Airbus Profits Fall In 'Challenging Year'

Airbus posted a 23 percent drop in first quarter core operating profits to EUR€501 million.

Group revenues were stable at EUR€12.2 billion

"2016 turns out to be the challenging year we anticipated," chief executive Tom Enders said in reporting the results.

Shares in the Franco German-led group fell 6 percent as it highlighted challenges, including a setback on the A400M military transporter.

Finance Director Harald Wilhelm said the financial impact from recent problems with the gearbox on the A400M's giant turboprop engines could be "significant," pointing to a potential charge later this year on top of the EUR€5 billion already off the balance sheet.

However, Wilhelm also said Airbus expected to catch up on deliveries of the A350 and A320neo airliners in the second half of the year after problems with some of its suppliers left a slew of aircraft waiting for delivery.

He reaffirmed the company's target for more than 50 deliveries of the A350 this year, up from just four in the first quarter, but acknowledged this goal was getting "tougher".

He also concurred with main rival Boeing in saying deferrals of new commercial jet orders remained at record lows despite widespread talk of an industry slowdown.

Airbus confirmed, however, there was an impact in its cash position in the first quarter as jets missing parts wait for delivery, with a negative cashflow of almost EUR€3 billion, up from EUR€1.1 billion in the same period last year.

Cash was also weakened as Airbus offered somme airlines bridge financing following a recent suspension of European export credit financing. It undertook EUR€255 million of customer financing compared with EUR€31 million in the same period last year.

European agencies suspended export credits and Britain alerted fraud police earlier this month after Airbus said it had uncovered errors in declarations on the use of foreign sales agents and reported them to the UK authorities.

Wilhelm said Airbus was working "full speed" with the UK to resolve the issue and was confident that the funding pipeline would reopen in 2016.

Airbus said in a statement it expected European export credits to resume "in the near future".