BOEING 
"2016 turns out to be the challenging year we anticipated," Chief Executive Officer Tom Enders said in reporting first-quarter results.
The world's second largest planemaker behind Boeing (>> Boeing Co) posted a 23 percent drop in core operating profits to 501 million euros (389 million pounds), just ahead of the average of market forecasts, with profits from the helicopter business suffering from weak oil industry demand.
Shares in the Franco German-led group fell as much as 6 percent as it highlighted challenges with some of its largest programmes, including a setback on the A400M military transport plane.
At 0745 GMT the shares were down 5.7 percent at 55.13 euros.
Finance Director Harald Wilhelm said the financial impact from recent problems with the gearbox on the A400M's giant turboprop engines could be "significant," pointing to a potential charge later this year on top of the 5 billion euros already sliced off the balance sheet by Europe's largest defence project.
However, Wilhelm also said Airbus expected to catch up on deliveries of its new A350 and A320neo airliners in the second half of the year after problems with some of its suppliers left a queue of aircraft waiting for delivery at European plants.
He reaffirmed the company's target for more than 50 deliveries of the A350 wide-body jet this year, up from just four in the first quarter, but acknowledged this goal was getting "tougher".
He also concurred with main rival Boeing in saying deferrals of new commercial jet orders remained at record lows despite widespread talk of an industry slowdown.
Airbus confirmed, however, there was a significant blowout in its cash in the first quarter as jets missing parts wait for delivery, with a negative cashflow of almost 3 billion up from 1.1 billion euros in the same period last year.
Industry sources told Reuters earlier this month that the queue of undelivered jets was putting a strain on cashflow. The company has significant cash reserves but the disruption has highlighted the manufacturing risks in delivering on a commercial order book worth well over $1 trillion (685 billion pounds), due to tight supply chains.
"I don't like a cashflow of minus 3 billion but it proves that we are getting ready for the ramp-up later this year," Wilhelm told analysts.
Cash was also weakened as Airbus offered somme airlines bridge financing following a recent suspension of European export credit financing. It undertook 255 million euros of customer financing compared with 31 million in the same period last year.
European agencies suspended export credits and Britain alerted fraud police earlier this month after Airbus said it had uncovered errors in declarations on the use of foreign sales agents and reported them to the UK authorities.
Wilhelm said Airbus was working "full speed" with the UK to resolve the issue and was confident that the funding pipeline would reopen in 2016.
Airbus said in a statement it expected European export credits to resume "in the near future".
(Editing by James Regan, Greg Mahlich)
By Tim Hepher and Cyril Altmeyer
