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Airbus shares fall after A400M crashes

Experts inpect the wreckage of the crashed Airbus A400M near Sevilla airport on May 11, 2015. AFP PHOTO/ CRISTINA QUICLER

PARIS: Shares in Airbus Group fell Monday after the fatal crash of an A400M military plane weighed on Europe’s largest and already struggling defense project, while the plane-maker pledged to overcome the tragedy.

The huge military plane crashed outside Seville Saturday, killing four crew and prompting Britain, Germany, Malaysia and Turkey to ground their fleets of Europe’s new troop and cargo carrier.

France said it would keep flying its planes, while Airbus pledged to resume flight testing Tuesday with the head of its military aircraft business, Fernando Alonso, on board.

There was no official word on the cause of the crash but Germany’s Der Spiegel magazine reported in its online edition that one of the survivors had said the plane suffered “multiple engine trouble” shortly after takeoff.

Airbus declined to comment on the report. “We have to wait for the results of the investigation,” a spokeswoman said.

Shares in Europe’s largest aerospace group, which hit a record high in April, fell as much as 4.5 percent in morning trading, erasing gains seen in the previous week.

The A400M Atlas was developed for seven European NATO nations – Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey – at a cost of 20 billion euros ($22 billion), making it Europe’s biggest single arms contract. So far Malaysia is the only export customer.

The plane entered service in 2013, more than three years behind schedule, and 12 out of the 174 sold have been delivered so far.

Problems in the development of the West’s largest turboprop engines helped to generate billions of euros of cost overruns and a bailout by the seven launch nations in 2010.

Different technical problems and new delays surfaced last year, leading to a new financial hit and management shake-up.

People with direct knowledge of the matter have said the aircraft suffered engine problems on its maiden flight in December 2009, delaying its landing in front of hundreds of VIPs.

The engines were supplied by a European consortium of Britain’s Rolls-Royce, France’s Safran, MTU Aero Engines of Germany and Spanish aerospace firm Industria de Turbo Propulsores. The consortium was picked after European politicians objected to Airbus’s proposal of an imported engine from Canada.

MTU, which had borne the brunt of criticism over the earlier development problems, declined comment on the Spiegel report.

Analysts said Monday that the crash raised fresh concerns about deliveries and long-term exports of the A400M, but Airbus Group chief executive Tom Enders reaffirmed the company’s commitment to the program as he paid tribute to the crew.

In a letter to staff seen by Reuters, Enders said testing would resume as planned Tuesday to “demonstrate to our customers, the air forces, that we fully trust this great transport plane and are as committed to the program and the further ramp-up of deliveries and capabilities as ever.”

Enders asked the company’s 137,000 employees to observe a minute’s silence for the captain, co-pilot and two test engineers who died. Two others remain in hospital.

“The men who lost their lives in Seville were great professionals; they knew about the risks of their job and they would not want us to stop flying,” he said.

A memorial service is expected to be held in Seville’s cathedral Tuesday.

In February, Airbus took 551 million euros in charges for the latest A400M delays, bringing the total company charges over the lifetime of the project to over 4.75 billion euros.

“Airbus can ill afford more delays,” Hamburg stockbroker Berenberg said in a note.

“Longer term, this latest development will almost certainly hamper the ability to sell A400M in the export markets, the only way this program will ever make any money.”

People close to the project expressed concerns over the impact of the crash on morale in the Spanish production plant.

The crashed aircraft was due to be delivered to Turkey and was on its maiden test flight when it ploughed into a field one mile (1.6 km) north of Seville’s San Pablo airport.

Alonso, the newly promoted head of Airbus Group’s military aircraft business, said Airbus would support Spanish investigators following the recovery of two black boxes from the crash site. “The A400M flight test program continues as planned unless or until we see any evidence why it should not,” Alonso said in a separate staff memo.

“At the same time we will give our total support to the investigating authorities and urge them for initial results as soon as possible.”

 
A version of this article appeared in the print edition of The Daily Star on May 12, 2015, on page 6.

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