told Reuters last year.

“Since its inception in 2003, this program has suffered not only from a number of operational issues but, more importantly, under a flawed contractual set-up and insufficient budget which resulted in significant losses for Airbus,” Airbus Chief Executive Tom Enders said in the statement.

“We have a good chance to stop or at least reduce the bleeding now and deliver the capabilities our customers need,” he added.

Reporting by Leigh Thomas; Editing by Adrian Croft

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