European aerospace group EADS denied a media report that it was considering dropping the Airbus A400M military transport project over expected cost overruns.

Germany's Focus Online website reported yesterday without citing any sources that EADS could bury Europe's biggest-ever defence contract even before the aircraft takes its first flight, planned for next week.

It said auditors PriceWaterhouseCoopers had concluded that developing the aircraft would cost €5.3 billion ($7.98 billion) more than originally planned.

The €20 billion A400M programme is already delayed by three to four years, and Airbus is pressing for concessions on the terms of the contract, saying it faces unaffordable losses in delivering the 180 aircraft ordered by seven NATO countries.

"Negotiations are ongoing. Everything else is speculation," an EADS spokesman said yesterday.

The seven nations buying the plane include Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey.

"We don't believe in the exit of the A400M project. The reputation risk is far too big for EADS," said one Paris-based trader. "We see this as the lobbying 'game' starting between EADS and the concerned states."

Shares in EADS were 2.6% lower at €11.60 by 1532 GMT, the only significant fallers on a 2.1% firmer French benchmark CAC 40 index