Quote:
Special Report: The incredible saga of Europe's A400M
Reuters News 06/08/2010
Authors: Tim Hepher and Sabine Siebold
© Reuters Limited 2010.
BERLIN (Reuters) - The first shot to be fired at Europe's 21st century army plane came not from the barrel of a gun but a safety inspector's clipboard. In 2008, weeks after the first A400M troop transporter rolled off a gleaming new assembly plant in Seville, a group of inspectors traveled to southern Germany to scrutinize an important component for the plane's huge turbo-prop engines.
The inspectors were from the European Aviation Safety Agency (EASA), an EU body responsible for certifying aircraft; they wanted to conduct a routine check of plans for the engine software. The A400M's maiden flight was already six months overdue, but in an industry which often measures delays in years, that was nothing much to worry about.
Soon after arriving in Munich, though, the inspectors discovered that MTU Aero Engines, the company behind the engine software, was so far behind schedule that there was no point even holding a meeting, according to people involved in the project.
This week, after almost three decades of squabbles over what the A400M should do, where it should be built, how much each plane should cost, the software catastrophe and uncertainty over 10,000 jobs, the 20 billion euro ($24 billion) troop carrier will finally woo crowds of plane-lovers during its first public display at the Berlin Air Show.
The software and paperwork problems cost Airbus more than a year and nearly crashed the entire project. A spokesman for MTU says the delay was caused by a decision to go for civil certification, which was outside MTU's control. EASA declined comment.
An even bigger crisis, over a huge funding shortfall, this year forced cash-strapped European governments to back a 3.5 billion euro bailout. "We hate you, but we don't want you dead," an exhausted government negotiator told Airbus officials before a deal was finally struck in March. (Because of the sensitivity of the matter, most people connected to the program spoke on condition that they not be named.)
Even as the A400M takes to the skies over Germany, officials from the seven European nations behind the project -- Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey -- are wrestling with a new problem.
Just 12 weeks after the rescue agreement, officials are locked in another struggle over the impact of inflation clauses on the project's final price. One senior official says the disputed sums could pile on another 3 billion euros. Meantime, buyers such as Britain, Germany and Spain are contemplating budget cuts that may yet impact orders.
At a moment when Europe should be celebrating the launch of its biggest collaborative defense project -- a plane that will massively boost the continent's expeditionary reach and ability to wage war or supply aid -- it's wondering yet again if it can even afford its new plane. "It should have been an ideal European program," said Alexandra Ashbourne-Walmsley, associate fellow of the Royal United Services Institute, a London-based defense think tank. Instead, "it is about the growth of Europe but also Europe's folly."
UP FROM THE ASHES
The only markings on the grey outer skin of the A400M in Berlin this week will be the national flags of buyer countries -- a hint at the complicated politics and bureaucracy that have continually flawed Europe's efforts in defense cooperation.
Arguments over who is to blame for letting Europe's biggest single defense contract degenerate into such a mess that it threatened Airbus's future are unlikely to end with the long-awaited first public fly-past. Much of the mismanagement and inefficiencies are laid out in a leaked 2009 audit.
A Reuters investigation into the A400M reveals that having meddled in designs, governments had little idea how their down-payments of 6 billion euros were being spent until little more than 6 months ago. Talks to rescue the project and shore up Airbus parent EADS (EAD.PA: Quote, Profile, Research) were marked by a clash of egos, royal intervention, blackmail and, perhaps most of all, a destructive nationalism that continues to divide Europe even when it is meant to be united.
"We are still miles away from an efficient and effective European defense procurement," concedes Airbus Chief Executive Tom Enders. "If significant issues arise, if the stakes are high, national decision-making prevails and overrules European bodies."
'WE DO CIVIL AIRCRAFT'
It wasn't meant to be like this. The idea for a new troop plane was born in the Cold War 1980s to meet the pressing demand in Europe for greater mobility and lifting power. Its designers -- both political and actual -- came from a generation of leaders who deliberately tied once-rival wartime aircraft factories into a unified peacetime industrial venture.
Designs for the plane, originally called Future Large Aircraft, were fleshed out in the 1990s to fill a gap between the Lockheed Martin (LMT.N: Quote, Profile, Research) C-130 Hercules tactical transporter and the Boeing (BA.N: Quote, Profile, Research) C-17, a large strategic transporter jet. Politically it marked a step away from dependence on the United States and pushed a vision of pan-European defense, extending important but smaller gains in fighter jets. Importantly, it would also provide thousands of industrial jobs.
By the mid-1990s, following several false starts, the countries backing the project called in Europe's commercial plane maker Airbus, made up of interests representing France, Germany, Spain and the UK. Could Europe's answer to Boeing build the new troop carrier?
Airbus boss Jean Pierson took one look at the plans and exploded. The politicians were telling him that the new plane would deliver a great leap forward in European defense capabilities. But Pierson saw something different: an unwelcome new ingredient in a carefully refined industrial recipe that had made Airbus jetliners a serious rival to Boeing. "Never! I don't want to hear about this plane," Pierson told the board. "We do civil aircraft."
Pierson was yanked back into line by the consortium's shareholders and in 2003, long after he had retired to his fishing boat, seven NATO allies placed a final order for 180 A400Ms. The planes would be built in Spain and would cost just over 100 million euros each. France would get the first plane in 2009.
COOPERATION PROBLEMS
Pierson's prediction that the A400M would hurt Airbus quickly proved right. It wasn't just the complicated politics behind the plane, but its tangled engineering. Often it was both.
Most aircraft engineers are reluctant to put a new generation of engine on an all-new plane. They'd prefer to stick with an existing engine to reduce risk. But when Pierson's successor Noel Forgeard ordered engines off the shelf from Pratt & Whitney (UTX.N: Quote, Profile, Research) Canada, European politicians cried foul, accusing Airbus of exporting defense jobs abroad.
The fight -- a parallel of the current row in Washington over the possible purchase of U.S. refueling tankers from Airbus -- ended with the formation of a new European engine consortium made up of Britain's Rolls-Royce (RR.L: Quote, Profile, Research), Snecma (which later merged with Sagem to form France's Safran (SAF.PA: Quote, Profile, Research), MTU Aero Engines (MTXGn.DE: Quote, Profile, Research) of Germany and Spain's Industria de Turbo Propulsores.
These firms had spent decades fighting national rivalries. Now they were supposed to cooperate on building the largest and most powerful turbo-prop engine ever seen outside the former Soviet Union. It wasn't the cheapest or most sensible option, but that didn't matter. "Politicians could not keep their fingers off the project," says Nick Witney, ex-chief executive of the European Defense Agency and a former UK defense official.
Nor could the military. The defense departments of the project members loaded up the A400M with optional extras, making it a juggernaut of conflicting requirements even before it left the drawing board. They wanted its own specially designed crane, ground-hugging capabilities owing more to modern missile technology than an airplane and a futuristic contour-tracking system able to read the landscape like Braille. "Over-ambition is the hallmark of every military project," says Witney, who is now a senior fellow at the European Council on Foreign Relations. But the A400M was in a different league.
All that, and wrangles over what type of armored vehicles the A400M should carry, pushed up the cost. It didn't help that the countries behind the plane had locked Airbus into a rigid fixed-price contract. Arms makers normally charge for their costs plus a guaranteed profit. Airbus had a reputation for delivering on time and on budget, so all sides thought the military planners and commercially savvy executives would keep each other in check. How could the continent that built high-speed trains and Ariane rockets fail to build something as apparently simple as a flying truck?
SOFTWARE MELTDOWN
In fact, the A400M is a surprisingly complex aircraft -- and defense deals rarely run to plan. In 2000 -- driven by the aim to make Europe's industries more competitive with those in the United States -- French, German and Spanish aerospace interests merged to create EADS (EAD.PA: Quote, Profile, Research). The huge new company now controlled Airbus, which soon became obsessed with a project that matched its global ambitions: the creation of the A380, the world's largest commercial airliner. In service since 2007, the superjumbo would leave a deep financial mess at Airbus and cost Forgeard his job.
Unnoticed through a string of management upheavals, the A400M was also slipping silently out of control.
First, were the software problems. Schooled in secretive defense projects, the engineers had failed to meet the very different civil documentation rules required by EASA. There was little choice but to retrace every step of their work on the complex software. Airbus, the company building the A400M, was horrified by the revelation, as were the three European companies that together with MTU made up the consortium building the plane's engine. When it failed the EU inspection, "that was the moment we knew something was seriously wrong," a top executive told Reuters.
At first, Airbus panicked. "They used all the classic tools: We'll sue -- everything like that," said one project insider.
But the engine consortium argued that there was nothing they could do. "Kill us if you like, we haven't got it," the engine makers told Airbus officials. After a while, said one insider, Airbus realized the threats weren't working. "They realized they needed the (software) guys."
Pressing on managers' minds was a deadline of March 2009. If the plane did not fly by then, EADS could be forced to repay 6 billion euros of advances plus penalties. EADS suspended the first flight and sent a Mayday to its buyers. "In September 2008 we received a letter from Airbus Military. They needed a lot of money but they gave us no figure...It was only very late in the talks that we came to know," said a source with a buyer country.
As well as money, EADS and Airbus needed more time. In January 2009, EADS Chief Executive Louis Gallois took a politically astute gamble and called for a contract renegotiation. The first plane would not be delivered until three years beyond the still unscheduled maiden flight.
THE PRINCE AND THE PARATROOPER
In the Swiss resort of Davos that January, Airbus chief executive Tom Enders put a brave face on the global financial meltdown hitting airliner orders and declared Airbus was "not going out of business". Privately, though, the lean former German paratrooper was worried the chaos surrounding the A400M could paralyze Airbus.
Worse, Carlos Suarez, the Spanish executive in charge of the project, was not answering emails or returning calls. Enders grabbed his Blackberry and fired off an email to Suarez: "I want you to call me now."
Officials familiar with the incident differ over what happened next. Some say Suarez replied; others that he didn't. Whatever the case, Enders soon sent another message: "I want you in my office tomorrow morning." Within days the Spaniard was out of a job and political tremors were shaking Europe's political classes.
As one executive puts it: "That is when the Spanish war began." Suarez could not be reached for comment because the aerospace supplier he has joined did not answer calls.
For years, Spain had felt treated as a second-class citizen within EADS. The Madrid government owns just five percent of the company; real power lies with France and Germany. The A400M was Spain's chance to change that. The country had won applause for its investment in composite carbon technology for airliners and the troop carrier was to be assembled in a state-of-the-art plant in the Spanish city of Seville rather than Toulouse or Hamburg, where Airbus's commercial planes are finished.
But now the Spanish unit was on a collision course with Airbus headquarters in France over the way it was managing the A400M. Backed by the EADS board, Enders proposed bringing supervision of the A400M project back to France, infuriating the southern nation and threatening to stall the project yet again. A way ahead only appeared when German President Horst Koehler, who stood down just last week, and Spanish King Juan Carlos, intervened during a Spanish-German business forum in a wood-paneled room at the Madrid stock exchange.
"I read you have some issues in Spain. Would you like to update us?" Koehler asked Enders over a banquet. An official present at the meal told Reuters that Juan Carlos, who trained as a military helicopter pilot and often speaks proudly of Spain's aviation achievements, at first appeared reserved, aloof.
As Enders spoke earnestly of his passion for flight and his own helicopter license, though, the temperature thawed. "I like helicopter pilots. Let's fly together," Juan Carlos told Enders, according to the official present. The monarch listened as the German executive outlined the stakes involved in the A400M project. "Come back and see me in two weeks," Juan Carlos told Enders. Spokespeople for the King, Koehler and Enders all declined to comment.
Enders and Juan Carlos held further undisclosed talks at the Zarzuela Palace, a royal residence on the outskirts of Madrid. Soon after, the Spanish EADS unit responsible for the troop carrier was officially renamed Airbus Military and began reporting to Toulouse, as EADS wanted. Spain would keep day-to-day control of all military transport projects including the A400M and the Airbus aerial tanker. In a move that might have been part of the peace deal, Spain later also doubled its share of allocated work on the next Airbus passenger jet.
EADS parachuted in Domingo Urena-Raso to lead the re-named unit. The tough but charismatic Spanish engineer had been Airbus's restructuring chief. He quickly overcame Spanish fears that he had "gone native" in Toulouse, and coaxed the industrial program back to life.
A DAY IN PROVENCE
There was still one problem: ever-rising costs. If a bank robber stole in 100 euro notes the amount that Europe's troop plane had gone over-budget, an A400M would be unable to lift the weight. To perform the getaway, the robber would need a larger Boeing C-17.
The almost 8-billion-euro cost blowout may pale next to U.S. projects such as the Joint Strike Fighter, but it's easily enough to rattle debt-laden Europe. By early last year, buyers were resisting talk of renegotiating the price of each plane.
Britain in particular was angry; Quentin Davies, the UK's then defense procurement minister, threatened to pull the country out of the A400M. The former diplomat and banker privately worked out a deal that allowed Britain to commit to the project without increasing its bill. Rather than put up new cash in any rescue package, London would trim its order of 25 aircraft without claiming a refund.
The deal -- spelled out in a side letter with EADS -- kept Britain onboard. But it also sparked fears of a wave of competing special demands, which could pull the project apart. Rushing to lock in orders, French Defense Minister Herve Morin, a slick centrist politician seen as a possible future presidential candidate, organized a summit on the hilltop estate of the late drinks magnate Paul Ricard. The estate, outside Marseilles, is home to a track that the King of Pastis built to indulge his love of motor racing.
With negotiations stalled, Morin pulled out his mobile and called EADS boss Gallois in Munich. The modest but steel-willed French executive wanted assurances that other nations would not overturn the British deal. Morin circled the table so that one by one each NATO member could exchange assurances with Gallois. The intervention paid off and nations formally agreed to open new talks on money.
But first, the buyers ordered an audit of Airbus, which disclosed the full horror of the A400M finances. EADS had already written off 2.4 billion euros but the project was still 5.2 billion short, a sum EADS said governments should fill by paying more for each plane.
That was not all. When every possible risk was added in, the program was a staggering 11 billion euros in the red - nearly as much as EADS's market value. The PricewaterhouseCoopers audit fingered EADS for management blunders, poor accounting systems and sloppy records. Worse still for investors, it suggested EADS might suffer a drop in its credit rating. Crucially, though, it failed to give a clear-cut endorsement for the price increase the company wanted.
A furious, private war of words ensued between Europe's industrial powerhouse, which thought PwC had overstepped its terms, and one of its biggest accounting firms. PwC has declined to comment on the A400M review.
MAIDEN FLIGHT
By last December, the A400M was finally ready to fly, two years later than planned. Airbus pushed its publicity machine into overdrive and two weeks before Christmas, Captain Ed Strongman squeezed up a narrow aisle past racks of test equipment and took his place inside a cockpit with computer screens and a side stick, a reminder that Europe's newest warplane was a cousin of Airbus's "fly-by-wire" commercial aircraft.
The flight was not perfect -- a faulty backup system caused problems. But Airbus had calculated a flight would create momentum that would make it harder for buyers to pull out. King Juan Carlos even turned up in Seville to watch the plane land.
Emboldened by a decision by France's market regulator to throw out charges of insider trading over A380 delays, the company decided to call the buyers' bluff over the A400M. "The blood pressure was up in the top management. The attitude was, if they won't talk to us before Christmas, there will be no talks after Christmas," one manager said.
EADS had two more reasons to speed things up. Its own auditors had pressured bosses to reach a deal or take a devastating hit in the company's accounts. As well, the window for a deal was closing ahead of UK elections expected in May. A new government was unlikely to make bailing out the A400M an early priority.
On New Year's Eve, Gallois authorized one more month of negotiations and Enders opened the attack. "We have had enough of these standstill agreements. Now it is time for some movement," he told German newspaper Die Welt. To the dismay of Berlin, Airbus signaled that without more money it would halt the program or starve it of cash. "Germany had some problems with certain people of EADS who made aggressive public relations statements," Ruediger Wolf, state secretary at the German defense ministry, told Reuters in a recent interview. "Their main aim was to transfer the risk to the nations."
Enders remains unrepentant. "I am not paid to avoid conflicts, I am paid to avoid or mitigate unacceptable risks for my company," he told Reuters. "The purpose of my public statements back in January was to make customers aware that the situation of the A400M program was untenable and posed grave dangers for the whole of Airbus."
BERLIN SHOWDOWN
With concerns about Europe's finances growing, final negotiations began on January 15 at the defense ministry in Berlin. The meetings took place in a room named after Colonel von Stauffenberg, a hero of the 1944 bomb plot against Adolf Hitler. A nearby memorial commemorates the German resistance.
Inside the meeting, Airbus, one of the great symbols of Europe's peaceful reconstruction was under discussion. Germany's state defense secretary Wolf, a reserved official with a forensic eye for detail, took the chair and seized the initiative in a calm, measured voice. "We would like you to make us an offer we can agree to," he said, according to delegates.
EADS officials insisted they needed their full 5.2 billion euro shortfall covered. The buyers disagreed. "Everyone threw their grenades," said one person of the discussions, which ran intermittently over five weeks. Germany, whose industrial base depends on hundreds of small suppliers, insisted EADS should agree to pass on part of any bailout to its suppliers.
At the final meeting, Gallois and Wolf squabbled as a draft took shape on a laptop. The cautious German defense chief and former French mandarin, whose careers had been largely spent bringing their respective states together, wrestled over the last comma. At one point, Germany issued a dramatic threat. "I stopped this at the last minute. I said 'If you don't agree I will stop this now,'" Wolf told Reuters.
Finally, in a classic European fudge, a deal to protect collective self-interest and save 10,000 jobs was forged. This time the paperwork was clever: 2 billion euros in direct aid plus another 1.5 billion framed so as to allow EADS to count it as revenue now and pay it back later.
EADS does not yet have its money, but Europe this week gets to see its new plane. For all its problems, the A400M should be a huge leap forward for European defense and could yet become a symbol of a more united continent. But as its rough ride so far shows, the plane's existence has just as much to do with jobs, parochialism and politics. (Additional reporting by Matthias Blamont in Paris, Maria Sheahan in Frankfurt, Tracy Rucinski in Madrid, Rhys Jones and Jason Neely in London, Reuters bureaus; Editing by Simon Robinson and Sara Ledwith)
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INTERVIEW-EADS urged to share A400M bailout cash
Reuters News 06/07/2010
Authors: Sabine Siebold and Tim Hepher
© Reuters Limited 2010.
BERLIN, June 7 (Reuters) - Airbus parent EADS faces new pressure over a multi-billion-dollar European bailout for the A400M troop plane after a senior German defence official said it had a "moral duty" to share the money with suppliers.
The call in a rare interview with State Secretary Ruediger Wolf reflects a dispute behind the scenes which almost caused a rescue deal announced in March to collapse at the last minute.
The Airbus troop plane is making its public debut at the Berlin air show this week after cost overruns and delays.
Wolf, head of the German defence budget who until recently ran procurement and chaired talks which led to a deal to prop up the A400M, urged EADS to protect small firms which have also been damaged by delays to Europe's largest defence project.
"For Germany it was very important to point out the importance of the suppliers -- not just the engine suppliers but also the small industries in Germany and Europe, and the subcontractors who usually have much tougher contracts than we have with EADS," Wolf told Reuters in an interview.
"So they depend on the goodwill of EADS. It is not a legal but a moral duty of EADS."
EADS declined to comment.
Buyer nations -- Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey -- agreed in March to pump in 3.5 billion euros. But formal ratification has been held up by budget problems and further wrangling over which countries should participate in a maximum quota of 10 plane cancellations.
EADS and a consortium of engine suppliers including German firm MTU Aero Engines , France's Safran and Roll-Royce blame each other for A400M problems and have notified each other of claims reaching up to 500 million euros.
Some suppliers such as French equipment firm Thales have complained that EADS did not share public advances on the 20 billion euro plane project.
The March 5 bailout deal calls on EADS to consider allowing suppliers to participate in an "appropriate way" in the money promised by governments, according to a copy seen by Reuters.
The clause led to a last-minute tussle over the wording between Wolf and EADS Chief Executive Louis Gallois.
"Mr Gallois is a very likeable person and he uses that in a very effective way. In the final session we saw how he can negotiate, making very hard points, very important points," Wolf said.
ENDERS ROLE
However he appeared less forgiving about a hard public line taken earlier this year by Airbus Chief Executive Tom Enders.
Enders threatened to stop the A400M project in January and also clashed with defence minister Karl-Theodor zu Gutenberg.
"For me it is a success that we agreed to negotiate between EADS and the nations. This was a basis to talk at a higher level. EADS as a company has more tools at its disposal, financial, compensation," Wolf said. "Mr Enders played his role as a chief executive of Airbus until the end."
Relations between EADS bosses and both France and Germany tend to be scrutinised because of their political influence.
(Asked separately about the row, Enders defended his role. "I am not paid to avoid conflicts, I am paid to avoid or mitigate unacceptable risks for my company," he told Reuters).
Wolf said EADS would have to start repaying 1.5 billion euros in export credits, which are designed to make up part of the planned bailout, as soon as it sold more A400M planes abroad.
"This is repayable after the first exported aircraft. So it is not additional money, they have to pay it back and it doesn't come from the defence budget. That was a success for us."
EADS is also seeking adjustments to an inflation clause, but Wolf cautioned against going back to an era of runaway costs.
"We agreed to negotiate this formula but not to the disadvantage of the nations," Wolf said.
"They wanted it to be more like previous contracts, but look what happened to the costs of other armament projects."
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Airbus A400M Flight Gets Cold Shoulder From Germany
By Andrea Rothman and Brian Parkin
June 8 (Bloomberg) -- The Airbus SAS A400M flew over the public for the first time in Berlin today, a spectacle the plane’s biggest client chose to ignore.
German Defense Minister Karl-Theodor zu Guttenberg decided not to attend the first public flight, an official at his ministry said. With 60 A400M military transporters on order, Germany is the biggest buyer, ahead of France and the U.K.
After years of delays and cost overruns, relations between Airbus and its European government clients are frayed. More than a year of haggling and the mutual threat to abandon the project resulted in a sweetened accord in March, with governments pledging additional funds. Since then, the two sides have failed to produce a written contract, as European states grapple with the fallout from deficit crises gripping the region.
“The real risk is, with all the costs of the A400M, the governments may be forced to tighten spending elsewhere on defense,” said Yan Derocles, an analyst at Paris-based Oddo Securities. “And there is a risk that worsening budget situations will pollute the A400M discussions.”
South Africa
Besides Germany, France and the U.K., Belgium, Turkey and Luxembourg also have ordered the A400M. Malaysia has also signed on as an export customer. South Africa had also ordered the plane before backing out last year.
The A400M competes with Lockheed Martin Corp.’s smaller Hercules plane and Boeing Co.’s larger C-17. Airbus says its A400M offers opportunities that neither of the other does. The C-17 is less equipped for short, poorly prepared runways, while the Lockheed can’t transport equipment as bulky as the cargo the A400M can accommodate, marketing director Francisco Navarro Celada said at the Berlin show.
In March, after a year of talks, Airbus got the seven ordering states to commit an additional 2 billion euros ($2.39 billion) to the 20-billion euro program, and grant development aid. The original accord called for delivery of 180 units at a fixed price.
Louis Gallois, the chief executive officer of Airbus parent European Aeronautic, Defense & Space Co., said last week he’s hopeful of reaching a contractual agreement with the governments by September. Any holdup puts pressure on Airbus because it forces the company to carry the costs of the program, which Airbus estimates exceed 100 million euros every month.
Delayed Contract
Relations between EADS and the German Defense Ministry have been further strained by technical glitches on the NH90 military transport helicopters and Tiger helicopters made by EADS’s Eurocopter unit. Guttenberg’s office said he has “other engagements” and can’t make the A400M debut at the air show, the country’s biggest biannual display of military equipment.
“It’s highly symbolic,” said Dan Solon, an analyst at Avmark International, a London-based advisory firm. “It sends a message of acute dissatisfaction with the program and he may not wish to be tainted by a highly visible association with a project that risks failing to meet performance targets.”
German Chancellor Angela Merkel visited the show today. Merkel yesterday announced a program amounting to 81.6 billion euros ($97.5 billion) that includes welfare reductions and a restructuring of the armed forces from 2011 through 2014, in what Merkel called an “unprecedented” round of budget cuts.
Debt Crisis
The debt crisis triggered by Greece pushed European Union countries to pledge a $1 trillion euro-region bailout, with Germany committing loans of as much as 148 billion euros to backstop the euro. The emergency funding may make countries more reluctant to commit to a 25 billion-euro program, the biggest military project in postwar European history.
Even after the two sides settled on a new accord in March, the haggling didn’t stop. EADS allowed the ordering countries to cut the total number of planes by 10. The U.K. took up the offer first, saying it would take as many as three fewer A400Ms. Germany has also said it will likely take fewer than 60 units.
Negotiations remain difficult because of the number of countries involved and the challenging economic climate, Domingo Urena, who heads Airbus Military, said at the show today. Urena oversees the A400M, the A330 tanker and smaller transport planes.
“I cannot deny that the economic situation is making things more difficult,” he said.
Cutting Numbers
Figuring out which nations can cut how many aircraft has complicated the talks. The export credit facility, based on the idea that EADS would repay the 1.5 billion euros from revenue of export sales later, has also slowed discussions. Gallois has said he also aims to market the plane to clients in the U.S.
The plane, which can transport heavy equipment, helicopters or troops, is aimed at replacing aging transporters in Europe as countries engage in more armed conflict around the world. Dropping the plane altogether would have jeopardized thousands of jobs in the European aerospace industry, particularly in Spain, where Airbus builds the A400M.
The plane performed its maiden flight in Seville, Spain, in December, and Airbus has rolled out one more test version of the A400M since, with both flying in Spain and France, logging 250 hours of flight in 62 test flights. The third test version will begin flying in several weeks.
The A400M boasts the world’s biggest turboprop fans, with four on each plane, and its ability to fly at both high speeds and low altitude has made the design more complex than civil jets.
EADS had been getting monthly payments from governments toward plane deliveries, originally scheduled to begin in 2009. When it transpired that year that difficulties developing the engines would delay the project, governments stopped making the payments pending a new accord to address cost overruns.
“It’s quite surprising that this plane still doesn’t have a firm contract,” says Richard Aboulafia, vice president at the Teal Group, a Fairfax, Virginia-based forecaster. “With no signature, there are no guarantees that we won’t see further, major stumbling blocks.”
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