Airbus tackles A400M woes at start of "challenging year"

* Fresh charges loom over A400M military plane

* Cashflow hit by undelivered jets, export credit row

* Shares (Berlin: DI6.BE - news) down 4.6 pct

* Reiterates financial and operational targets for 2016 (Recasts after shareholder meeting)

By Tim Hepher and Cyril Altmeyer

AMSTERDAM, April 28 (Reuters) - Airbus Group (Swiss: AIR.SW - news) prepared investors for a charge on its troubled A400M military aircraft programme and reported a heavy cash impact from delays in civil jet deliveries, sending its shares lower despite a pledge to meet full-year targets.

Europe's largest aerospace company gained a 3.5 billion euro ($3.96 billion) bailout for the A400M cargo and troop carrier from six nations in 2010 but is wrestling with fresh technical problems including gearbox glitches on its turboprop engines.

Chief Executive Tom Enders, who helped to convince governments to bear part of a massive cost overrun in 2010 after botched procurement decisions by politicians, expressed frustration at the latest supplier problems.

"There are challenges galore on this A400M aircraft," he told the annual shareholder meeting on Thursday.

The contract to build the West's largest turboprop engines was awarded to a European consortium, overruling Airbus's preference for an existing Pratt & Whitney model.

That included a gearbox supplier from Italy, which was originally part of Europe's largest defence project.

Military use of the A400M has been hampered after European authorities insisted that checks be made on the gearbox after every 20 hours of use.

Leaving no doubt who he believes is to blame, Enders said he was happy that gearbox supplier Avio Aero had been bought by General Electric (Euronext: GNE.NX - news) , which has sent teams to resolve the problems.

"This is painful ... This was not on the list of problems we expected," said Enders, who was reappointed group CEO for three years on Thursday.

GE declined comment.

Executives from the consortium making the engines say that an interim solution has been found, though it remains unclear how long it will take to come up with a permanent fix.

Finance Director Harald Wilhelm said the impact of the latest A400M woes could be significant, pointing to a new charge later this year on top of 5 billion euros the project has already sliced off the Airbus balance sheet.

LOW ORDER DEFERRALS

Shares in Airbus Group fell as much as 6.9 percent as executives peppered their speeches with "challenges" for 2016. They closed 4.6 percent down at 55.77 euros.

Airbus posted a 23 percent drop in core operating profit to 501 million euros, just ahead of market forecasts, but Enders dismissed recent concerns that aircraft markets are weakening.

The group's growth is secured by record orders, he said, with airline order deferrals at record low levels.

The year started slowly as problems with some suppliers left incomplete jetliners waiting at European plants, which led to a trebling of the seasonal outflow of cash to 3 billion euros in the first quarter, exceeding analyst expectations.

The company has significant cash reserves but the disruption highlights the sector-wide risks on commercial order books worth more than $1 trillion but with tight supply chains.

Cash also weakened as Airbus helped some airlines to fund jets after it notified UK authorities that it had found anomalies over the declaration of overseas agents, prompting Britain, France and Germany to suspend European export credit financing for the company.

Airbus reported an eightfold rise in customer financing to 255 million euros in the quarter, though Wilhelm said he was confident that export credits would resume this year.

Enders, meanwhile, confirmed a Reuters report that Airbus planned to cut output of its A380 superjumbo because of weak sales. He expressed optimism sales would recover but also said Airbus would only build aircraft that made "good returns". ($1 = 0.8836 euros)

(Editing by Greg Mahlich and David Goodman)