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Airbus profits hit by military plane woes

Airbus says charges stemming from problems with its A400M military cargo transport plane hit net profits hard in 2016

European airplane maker Airbus said Wednesday that its profits nosedived last year as charges related to problems with its A400M military cargo transport plane sent earnings into a tailspin. Airbus said in a statement that its bottom-line net profit plummeted by 63 percent to 995 million euros ($1.0 billion) last year, shot down by a 2.2-billion-euro hit on the A400M. Revenues grew by three percent to 66.6 billion euros. "We have delivered on the commitments that we gave a year ago and achieved our guidance and objectives, with one exception, the A400M, where we had to take another significant charge totalling 2.2 billion euros in 2016," said chief executive Tom Enders. "De-risking the programme and strengthening programme execution are our top priorities for this aircraft in 2017." The A400M was commissioned jointly in 2003 by the governments of Germany, Belgium, France, Britain, Luxembourg, Spain and Turkey. Originally planned for launch in 2011, its delivery was substantially delayed by a string of technical problems and different requests from the governments. And new faults were discovered in the propellor engines last year. Airbus delivered 17 A400M in 2016, compared with 11 in 2015 and has delivered two of the military transport planes so far this year. "Cash retentions by customers will continue to weigh significantly in 2017 and 2018 in particular," Airbus warned. "Given the size of the cumulative A400M programme loss, the board of directors has mandated management to re-engage with customers to cap the remaining exposure." - Plea for help - Enders, in a conference call with reporters, clarified that the group would ask clients to refrain from imposing further penalties over the A400M debacle. "We need the cooperation of clients... to push the programme forward and end the haemorrhaging," he said. The German government, the main customer for Airbus' military aircraft, for its part urged the firm to live up to its contractual obligations and deliver the promised A400M jets. "It's important to us that the manufacturer solves this problem, because of course we need these aircraft that we are contractually entitled to," defence ministry spokesman Boris Nannt told reporters in Berlin. He said the government was "in discussions" with Airbus but declined to give further details and did not comment directly on whether Berlin was willing to show any financial flexibility. Germany has ordered 53 A400M transporters and taken delivery of eight so far, Nannt added. - Job cuts - Returning to its group results, Airbus said that new orders amounted to 134 billion euros in 2016, down from 159 billion euros in 2015. The total value of the group's order book stood at 1.06 trillion euros at the end of December, up from 1.0 trillion euros a year earlier. Total deliveries of commercial aircraft rose to 688 in 2016 from 635 a year earlier and helicopter deliveries were up at 418 compared with 395. Airbus announced late last year it was cutting more than 1,100 jobs in France and Germany and closing a research facility near Paris as part of a cost-cutting drive. Shares in Airbus were down 1.3 percent in late-afternoon business on the Paris stock exchange.