Airbus has not been destroyed despite A400M pain: CEO

Progressing on A400M program: Airbus CEO

Airbus has been forced to write-off billions of dollars as it struggles to get its beleaguered A400M military plane back on track but the company's chief executive insisted the company's underlying potential remained strong.

Airbus witnessed a significant uptick in orders in its commercial airliner business in 2017 though frequent setbacks on its military programs significantly damaged its earnings report released on Tuesday.

"We have a particular concern in the military area, that is with our transport aircraft the A400M where we took a charge from the entire year of $2.2 billion… that hurts for sure," Tom Enders, chief executive of Airbus, told CNBC on Tuesday.

"But it does not destroy, so to say, the underlying story of the improvement potential that we have ahead of us in the coming years and that goes particularly for earnings and for free cash flow," he added.

The plane's engines have been the main source of problems, with seven NATO countries giving Airbus 3.5 billion euros in 2010 to resolve issues. Earlier this month, Germany revealed only one of its eight A400Ms was in use after the German Defence Minister Ursula von der Leyen was left stranded in Lithuania, when the aircraft broke down on the ground. Another aircraft crashed in Spain killing four crew members in 2015.

The European plane maker has asked governments to renegotiate contracts for the military transporter, which has now led it to write off more than 6 billion euros.

An Airbus A400M military aircraft with army personnel onboard takes off from the German army Bundeswehr airbase in Jagel, northern Germany.
Carmen Jaspersen | AFP | Getty Images

Turbulent start to the year

The European aerospace company reported its net income had fallen by almost two-thirds to 995 million euros ($1.04 billion) however revenue increased 3 percent to 66.5 billion euros.

Airbus faces numerous changes in the year ahead with Marwan Lahoud, the group's strategy chief, due to step down in February and John Leahy, commercial sales chief, scheduled to retire in 2018. However, Reuters reported Leahy could be poised to depart before the end of the year.

Two other high-profile executives, programs chief Didier Evrard and operations head Tom Williams are also due to retire in the near term although Airbus have reported their departure from the company would be a gradual process.

Airbus' rocky start to the calendar year was further hampered by the loss of a Singapore Airlines order to rivals Boeing.