Airbus SE agreed to settle allegations of bribery in three countries in a deal that will likely see the European airplane manufacturer pay billions of dollars to move past an investigation that has shadowed it for four years.
A final agreement with the UK, France and the US could total in the range of $3bn according to people familiar with the matter. It could be announced as soon as this week, though the timing may slip to February, said the people, who asked not to be named discussing private negotiations. Airbus shares jumped on the deal, which comes at a time when its main competitor, Boeing Co, is struggling with the grounding of its 737 MAX aircraft following two deadly crashes.
The charges involve the use of intermediaries in securing jet orders, a practice that Airbus employed as it tried to reach parity with its US rival. The preliminary settlement is poised to trigger one of the largest fines for corporate corruption in recent years. It remains subject to approval by courts and authorities in the three countries, Airbus said in a statement on Tuesday.
“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 plane maker said that for legal reasons it can’t comment on the details of the discussions. The UK Serious Fraud Office declined to comment, as did the US 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 1.5% as of 1:23pm. The UK part of the settlement is set to surpass the record £500mn ($651mn) 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 settlement. It’s scheduled to report year-end results on February 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, working with its French counterpart. They were joined late in 2018 by 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 cancelled 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 UK 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 co-operate 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.
Progress toward a settlement has been slowed by numerous issues, including the availability of judges in France and the UK, holiday scheduling and procedural differences, according to a person familiar with the situation.
The deferred prosecution agreement, an admission of guilt in the UK, 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 €500mn to end a tax fraud case. In court, UBS Group AG was ordered to pay a €4.5bn penalty in a case led by the PNF.
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