EADS confident on A400M exports after rescue deal

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Weeks ago, EADS bosses were warning that without a bail-out the troubled A400M programme could sink Airbus. Now, following a 5 March agreement in principle with the seven government customers, the European company claims the airlifter will replace Lockheed Martin's C-130 as the world's military transport of choice.

"The export potential is huge," says EADS chief executive Louis Gallois. "I think we could reach 400-500 in the next 20 years."

Gallois says negotiations are taking place with South Africa, one of two non-European customers - along with Chile - to cancel commitments. "We will give you an update in a few weeks," he said following the EADS annual results presentation in Paris on 9 March. Pretoria pulled its contract for eight aircraft in November citing delays and rising costs.

 
© Airbus Military
Aircraft MSN001 left Seville for Toulouse on 4 March

The new deal commits the seven original customers - Belgium, France, Germany, Luxembourg, Spain, Turkey and the UK - to pay EADS an additional €2 billion ($2.74 billion), waive all liquidated damages related to the delays and provide a further €1.5 billion in exchange for a share of export sales.

Details have still to be agreed as to how the extra cost will be shared among the countries, although Gallois said it would likely be allocated according to aircraft commitments. Under the deal, nations can drop a total of 10 of the 180 A400Ms on firm order, although Gallois expects delivery schedules to remain intact, with the first aircraft handed over in July 2013.

The size of the export levy paid to the governments is also unclear, but Gallois insisted it will not be so high that the aircraft becomes uncompetitive. "We have agreed that the levy should not put a brake on exports. We have a common interest: nations have to get their levies and we have to make profit," he said.

He added that negotiations with suppliers to recover some of the costs incurred by the failure to integrate on time key equipment - including the Europrop TP400-D6 engine - "will take years".

Gallois denies that the A400M programme, which is three years behind its original schedule, has been a "disaster", saying: "Give me an example of any military equipment which has been delivered with less than a three-year delay. It is not a bad performance. I am not proud of it, but 10 years is the benchmark in our business."

EADS blames many of the programme's problems on an "unrealistic" price and supplier workshare contracts agreed in the original contract.

 
© Airbus Military
The European programme's second A400M (above) should fly 'within days'

The first A400M (MSN001) flew from Seville to Toulouse on 4 March in its tenth sortie since its maiden flight on 11 December. The second test aircraft will fly "within days", while the third is undergoing final production ground tests before engine installation and will take to the air by the middle of the year.

The fourth test aircraft, now in final assembly at Seville, will join them in the second half of 2010.