By Tim Hepher and Cyril Altmeyer
PARIS (Reuters) - France's Senate on Thursday voiced concerns over engine problems and spares shortages on the A400M as its maker Airbus said it had pulled Europe's flagship army plane from the flying roster at next week's Farnborough Airshow.
Confirming what industry sources had previously told Reuters, Airbus said it had dropped the A400M's wheeling and steeply slanted flying display for the second year in a row after engine problems.
A Senate panel said after studying delays and overruns in Europe's largest arms project that problems with the aircraft's huge turboprop engines should be kept under close surveillance, but it did not expect further slippage in deliveries.
The panel also issued a warning of the risks caused by a lack of funding for spares to support the troop and cargo carrier once it enters service next year, following four years of delays.
"We must not have a situation where budget restrictions on spares throw the whole program into doubt," said Jean-Louis Carriere, president of the Senate's foreign affairs commission, outlining a report on Europe's effort to build its own airlift capacity to support military and humanitarian operations.
The A400M cost 20 billion euros ($25 billion) to develop and is designed to add airlift capacity for seven European NATO nations: Britain, Belgium, France, Germany, Luxembourg, Spain and Turkey.
It has suffered a series of teething problems with its engines, the largest turboprops ever built in the West, leading to billions of euros in cost overruns.
A gearbox failure forced Airbus to cancel the A400M's flying displays on the eve of last year's Paris air show. The industry's leading annual event rotates between Farnborough in Britain and Le Bourget outside Paris.
"The decision to have the aircraft on static display only is based on engine issues that happened last week which need further investigation," Airbus Military said in a statement.
The announcement threatens to overshadow a ceremony at which European air chiefs are due to adopt the airplane - nicknamed "Grizzly" by its pilots - by renaming it "Atlas" on Friday.
Traders said A400M concerns also pushed shares in Airbus parent EADS down more than 1 percent to 28.67 euros, as Airbus and Air France also awaited a final report on the 2009 Rio-Paris jet disaster amid high stakes for both companies.
In 2010, nations agreed a 3.5 billion euro bailout for the A400M to protect 10,000 jobs. But Europe's debt crisis has closed the door to further support and analysts expect any further unbudgeted development costs to be absorbed by EADS.
Although popular with the public, flying stunts such as those originally planned at Farnborough do not directly generate orders. But the A400M's de-selection from the prestigious air show carnival highlights continued sensitivities over the project as Airbus awaits safety certification.
The manager of the project said civil certification would be pushed back by at least a month from late July to the end of August or early September because of the latest problems.
Military certification will take place in the fourth quarter, Cedric Gautier told reporters.
Both steps are necessary to allow Airbus to deliver the A400M to its first customer, France, at the turn of the year.
But it is the complex regime for civil certification - chosen as a convenient common standard by purchasing nations - that has provided the biggest headaches during engine design.
(Editing by David Holmes)