The seven European nations that have ordered 180 Airbus Military A400M transport planes for 20 billion euro in 2003 have agreed to seek an “acceptable” deal over a massive cost blow-out that threatens the future of the project and the viability of the manufacturer.
Reuters reports the agreement, reached Thursday night, ends a chill in negotiations. Germany, which has so far opposed moves to provide increased European government help for the delayed troop transporter, says buyers were committed to sticking with the project “but not at any price” and signalled talks with Airbus in coming days.
The A400M is Europe’s attempt to build a home-grown troop and heavy equipment transporter for global military and humanitarian missions by seven NATO countries — Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey.
Its future has been threatened by an 11 billion euros or 55 percent surge in combined development and production costs, overshadowing a successful maiden flight last month. Airbus parent EADS said it was ready to negotiate an “acceptable” funding deal at a meeting of junior defence ministers which it expected to be invited to next week.
The move follows a meeting of buyers in London on Thursday and marks a possible thaw in negotiations after EADS complained it had been left out of crucial meetings and set a January 31 deadline for an agreement to avoid scrapping the plane.
But there was no immediate indication how far either side was prepared to compromise and some sources close to the negotiations suggested it may take the involvement of European leaders, notably French President Nicolas Sarkozy and German Chancellor Angela Merkel, to clinch a final accord.
“The talks continue at working level with strong involvement of the ministries concerned. The French would like to see the whole issue treated at top level, but that’s not the case yet,” an aide to one European leader told Reuters.
France said last week it was ready to contribute to a funding deal and suggested one could be finalised on the sidelines of an informal NATO meeting in Istanbul on February 4 and 5. That meeting takes place shortly after an international leaders’ conference on Afghanistan in London on January 28 where A400M buyer nations could also conduct any necessary side talks.
A similar deadlock over the future of the next phase of the Eurofighter Typhoon combat jet was lifted after Merkel and British Prime Minister Gordon Brown intervened last year.
A German spokesman said buyers had hammered out a joint position and agreed on Thursday to invite Airbus to talks on an “acceptable” solution by the end of January.
The planemaker’s efforts to impose a deadline had initially rankled with Berlin which said it would not be held to ransom. Germany is the largest A400M customer with 60 out of 180 planes on order.
Berlin has so far rejected a proposal by EADS that would see the seven launch nations pay up indirectly for an overrun in production costs, pegged by sources at 5.2 billion euros, but it is widely assumed it would be willing to do a deal on its terms.
To avoid triggering unpopular spending decisions during the economic crisis, the proposal being discussed would not involve new taxpayer money in the short run. It would instead engineer a 25 percent price hike per plane by delivering correspondingly fewer planes under the original budget 20 billion euros budget.
In return, industry sources say EADS has offered to shoulder up to 6 billion euros in development “risk,” of which 2.4 billion euros has already been provisioned in its accounts.
This so-called tranche approach would leave some 40 of the 180 planes in budget limbo until after 2020 when nations could either put up more money or leave Airbus to try to export them. (
EADS chairman Louis Gallois yesterday welcomed the development, saying it was “a very positive sign,” in an interview with Frankfurter Allgemeine Sonntagszeitung (FAS). “We are ready to work constructively towards a solution that is acceptable to all sides,” he said.
“The A400M even at a higher price is cheaper, more modern and more flexible than the American competition,” Gallois said in the FAS story.
The Handelsblatt business daily in pre-release abstracts of a story due to be published today said that the meeting between governments and Airbus was likely to take place at the end of the week in Berlin, citing government sources.
The paper added that the governments are ready to offer a compromise under which they would be willing to forego some of the handling characteristics sought by the military — a step which could significantly reduce the plane’s production costs.
There was no comment immediately available from the German Defence Ministry, which has been negotiating on the project.
The planes had been due for delivery in 2009 but delivery is now only likely from 2012.
Gallois said the planned development schedule had been too tight initially and no comparable plane had needed less than 12 years to come to fruition.
“…with about 10 years for the A400M, we will be ready in very good time,” he said.
He said that 40 000 jobs depended on the plan, including 11 000 in Germany.