Airbus reveals violations over payments to middlemen

Airbus has told US authorities it has breached US arms trafficking regulations, admitting to disclosure violations over payments to middlemen in a move that adds to the list of countries in which it is faces regulatory scrutiny.

Europe’s flagship aerospace and defence group, which is already under investigation in the UK, France, Germany and Austria, said on Tuesday it had discovered “certain inaccuracies” in filings made to the US Department of State.

The violations included a failure to meet the full disclosure requirements over the payment of commissions on sales of defence equipment and services to non-US military customers — as dictated by Part 130 of the US International Traffic in Arms Regulations (Itar). The rules cover defence equipment that contains US content.

Airbus said it was co-operating fully with US authorities. It insisted that it continued to have a constructive dialogue with the state department, which has civil jurisdiction, and it continued to win export licences.

It is unclear, however whether the US Department of Justice, which has criminal jurisdiction, will decide to investigate.

In 2010, BAE Systems was fined $400m, at the time one of the largest criminal fines imposed by the DoJ, for violations including inaccuracies in its disclosures about commissions as required under part 130 of the Itar rules.

News of the violations comes just weeks after Tom Enders, chief executive, sought to contain damage to morale from a mounting corruption scandal. He wrote to the aircraft maker’s 130,000 staff to warn of the potential for “significant penalties” arising from the investigations already under way.

He urged staff to ignore media speculation and attempts by “individuals with vested interests to discredit top management by spreading false allegations” as the investigations continue.

Harald Wilhelm, finance director, said on Tuesday that US authorities had been informed of potential disclosure violations at the end of last year. After a full internal investigation, a final report was delivered in July.

He said the disclosures were entirely separate from the UK and French investigations — also into violations over information on the use of agents — and that he could make no judgment on the timing of any formal US inquiry.

Mr Wilhelm sought to damp concerns that the latest disclosures could affect Airbus’s ability to do business in the US. “We continue to apply for export licences and they are being processed by US authorities,” he said. “We continue to do business as usual.”

Airbus said that although potential penalties resulting from both “could have negative consequences” for the company, “at this stage it is too early to determine the likelihood or extent of any such possible consequences”.

The company has warned it is likely to fall short of its target for delivering 200 of its popular A320neo single-aisle jets this year, due to problems with the Pratt & Whitney geared turbofan engine and with the Leap turbine made by CFM, a joint venture of General Electric of the US and Safran of France.

The finance director said “significant progress” had been made on the technical problems with the Pratt engine and there was a “clear way forward” for deliveries to accelerate next year. However, he said some uncertainty still remained over the impact of temperature issues on the Leap engine.

Airbus also warned that significant uncertainty remained over the costs of its A400m transport programme as negotiations continued with customers about a “new road map” for the troubled project.

The group took a further €80m hit in the third quarter for costs badociated with production adjustments.

Mr Wilhelm insisted that despite these issues, Airbus was sticking to its guidance for mid-single digit growth in adjusted earnings before interest and tax and earnings per share this year.

Overall, third-quarter profits and cash flow came in ahead of consensus with adjusted earnings before interest and tax falling 4 per cent to €697m while sales rose 2 per cent to €14.2bn.