Page 2 - Aerotech News and Review 5-6-16

Briefs
Airbus profits down; gearbox troubles in
military plane
Airbus Group said April 28 it’s facing a “chal-
lenging year” after troubles surfaced with a
gearbox on the A400M military transporter and
export credit agencies suspended financing for
the plane-maker.
Despite a problematic first quarter, the com-
pany is maintaining its forecast for growth in
plane orders and deliveries over 2016.
The parent of European plane-maker Airbus
reported 399 million euros ($453 million) in
profits for the quarter, down 50 percent from
792 million euros in the same period last year,
when profits were boosted by the sale of a big
stake in Dassault Aviation.
Sales were up slightly in the first quarter this
year to 12.2 billion euros, from 12.1 billion eu-
ros in 2015.
The company said problems discovered with
the engine propeller gearbox on the long-trou-
bled A400M could have a “significant” financial
impact that is still being evaluated.
Chief Financial Officer Harald Wilhelm said
the gearbox will have to be modified, and in-
sisted “we’re working hard” with engine-maker
General Electric to fix the problems. Airbus,
which sold the A400M to several European
militaries, is studying what to do about planes
in production and those already in service.
Airbus also said some export credit financ-
ing has been suspended after it informed British
authorities of “mistakes and omissions” discov-
ered during internal auditing. The concerns cen-
ter around questionable activity by intermediar-
ies used by Airbus to handle applications.
Wilhelm warned of “volatility” in the months
to come because of the suspension, but said the
company is seeking other sources of money and
hopes the financing will resume soon.
Airbus also announced a huge proposed deal
during the first quarter to make more than 100
jets for Iran, after sanctions were lifted thanks to Marine Systems and Japan’s Mitsubishi Heavy
a landmark nuclear accord. Wilhelm said Airbus
is working on how to ensure financing of the
multi-billion-euro deal. He didn’t elaborate. AP
High product, labor costs lead to decline in
Boeing’s profit
Aerospace giant Boeing saw its quarterly
earnings plunge 9 percent compared to last year,
with the Chicago-based company posting $1.2
billion in profits.
Revenues were up 2 percent to $22.6 billion
but that was not enough to offset higher costs
for Boeing’s products and labor.
Boeing is currently in the process of reducing
its 160,000-person workforce by about 4,500 to
help keep its costs under control. The bulks of
those jobs — about 4,000 — will come from its
commercial aircraft unit. The company had a
backlog of 5,740 commercial jets at the end of
March but orders for new planes have slowed
as oil prices have fallen and most airlines have
their future aircraft needs mapped out. While list
prices for new planes continues to rise, fierce
competition with European plane-maker Air-
bus and a surplus of cheap used planes has led
to deep cuts in the prices actually paid by air-
lines. Boeing values its backlog at $424 billion.
Most of that money is not actually paid until the
planes are delivered.
CEO Dennis Muilenburg told Wall Street
analysts on a call April 27 that low oil prices
have not changed the company’s outlook to-
ward future jet purchases. He said cancelations
or changes to bookings are lower than historic
averages.
The company delivered 176 commercial jets
during the quarter, down from 184 during the
same period last year.
During the first three months of this year,
Boeing’s products and labor costs increased to
2
$19.1 billion, up 3.2 percent from the same pe-
riod last year. It also spent an extra $148 million not finished doing the math.
— or 19 percent — on research and develop-
ment as it prepares to roll out a new generation
of its popular 737 and 777 jets.
The company also took a $162 million pre-
tax charge on the Air Force’s KC-46 Pegasus
Tanker, a midair refueling plane Boeing is build-
ing off its commercial 767 jet frame. That is in
addition to a $536 million after-tax charge the
company took last year on the tanker. The cur-
rent one is related to engineering changes into
aircraft already built and those in production.
Boeing is currently building production aircraft
while it is still doing flight testing to speed up
the delivery of the delayed tanker program.
There was also a $70 million pretax charge
on Boeing’s 747-8 freighter program which re-
flects a decline in the value of future revenue
on the program. The four-engine jet has been
unpopular with airlines and shippers, with just
51 passenger models ordered and 74 cargo ver-
sions. The global cargo market has slowed and,
with that, so have new jet orders.
Boeing said it had profit of $1.83 per share.
Earnings, adjusted for non-recurring gains, came
to $1.74 per share.
The results missed Wall Street expectations.
The average estimate of seven analysts surveyed
by Zacks Investment Research was for earnings
of $1.81 per share.
Boeing shares rose $2.07, or 1.6 percent, to
$135.31 in midday trading. Its shares are down
8 percent in the last 12 months. AP
French company scores huge Australian
submarine contract
Australia’s largest-ever defense contract has
gone to a French shipbuilder to produce a new
generation of submarines, thrilling officials in
Paris and inaugurating half a century of close
defense cooperation between the nations.
French state-controlled defense contractor
DCNS won out over Germany’s ThysennKrupp
Industries to build 12 conventional submarines
that the Australian navy expects will cost at least below 480,000 active-duty soldiers, add 7,000
56 billion Australian dollars ($43 billion), a deal service members to the Air Force and Marine
which French media hailed as the contract of
the century.
The Mitsubishi bid was the early favorite, and
the contract had promised to become Japan’s
first full-fledged military technology transfer
since World War II, but Tokyo’s chances ap-
peared to diminish when Australian government
lawmakers dumped Tony Abbott as prime minis-
ter in September and as the seasoned European
exporters made their pitches.
The bid process was shot through with stra-
tegic considerations. Abbott saw the Japanese
bid as having a strategic value by building on
ties with Japan and the United States but others
warned that Japan’s long-term cooperation in
the submarine contract might hinge on Australia
forming an alliance that could bring Australia
into conflict with China, Australia’s most im-
portant trade partner. AP
For more on this story, visit www.aerotech-
news.com.
A Washington ritual: Pentagon, Congress
at odds over bases
The Pentagon thinks it has a winning argu-
ment for why Congress should allow a new
round of military base closings. The case goes
like this: The Army and Air Force have vastly
more space for training and basing troops than
they need, and trimming the surplus would save
money better used to strengthen the military.
Congress, however, has its own logic: Clos-
ing bases can hurt local economies, which can
cost votes in the next election. Besides, some
lawmakers say, the Pentagon has cooked the
Aerotech News and Review
www.aerotechnews.com ........ facebook.com/aerotechnewsandreview
books to justify its conclusions or at least has
Lawmakers are fiercely protective of bases
in their district or state and generally prefer to
ignore or dismiss any Pentagon push to close
them. Nearly every year the Pentagon asks Con-
gress for authority to convene a base-closing
commission. The answer is always the same:
not this year.
And probably not anytime soon, either. AP
For more on this story, visit www.aerotech-
news.com.
Armed Services chief lays out risky strat-
egy for budget hike
Seeking to halt an erosion of the U.S. mili-
tary’s combat readiness, a senior House Repub-
lican unveiled legislation April 25 that would
boost the defense budget by billions of dollars to
pay for additional ships, jet fighters, helicopters
and more.
But there’s a catch to the plan outlined by
Rep. Mac Thornberry of Texas, the chairman
of the House Armed Services Committee: He’s
counting on President Barack Obama’s succes-
sor to back him up.
Thornberry’s annual defense policy bill shifts
$18 billion from the account that finances ongo-
ing war operations to prohibit further troop cuts
and buy weapons the Pentagon didn’t ask for in
its $583 billion request. To make up for the large
shortfall in war spending, the new president will
have to submit a supplemental budget to Con-
gress in early 2017.
Budget experts described Thornberry’s bid as
a gamble, especially in the House, where fiscal
conservatives in his own party may refuse to
go along.
Todd Harrison, director of defense budget
analysis at the Center for Strategic and Inter-
national Studies, said Democrats might insist
on an equal increase in non-military spending if
they control the White House and Senate after
the November elections.
The bill would prohibit the Army from falling
Corps, and approve a 2.1 percent pay raise for
the troops.
Thornberry’s blueprint rejects the Pentagon’s
proposal to cut one of the Navy’s 10 carrier air
wings. It also includes 11 additional F-35 stealth
fighter jets, which cost roughly $100 million
each, more Blackhawk and Apache helicopters,
and troop-carrying V-22 tiltrotor aircraft. AP
For more on this story, visit www.aerotech-
news.com.
Navy commander sentenced to 78 months
in bribery scandal
A Navy commander who fled Cambodia’s
killing fields as a boy to grow up to become a
decorated U.S. military officer was sentenced
April 29 to 78 months in prison for providing
classified ship schedules in exchange for the
services of prostitutes, theater tickets and other
gifts from a Malaysian defense contractor.
A federal judge in San Diego gave Captain-
select Michael Vannak Khem Misiewicz, 48, the
longest sentence handed out so far in one of the
worst bribery scandals to rock the Navy. The
contractor overbilled the Navy by more than
$34 million.
U.S. District Judge Janis L. Sammartino told
the court this offense was “one of the most seri-
ous I’ve had on my time on the bench.”
In his plea agreement, Misiewicz acknowl-
edged providing classified information to Leon-
ard Glenn Francis, whose Singapore-based
Glenn Defense Marine Asia, or GDMA, sup-
plied ships in the Pacific for more than 25 years.
See BRIEFS, Page 4
How to contact
Aerotech News and Review
• Mail: 456 E. Ave. K-4,
Suite 8, Lancaster CA 93535
• E-Mail: editor@aerotechnews.com
• Phone: (661) 945-5634
• Fax: (661) 723-7757
Advertising
Corporate Headquarters:
(877) 247-9288
Subscriber Services
Subscriptions to Aerotech News
and Review are $59 for six months
or $89 for one year. For more in-
formation, contact the subscription
department at:
456 E. Ave. K-4, #8, Lancaster CA
93535
Story ideas, letters, editorials
Please address all letters and edi-
torials to Stuart A. Ibberson, editor,
456 E. Ave. K-4, Suite 8, Lancaster
CA 93535
Web Site
Access the Aerotech News web site
at www.aerotechnews.com
Submissions for upcoming events,
air shows and museums should be ad-
dressed to Web Updates, 456 E. Ave.
K-4, Suite 8, Lancaster CA 93535
For questions concerning the web site,
contact the webmaster at webmaster@
aerotechnews.com.
Where you can get
Aerotech News and Review
For information on Aerotech dis-
tribution, call Chris Ramos, Circula-
tion Manager, at (661) 949-7293 or
e-mail delivery@aerotechnews.com.
Aerotech News and Review is published
every Friday serving the aerospace and
defense industry of Southern Califor-
nia, Nevada and Arizona. News and ad
copy deadline is noon on the Tuesday
prior to publication. The publisher as-
sumes no responsibility for error in ads
other than space used.
Your comments are welcomed and
encouraged. Write to the address below.
• Publisher .........................Paul Kinison
• Business Manager.............Lisa Kinison
• Editor..............................Stuart Ibberson
• National Advertising
Manager ..........................Paul Kinison
Aerotech News and Review
456 E. Ave. K-4, Suite 8
Lancaster, CA 93535
e-mail: editor@aerotechnews.com
Visit our web site at www.aerotechnews.com
May 6, 2016