PARIS (Reuters) - Airbus AIR.PA staged its biggest one-day stock-market gain in five years on Thursday as increased jet output boosted its coffers and eclipsed a 1.3 billion euro hit from its delayed A400M military plane program.

Investors pushed shares in Europe’s largest aerospace group up as much as 11 percent as the firm’s underlying free cashflow more than doubled. The stock closed 10.2 percent higher at 92.82 euros, narrowing Airbus’ performance gap against U.S. rival Boeing.

“It is partly a convergence play as Airbus stock plays catch up with Boeing, which before today had outperformed Airbus nearly 20 percent in 2018,” said Agency Partners analyst Sash Tusa. “And cash was much better than expected thanks to higher pre-delivery payments and improved working capital.”

Airbus confirmed it may raise output of the best-selling A320 model by 17 percent to 70 a month on strong demand, though no decision has been taken as it faces a taut supply chain.

Chief Executive Tom Enders also predicted a decision this year on whether to increase production of the A350 wide-body jet, Europe’s response to the Boeing 787 Dreamliner.

“It is blatantly clear that the demand is there,” Enders said, adding Airbus must be careful not to overstretch a supply chain already running flat-out to keep up with demand.

Enders urged engine makers to tackle delays that have disrupted deliveries of the upgraded A320neo and said its target of 800 total deliveries this year would depend on them.

Airbus has been beset by delays mainly from Pratt & Whitney, UTX.N as well as some delays and now "maturity" issues at engine maker CFM International SAF.PAGE.N as it upgrades the medium-haul A320, the workhorse of its jet business.

Airbus said it was still looking at the impact of a fresh round of problems with Pratt engines that saw some A320neo jets grounded and certain deliveries halted this week.

Led by its main commercial arm, Airbus posted an 8 percent increase in adjusted 2017 operating profit of 4.253 billion euros on flat revenues of 66.767 billion euros and predicted a 20 percent rise in the widely watched core profit item.

Analysts were on average expecting adjusted 2017 operating profits of 3.996 billion euros and revenues of 67.343 billion. The company lifted its dividend by 11 percent.

Stronger than expected cashflow came after what the Airbus finance director called an “all hands on deck” effort, leaving it with over 13 billion euros of net cash at the end of the year.

In October, Airbus’ defense unit froze capital spending and urged staff to take “drastic measures” to save cash to avoid missing targets, according to an internal posting.

U.S. PROBE QUERY

The A400M charge comes after Airbus last week reached a provisional agreement with seven European NATO buyer nations over further delays for the new troop carrier..

“This certainly ain’t pretty but we are making good progress overall,” Enders told analysts.

Airbus also took a 117-million-euro fourth-quarter charge following a settlement with German prosecutors over a corruption case linked to a fighter sale to Austria in 2003. That includes 35 million euros of ongoing legal costs.

FILE PHOTO: An Airbus A400M military aircraft participates in a flying display during the 51st Paris Air Show at Le Bourget airport near Paris, France, June 16, 2015. REUTERS/Pascal Rossignol/File Photo

Austria, where prosecutors continue to probe the same fighter deal, said it would review a previous administration’s decision to end the Eurofighter program early.

But the country's chief lawyer said Austria would not consider a new deal with the Eurofighter consortium - which includes Airbus, Britain's BAE Systems BAES.L and Italy's Leonardo LDOF.MI - before compensation had been paid.

The fighter row is one of several investigations over the conduct of Airbus’ defense and commercial jetliner activities.

It has been forced to stump up some financing to help airlines after European export credit agencies halted support in 2016, when Airbus acknowledged having misled a British agency in funding bids, triggering an Anglo-French corruption probe.

Airbus said on Thursday it had now reached agreement allowing the export funding to resume on a case-by-case basis.

However, it raised the prospect for the first time that the United States could be drawn into the Anglo-French probe, saying it had been asked to supply information to U.S. authorities about conduct potentially under their jurisdiction.