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Airbus Group takes 1.4-bn hit over glitches, delays

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27 July 2016

Airbus Group SE took charges totaling 1.4 billion ($1.5 billion) over delays and glitches at two key programmes leaving it reliant on a second-half production increase to meet annual earnings goals.

The European manufacturer took a hit of 1.03 billion to fix faulty gearboxes on its A400M military transport, coupled with a penalty of 385 million on the A350 wide-body, deliveries which had slowed to a trickle amid a shortage of cabin fittings including seats and lavatories.

Chief executive officer Tom Enders said Wednesday he was supporting a full-year target of matching 2015's earnings figure, though that would be more challenging now. The situation had been worsened by engine issues with the company's revamped A320 workhorse, warranting a major effort to make deliveries so that final payments could be booked in time.

Meanwhile, the company's engine partner had devised an interim fix for the gearbox to stretch the gap between inspection, however, it was still working on  a long-term solution that would entail further costs and might also need to compensate customers who were having to wait for planes, Enders said on a conference call.

The Toulouse, France-based company faced ''a sprint finish'' to achieve its full-year goals, Sandy Morris, a London-based analyst at Jefferies International, said in an investor note, Bloomberg reported.

Earnings before interest and taxes before one-time charges, fell 4 per cent to 1.18 billion in the second quarter.

Net income in the period increased 86 per cent to 1.4 billion. A 1.1 billion gain from the creation of a rocket joint venture with France's Safran SA and the sale of 868 million worth of shares in French combat plane maker Dassault Aviation SA bolstered the bottom line.

Airbus sales in the period retreated 1 per cent to 16.6 billion.

According to Airbus, further A400M charges could be ahead as it negotiated with customers about revised delivery plans. It said the  potential impact could be "significant."





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