July 6, 2018 / 9:28 AM / 4 months ago

UPDATE 2-Airbus CEO steps up warning on danger of hard Brexit

(Recasts with CEO comments)

By Tim Hepher

LONDON, July 6 (Reuters) - The head of Airbus warned the British government on Friday that in a worst-case scenario Brexit could result in production at its factories stopping and aircraft being grounded.

Companies have become increasingly vocal about the risks of Brexit, hoping to have an impact on the outcome of crunch talks between British Prime Minister Theresa May and her senior ministers on Friday.

For companies, the biggest worry is that Britain leaves the bloc without a deal, a so-called "hard" Brexit.

"The certification for thousands of parts that are today part of the supply chain, part of our aircraft, would fall apart, and that could be a very troubling situation for us and could eventually lead to a standstill of production," Airbus Chief Executive Tom Enders said, contemplating the worst-case scenario.

For Airbus, which makes the wings for all its passenger jets in Britain, that worst-case scenario would occur if Britain is no longer part of the EU aviation safety certification agency, EASA, which gives planes and parts approvals so that they can fly.

Guillaume Faury, boss of Airbus's planemaking unit, said planes could also be grounded.

"In case there is no agreement, we will not be allowed to install parts and make them fly on airplanes so there will be aircraft grounded," he said at Airbus's annual media briefing in London.

FRACTIOUS CABINET

PM May hopes to settle differences in her fractious cabinet about Brexit at the meeting at her country residence Chequers, enabling her to unblock stalled talks with the European Union.

Those talks follow a step-up in warnings from various companies in recent weeks.

Airbus last month issued its strongest warning yet over Brexit, saying that withdrawal without a deal would force it to reconsider its long-term position and put thousands of British jobs at risk.

Britain's biggest carmaker Jaguar Land Rover joined in on Wednesday, saying that a chaotic Brexit would cost it 1.2 billion pounds ($1.59 billion) a year, curtailing operations in the United Kingdom. The retail industry said a "no deal" might see "food rotting at ports".

Enders did not seem hopeful that the British government will make progress, saying earlier that it has "no clue or at least (no) consensus on how to execute Brexit without severe harm".

He defended Airbus's decision to issue the warnings.

"We will, of course, speak up. We do this because this is what we owe our shareholders," German-born Enders said.

Asked to provide examples of the steps being taken to soften the impact of Brexit, Airbus's Faury said the company was looking at installing a three-month buffer of parts in some factories.

But in order to reach this level in the nine months remaining before Britain leaves the European Union, suppliers would have to abruptly raise production by one third - whereas most of suppliers were already at full capacity, he said.

Airbus is building warehouses to store the extra parts, an industry source added. ($1 = 0.7559 pounds) (Reporting by Tim Hepher, additional reporting by Victoria Bryan, writing by Sarah Young Editing by Keith Weir and Louise Heavens)

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