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Problems emerge in Leonardo's aerostructures business

Leonardo's bottom line was hit by poor "industrial performance" at its aerostructures unit last year, the Italian company has reported.

The division made revenue of around €1 billion ($1.2 billion) in 2017, but it was "slightly negative" in profitability, chief executive Alessandro Profumo said during a full-year earnings call on 15 March.

In previous years, quality issues – notably on parts produced for the Boeing 787 – significantly hampered the division.

Profumo says the US airframer is now "happy… in terms of quality", but the specifics of Leonardo's contract mean that a higher payment rate will only start in around five years' time, after the 1,250th fuselage section has been shipped.

"We know that programme will be profitable, but today, on a yearly basis, it is slightly negative in terms of profitability," he says.

The production rate will later this year transition from 12 fuselage barrels per month to 14. Although this could even be increased to 16, that would be a "very stretched production rate", says Profumo.

While he highlights Boeing's satisfaction with Leonardo on the Dreamliner – for which the Italian company produces sections 44 and 46 of the composite fuselage and the horizontal stabilisers – Profumo acknowledges issues on the 767. "We are improving on quality, but we are not yet where we want to be," he says.

In order to ensure timely delivery of some structures, Leonardo is relying on chartered Antonov freighters – "a very expensive aircraft", hurting profitability.

Output for the ATR turboprop programme is also under par, he admits, but efforts are under way to improve, as well as to alter the way Leonardo manages the relationship with the turboprop manufacturer, in which it is a 50% shareholder.

Leonardo is also discussing with Bombardier a revision to its CSeries contract. "We are discussing with Bombardier on how to come out from this situation, because we are losing money on that," he says.

Nonetheless, quality remains an overriding concern, says Profumo: "The quality is a key element for the economic results."

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