Airbus to sell off business units in defence and space review

Airbus Group has unveiled plans to sell half a dozen businesses with combined annual revenues of around 2 billion euros (1.6 billion pounds), simplifying its Defence and Space division to focus on warplanes, missiles, launchers and satellites.

Announcing the results of a portfolio review, Europe's largest aerospace group signalled a break with previous efforts to diversify into security activities and a halt to investment in defence electronics, in which it lacks the scale of rivals.

Europe's defence industry is struggling as cash-strapped governments cut back on military spending. EADS, later renamed Airbus, responded in 2012 by trying to merge with Britain's BAE Systems, but the deal was blocked by Germany.

That, coupled with the stronger-than-expected growth of its jetliner business, led Airbus to drop a previous goal of having broadly balanced revenues from its commercial and defence arms, and launch a reassessment of its defence and space activities.

The group said on Tuesday it would sell its Professional Mobile Radio secure communications assets and confirmed plans to sell a 49-percent stake in submarine supplier Atlas Elektronik, unwinding two efforts at diversification embarked on nine years ago. It said it would also consider selling other commercial and non-governmental satellite communications activities.

Also up for sale are systems and software company ESG, as earlier reported by Reuters, and three smaller units: U.S.-based environmental systems supplier Fairchild Controls, German cabin simulator maker Rostock System-Technik and AvDef, a small aviation company in southern France that trains fighter pilots.

In early trading, Airbus Group shares were down 0.7 percent, in line with the broader European market.

The move comes weeks after a reorganisation of space launcher activities jointly with France's Safran and leaves Airbus Group's share of the Eurofighter and MBDA missile consortia, as well its own A400M airlifter, at the centre of a non-jetliner portfolio focused on aeronautics and space.

"We came to the conclusion that our division must focus on the following core businesses: Space, Military Aircraft, Missiles, and related Systems and Services," Bernhard Gerwert, head of the Defence & Space business, said in a letter to staff.

"These are the key areas in which we will further invest to strengthen our leading position."

The shake-up is likely to test the group's prickly relations with the German government, following warnings from group Chief Executive Tom Enders about the impact of Berlin's stringent export controls on defence jobs and industrial investment.

In an interview, Gerwert played down the row, however.

"I want to make clear that this is not just about cutting more jobs or closing more sites, quite the contrary," he told Reuters. "We’re focusing on certain businesses and are looking for someone who’s willing to develop and invest in these businesses.”

But he said Airbus would no longer invest in defence electronics and security, something it would need to do in order to reach a global position. The group is overshadowed by competitors including France's Thales, Europe's largest defence electronics firm.