Airbus Reaches Deal to Settle Multiple Bribery Probes
Airbus SE reached an agreement to settle long-running bribery investigations in the U.K., France and the U.S. in a deal that could cost the European airplane manufacturer in the range of US$3 billion.
A final agreement could be announced as early as this week, according to people familiar with the matter. The preliminary deal remains subject to approval by courts and authorities in the three countries, Airbus said in a statement Tuesday.
The charges involve the use of intermediaries in securing jet orders, a practice that Airbus employed as it tried to reach parity with U.S. rival Boeing Co. A settlement, among the largest for corporate corruption in recent years, would allow Airbus to move past a probe that has shadowed the company for years, doing so at a time when Boeing is struggling with the grounding of its 737 Max aircraft following two deadly crashes.
“In the near four years this investigation has been going on, the world has moved on and the backdrop has changed,” said Sandy Morris, a research analyst at Jefferies International. “Perhaps Airbus can steal a march on Boeing while Boeing is preoccupied.”
The European planemaker said that for legal reasons it can’t comment on the details of the discussions. The U.K. Serious Fraud Office declined to comment, as did the U.S. Department of Justice and representatives at the office of France’s financial prosecutor, the Parquet National Financier.
Airbus shares gained as much as 3% in Paris and were up 1.7% as of 10:34 a.m.
The U.K. part of the settlement is set to surpass the record 500 million-pound (US$651 million) fine paid by jet-engine maker Rolls-Royce Holdings Plc, the Financial Times reported earlier.
Airbus said it hasn’t previously booked any earnings provision for anticipated costs of the probe and settlement. It’s scheduled to report year-end results on Feb. 13.
The company has enough cash withstand the financial impact, Morris said in a note.
Airbus’s corruption saga has lasted almost four years. The company reported itself to authorities in 2016 after then-Chief Executive Officer Tom Enders launched an internal probe. The SFO opened its investigation that year, followed by its French counterpart and, late in 2018, the Department of Justice.
The fallout reached high into the ranks at Airbus and was partly responsible for an exodus of top management. Last year, the company canceled publication of a book it had commissioned on its 50-year history, because a chapter that addressed the bribery episode could have interfered with the cases.
One focus of the U.K. inquiry was Airbus’s failure to disclose its use of third parties to the country’s Export Finance agency, which arranges credit guarantees for overseas sales. The decision to cooperate allowed Airbus to keep receiving government-backed loans. But it also forced Enders to clean house before retiring last year.
Airbus’s sales staff weathered a major shakeup. Kiran Rao, who had already been announced as the replacement to longtime sales chief John Leahy, was sidelined and has since left the company. After an outsider, former Rolls-Royce executive Eric Schulz, didn’t work out, Airbus went with Christian Scherer, who led its regional aircraft business, for the top sales role for jets such as the A320neo narrow-body, the world’s best-selling plane family.
Fabrice Bregier, Enders’s longtime second-in-command and a candidate to become CEO, was also forced out. Guillaume Faury, who had earlier headed Airbus’s helicopters unit, replaced him and became CEO of the group in April.
Progress toward a settlement has been slowed by numerous issues, including the availability of judges in France and the U.K., holiday scheduling and procedural differences, according to a person familiar with the situation.
The deferred prosecution agreement, an admission of guilt in the U.K., marks the most significant settlement by the SFO since it changed leadership 17 months ago. Conservative politicians, including former Prime Minister Theresa May, have questioned whether it’s worth keeping the country’s top white-collar crime prosecutor.
The success of the DPA will depend on prosecutors’ ability to prosecute individuals responsible for the wrongdoing, particularly after the SFO decided not to charge any individuals in connection with the 2017 Rolls-Royce case, the agency’s biggest DPA in history. The company admitted to paying bribes to secure aircraft engine contracts around the world.
The Parquet National Financier was set up in 2014 to focus on major financial crime after a former French budget minister was found to have used a secret Swiss account to dodge taxes. The PNF last year reached its largest settlement with Google, which agreed to pay 500 million euros to end a tax fraud case. In court, UBS Group AG was ordered to pay a 4.5 billion-euro penalty in a case led by the PNF.
--With assistance from Gaspard Sebag.