PARIS, July 30 (Reuters) - Europe's Airbus

reported sharply lower second-quarter profits on Tuesday as the

cost of investing in higher jetliner production, coupled with

largely pre-announced charges in its Space Systems business,

outweighed higher revenue.

The world's largest planemaker said adjusted operating

profit fell by more than half to 814 million euros ($879.7

million) in the quarter as revenue edged up to 15.995 billion

euros.

It also took a charge of 989 million euros on forward losses

in its space business, slightly higher than the estimate of

about 900 million euros it gave with a profit warning last

month.

Profits still came above analysts estimates, who were on

average expecting second-quarter adjusted operating income of

699 million euros on revenue of 15.822 billion euros, according

to a survey compiled by the company.

The charges bring to just under 1.6 billion euros the amount

written off Airbus's balance sheet in just over five months to

reflect a new audit of potential losses on key communications

and navigation satellite in its troubled Space Systems business.

"We are addressing the root causes of these issues," Airbus

CEO Guillaume Faury said in a results statement.

Industry sources say much of the newly identified risk is

accumulated in the OneSat satellite project and EGNOS, a system

designed to improve accuracy of existing navigation signals.

Airbus is working on a review of space activities as it

discusses potential alliances with France's Thales

and Italy's Leonardo, and meanwhile plans to announce a

new turnaround plan for Space Systems in September, Reuters

reported on Monday.

It has also launched an expanded cost containment plan for

the wider Defence and Space division, accelerating and deepening

existing cost measures, industry sources said.

Announcing its own mid-year results on Tuesday, Leonardo

confirmed talks with its existing partner Thales and with Airbus

over possible alliances in the space sector. Europe most likely

needs a stronger structure to compete with the United States and

China, Leonardo CEO Roberto Cingolani told analysts.

($1 = 0.9253 euros)