UK’s Serious Fraud Office probes Airbus sales

A criminal investigation into Airbus Group’s practices in selling planes and arranging financing overseas will seek to shed light on the use of third parties who are often critical in closing deals.

The inquiry the UK’s Serious Fraud Office said it opened in July and could run for years. 

While Airbus may not feel the short-term impact, given it has dropped the questionable middlemen and expects suspended financing guarantees to be restored, an unfavourable outcome could result in fines and damage the company’s reputation.

Scrutiny of the use of third parties comes as Airbus and its rivals seek greater influence in emerging markets taken over from the US and Europe as drivers of growth in the commercial aircraft business. 

Airbus said in April top management identified questionable use of third parties and alerted the UK and other regulators, but the formal investigation brings the issue to a new, more serious level.

“The news came as a shock, since the issue had been downplayed,” Kepler Cheuvreux analyst Christophe Menard said. 

One focus of the SFO inquiry is Airbus’s failure to disclose its use of third parties to UK Export Finance, an agency that arranges credit guarantees for overseas sales.

Airbus lost export credit in April after the plane maker informed authorities of inaccuracies in a number of applications. Government guarantees are expected to resume by year-end, Airbus chief executive Tom Enders has said. Airbus shares fell less than 1% in Paris trade.

The investigation adds to a growing list of challenges facing the company, including delays on its A400M military transport, production teething problems with the wide-body A350 commercial jet, slow sales of the A380 super-jumbo and the grounding of the Super Puma helicopter after a fatal accident.

Managing sales in the Middle East, Asia and other fast-growing regions, where governments often hold key stakes in airlines and other businesses, has tripped up other manufacturers.

Because setting up a local office can take several years, the faster route is often to rely on local, established companies with connections to people making purchase decisions. Using intermediaries for overseas sales is not illegal, but can complicate oversight.

In 2012, aircraft engine maker Rolls-Royce Holdings handed over details on what it called “matters of concern” uncovered in China and Indonesia. 

The following year, the SFO opened an investigation into whether Rolls-Royce engaged local agents in return for orders.


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