Airbus Faces Nearly $4 Billion in Fines to Settle Corruption Probes--3rd Update

By Benjamin Katz 

LONDON -- Airbus SE will pay a record EUR3.6 billion in a settlement with fraud agencies in the U.S., U.K. and France over probes into bribery and corruption, lifting a reputational and legal cloud that has hung over the company for years.

The European plane maker said it had reached an agreement in principle with prosecutors at a preliminary court ruling in the U.K. on Tuesday, paving the way for a so-called deferred prosecution agreement that allows the company to avoid formal charges.

The agreements still require final approval by courts in each jurisdiction, Airbus said, with hearings expected on Jan. 31. If approved, Airbus will book the penalties as a provision in its 2019 financial accounts.

The settlement comes about four years after Airbus first announced it was under investigation for using third-party consultants to help secure lucrative orders for commercial aircraft.

Airbus said at the time it had self-reported to investigators after discovering irregularities in its submissions for state-backed funding guarantees. It later came under the purview of the U.S. Department of Justice for inaccuracies in disclosures relating to military export equipment that included U.S.-made components

The resulting investigations grew into a slow-boiling crisis for Airbus, eventually triggering a nearly complete overhaul of its top management and sales teams. Airbus has handed over millions of documents to investigators, and created a new ethics and compliance system designed to prevent future contraventions.

It also placed a blanket ban on the use of third-party agents and halted ongoing contracts, a move which has led to a series of legal disputes.

The deal follows a similar agreement reached with Rolls-Royce Holding PLC in 2017 that required the engine maker to pay GBP671 million ($874 million) in penalties to U.K., U.S. and Brazilian investigators. Based on the scope of the Airbus probe, any settlement the company reaches could be several times bigger.

Airbus shares rose sharply on the news of the deal, though fell back somewhat later in the day. Airbus was trading up 1% in midafternoon trading.

The deal allows Airbus Chief Executive Guillaume Faury, who took over the top job in April, to move past a major legacy overhang from his predecessor, Tom Enders. Airbus' new management team can now focus more fully on running the company at a time when its arch rival, Boeing Co., is facing its own crisis surrounding the grounding of its 737 MAX airliner.

The grounding has allowed Airbus to overtake Boeing as the world's largest jet maker by deliveries, a crown it has chased for years. Despite that victory, Airbus has been battling its own production issues at its factories and among its suppliers. Those issues have prevented it from increasing production rates of its A320neo, the main competitor to the MAX, and winning over some Boeing customers exploring dropping orders for the grounded jet.

The probe consumed much of Mr. Enders' time at the end of his tenure as Airbus CEO. He helped oversee an internal investigation into the use of middlemen and changed out management layers in an effort to secure a deal with international prosecutors.

Write to Benjamin Katz at [e-mail]

(END) Dow Jones Newswires

January 28, 2020 14:12 ET (19:12 GMT)

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