A400M negotiations on hold as termination deadline looms

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The right of A400M customer nations to seek contract termination at the end of the month is "very unlikely" to be exercised, says EADS, but formal negotiations on the future of the European tactical airlifter programme will not begin until the deadline passes.

EADS acknowledges that "as the A400M will not perform its first flight before the end of March 2009" the customer - European procurement agency OCCAR - has a contractual right to claim termination of the entire contract as of 1 April, if "a unanimous mandate of all the launch nations" is secured. Termination would trigger reimbursement of pre-delivery and other payments amounting to about €5.7 billion ($7.3 billion).

"We are not negotiating with them [customers] for the time being," EADS chief executive Louis Gallois told Flight International. "I think we will enter into negotiation after the milestone of 31 March - and when they have common position." EADS has been seeking a renegotiated contract that recognises "the military nature of the programme" and the risk involved.

a400m eads
 © EADS

Gallois notes that France and Germany have expressed a "wish to negotiate", while the British "have not said the opposite". EADS's company position is that termination is "very unlikely".

However, some analysts dispute this view. "With governments so tight for cash and yet desperate to have a decent, reliable medium-lift military transport aircraft soon, buying C-17 and/or C-130J aircraft from Boeing and Lockheed Martin is starting to look like a much better option," says Howard Wheeldon, a senior strategist at BGC Partners.

Richard Aboulafia, vice-president of analysis at the Teal Group, suggests there is "a very good chance that one or more partners will back out, leaving OCCAR with a serious problem and probably little alternative but to cancel the contract".

Under the A400M contract, individual customers have the right to cancel any aircraft delayed by more than 10 months. "That is another possibility - we can't exclude it," says Gallois. "But I don't want to overestimate the possibility because the global balance of workshare is linked to the number of airplanes taken by every country."

He acknowledges that some customers "are in a hurry" to get A400M aircraft, citing the British and French air forces, and says that EADS is "ready to discuss bridging solutions to fill the capacity gap we are creating with the delays".

Under "a new approach" proposed by EADS in January, first delivery of the A400M would follow a full three years after its first flight, with series production resuming only once "adequate maturity" is reached, based on flight-test results. The A400M programme schedule has been severely disrupted by delays to the full-authority digital engine control software that will control its Europrop International TP400-D6 turboprop engines.

However, Gallois admits that EADS has "its own part of responsibilities for the fact that we are late", adding: "We are trying to mitigate the effect of that partly by reorganising the programme management." In December, EADS's Military Transport Aircraft Division was merged into Airbus to create the Airbus Military business unit. Previously, the programme's complex structure had been "impossible to explain to customers", admits Gallois.

However, the merger met internal opposition, manifest in the recent departure of MTAD head Carlos Suárez. In keeping with EADS's policy, a Spaniard - Domingo Ureña-Raso - is to replace Suárez.