High stakes as A400M nations decide: stick or twist?

London
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As a game of poker, the stakes do not get higher. With just one A400M having flown, EADS has threatened to scrap the airlifter unless its seven European launch customers can agree by 31 January to stump up funds to keep the programme on track.

Barring a surprise consensus from governments during meetings in London late last week, its act of brinkmanship could go to the wire.

The European aerospace group - parent of the aircraft's manufacturer Airbus Military - has been complaining for over a year that it cannot afford to continue developing the A400M without a fresh injection from governments to help cover the additional costs of building the aircraft. EADS has already written off €2.4 billion ($3.4 billion) to cover losses from the project, and says it cannot risk any more of its cash.

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 © Airbus Military

In a "'who-blinks-first" stratagem, EADS chief executive Louis Gallois last week defied warnings from a series of ministers in customer nations that more taxpayer money would not be used to bale out a programme that is more than two years behind schedule, by stating: "We cannot continue beyond the end of January without knowing where we are going financially."

Speaking in Seville, Spain, Gallois said the company is spending between €100 million and €150 million a month on the A400M. "I am sending a message of urgency to governments. We are ready to negotiate at any time."

He also repeated a previous assertion that EADS had made a "mistake in accepting a fixed-price contract on a programme with huge technical challenges and an unrealistic schedule". However, there were "responsibilities on both sides" for the delay, he said.

a400m launch nations

"It was the nations who pushed the production sharing between countries, including some choices with [the Europrop International TP400-D6] engines," he added. "We must find a solution for sharing the burden with them. If we want to protect the capacity of the group, we can't add losses to losses without clear limits."

Tom Enders, chief executive of Airbus, which now has direct responsibility for Airbus Military's business, raised the stakes further, stating: "We cannot continue without a significant financial contribution from our customers. The A400M as it is set up today will put the whole of Airbus in jeopardy, and I will not go down that road."

Gallois stopped short of detailing what EADS might do if an agreement is not secured by the end of the month. "Can you leave us room to negotiate with our customers?" he said.

Pressure on defence budgets as a result of rising deficits has added to frustration over delayed deliveries among A400M customers, which include France, Germany, Spain and the UK.

Politicians in all these countries have warned that taxpayers ought not to have to fund the rising costs of the programme. Deliveries should have started in October 2009, but are now not expected until around December 2012.

European defence ministers were scheduled to meet representatives from the OCCAR procurement agency in London to discuss the latest proposals to save the project, with reports having suggested that EADS could require in the region of an additional €6 billion to deliver on the A400M, above its original €20 billion contract with the nations.

Previously one of the fiercest critics of the troubled project, the UK government appears to have adopted a more conciliatory position than that voiced by its previous defence secretary John Hutton, who last year said that no additional funds would be provided.

Current defence secretary Bob Ainsworth told Flight International that the UK needs the A400M, and described the ongoing contractual disquiet as a sign of "tough love".

Additional reporting by Craig Hoyle in London