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Airbus seeks new talks with European nations over A400M costs


´╗┐Airbus (AIR. PA) called for new talks with European governments to ease "heavy penalties" for delays to its A400M military aircraft on Wednesday, after taking a fresh 1.2-billion-euro ($1.3 billion) charge in the latest blow to Europe's largest defense project. Chief Executive Tom Enders told reporters the aerospace group was still paying for the "original sin" of striking an unrealistic procurement deal when the plane was launched in 2003. Airbus won a 3.5 billion euro bailout from seven European NATO nations in 2010 after being saddled with liability for wild cost overruns on its engines. The company said on Wednesday it needed more relief following fresh problems in supplying the troop and armored vehicle carrier's advanced defensive capabilities, which have led to new penalties and cash being held back by governments. Hailed at the time as an innovative, fixed-price commercial-style deal, the contract foundered over the problems with the West's largest turboprop engines and an ambitious schedule for innovations such as ground-hugging technology to avoid radar. The 2010 bailout included 1.5 billion euros to be repaid from exports that Airbus says are now looking more challenging. So far, the only non-European buyer is Malaysia. Enders, who is said to privately regret not cancelling the project in 2010, declined to say whether Airbus would threaten to stop building the plane but denied that the project found itself in the same dire financial straits as seven years ago.

Nonetheless, he described the penalties as "inappropriate" given the fact that the aircraft was playing a key operational role in Africa and elsewhere. The comments came as Airbus wrote to the core buyers - Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey - formally requesting discussions over the contract revisions.'REASSURE INVESTORS'

Airbus shares fell more than one percent on the fourth-quarter A400M charge, which was about twice as large as expected and pushed total writedowns on the program above 6 billion euros."It is likely to be important for Airbus to reassure investors that the company is close to the end for this stream of significant charges," said Raymond James analyst Harry Breach in a note to investors. The charge overshadowed stronger than expected full-year earnings buoyed by record commercial jet deliveries.

The company, reporting for the first time as plain Airbus after ditching the Airbus Group brand in a reorganization that recognizes the dominance of its civil business, said "adjusted" operating income fell 4 percent to 3.955 billion euros on revenues which rose 3 percent to 66.581 billion. Analysts were on average expecting a 7.3 percent drop in full-year operating earnings before one-offs to 3.83 billion euros on sales up 0.7 percent to 64.919 billion. On two broadly successful civil projects which have seen delays creep into the schedule in the past year, Airbus said the production ramp-up of A350 and A320neo jets remained "challenging". But bottlenecks in the A350 supply chain had improved and its output targets remained on track. Airbus confirmed a projection of more than 700 jetliner deliveries in 2017, up from a record 688 in 2016. It did not give a target for orders but executives have said they will trail behind deliveries for the first time since 2009 as the aircraft market slows, following a multi-year order boom.

Refinancing share of U.S. mortgage applications at lowest since


´╗┐NEW YORK Refinancings' share of U.S. mortgage applications shrank to its lowest level since late 2008 at the peak of the global credit crisis, as home borrowing costs remained elevated in line with bond yields, the Mortgage Bankers Association said on Wednesday. The share of requests from homeowners to refinance a mortgage fell to 46.2 percent in the week ended Feb. 17. This compared with 46.9 percent in the previous week and was their smallest share since November 2008, the Washington-based industry group said. The MBA's seasonally adjusted index on refinancing activity dipped 1 percent to 1,227.6, its weakest level in six weeks. A year ago, it stood at 2,267.4. Refinancing applications declined with a pickup in mortgage rates as U.S. Treasury yields rose last week following Federal Reserve Chair Janet Yellen's testimony before Congress, where she hinted chances of a rate hike at an upcoming policy meeting. Interest rates on 30-year, fixed-rate conforming mortgages, the most widely held type of U.S. home loan, averaged 4.36 percent, up from 4.32 percent the prior week. It was up about half a percentage point from a year earlier.

Conforming loans are those with balances of $424,100 or less and qualify for guarantees from federal mortgage agencies Fannie Mae and Freddie Mac. Mortgage rates on other types of home loans that the MBA tracks were broadly higher from the prior week.

Higher borrowing costs also reduced applications on home purchases. The MBA's seasonally adjusted gauge on purchase application activity, a proxy for future home sales, fell 2.8 percent to 216.9 in the latest week, which was the lowest since November. A year ago, it was 217.9.

The group's barometer on overall mortgage activity on a seasonally adjusted basis decreased 2.0 percent to 371.5 in the latest week and was down from 521.5 a year earlier.