Airbus Said to Cut German A400M Deliveries for 2016 in Half
Planemaker grappling with gearbox, engine, fuselage faults
Airbus Group SE will deliver just over half the A400M military transport planes Germany was set to receive this year, exacerbating delays in the troubled model and raising the prospect of further writedowns for the manufacturer.
A preliminary delivery plan Airbus presented to the country’s Defense Ministry indicates the company will deliver five A400Ms in 2016, instead of the nine agreed on earlier, according to people familiar with the matter, who asked not to be identified because the information is confidential. The air force received its first plane from this year’s batch last Wednesday.
A ministry spokeswoman said Airbus has presented “a first delivery and retrofit plan” and is being asked to provide further details. She declined to comment on the number of aircraft Germany expects to receive. Kieran Daly, an Airbus spokesman, said in an e-mail that delivery schedules with customers for this year are still being finalized.
Germany is among seven North Atlantic Treaty Organization countries that commissioned the four-engine A400M turboprop transporter in 2003 to replace decades-old models. Faulty gearboxes and a crash during a test flight caused by an engine failure have led to multiple delivery holdups. Airbus may need to take “an incremental charge in our next quarter” because of slower-than-expected progress with fixing the model, Chief Executive Officer Tom Enders told analysts a week ago.
The company booked 290 million euros ($321 million) in provisions related to the A400M in 2015, on top of 551 million euros in costs posted in 2014. Airbus’s next quarterly earnings reports are scheduled for July 27 and in October. “The magnitude of probable charges is extremely difficult to predict, but 500 million euros should be realistic, with the possible maximum at about 1 billion euros,” said Stefan Maichl, an analyst at LBBW in Stuttgart. The lower figure is “already anticipated by the financial markets.” Airbus fell as much as 0.9 percent and was trading down 0.8 percent at 51.80 euros as of 12 p.m. in Paris. The stock has dropped 16 percent this year, valuing the planemaker at 40 billion euros.
German Defense Minister Ursula von der Leyen said last month that the government will seek
compensation from Airbus and might look at competing suppliers. The country’s A400M fleet consists of three planes delivered in 2014 and 2015, as well as the one handed over last week. Two of the aircraft received earlier have been grounded because of the gearbox flaw. Germany has ordered more than 50 of the aircraft.