Airbus shares fall after A400M military plane crash

Shares in Airbus Group (AIR.PA) fell on Monday after the weekend crash of an A400M military plane increased investors' anxieties over Europe's largest and heavily delayed defense project, while the planemaker pledged to overcome the tragedy.

Shares in Europe's largest aerospace group, which hit a record high in April, fell 3.8 percent to 61 euros in morning trading, erasing gains seen in the previous week.

The military plane crashed outside Seville on Saturday, killing four crew and prompting Britain, Germany and Malaysia to ground their fleets of Europe's new troop and cargo carrier..

France said it would keep flying its planes, while Airbus pledged to resume flight testing as planned on Tuesday.

Analysts said the crash raised fresh concerns about deliveries and long-term exports of the A400M, but the company's chief executive Tom Enders reaffirmed the company's commitment to the program as he paid tribute to the crew.

In a letter to staff seen by Reuters, Enders said testing would resume as planned on Tuesday to "demonstrate to our customers, the air forces, that we fully trust this great transport plane and are as committed to the program and the further ramp-up of deliveries and capabilities as ever".

Enders asked the company's 137,0000 employees to observe a minute's silence at midday for the two pilots and two test engineers who lost their lives. Two others remain in hospital.

"The men who lost their lives in Sevilla were great professionals; they knew about the risks of their job and they would not want us to stop flying," he said.

The A400M was developed at a cost of 20 billion euros ($22.33 billion) to give European NATO nations independent access to heavy airlift for military and humanitarian operations.

After more than three years of delays and billions of euros of cost overruns, European governments injected more money into the project in 2010. But delays and technical problems resurfaced last year, leading to a management shake-up.

In February, Airbus took 551 million euros in charges for the new A400M delays, bringing the total written off over the lifetime of the project to more than 4.75 billion euros.

"Airbus can ill afford more delays," Hamburg stockbroker Berenberg said in a note.

"Longer-term, this latest development will almost certainly hamper the ability to sell A400M in the export markets, the only way this program will ever make any money."

The crashed aircraft was due to be delivered to Turkey and was on its maiden test flight when it ploughed into a field one mile (1.6 km) north of Seville's San Pablo airport.

Spain said it had recovered the two flight recorders.

The A400M is powered by the West's largest turboprop engines, supplied by Britain's Rolls-Royce (RR.L), France's Safran (SAF.PA), MTU Aero Engines of Germany (MTXGn.DE) and Spanish aerospace firm Industria de Turbo Propulsores (ITP).

Shares in the engine makers were broadly unaffected.

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