A400M talks eyed as bailout draws close

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European buyers of Airbus’s A400M are to meet in Toulouse on Friday, a French government source said on Thursday, as a long-awaited funding deal to rescue the troubled military transport takes shape.

Seven European countries provisionally agreed in March to pump in 3.5 billion euros (US$4.9 billion) to prevent Europe’s largest defense program collapsing with the loss of 10,000 jobs after delays and cost overruns at EADS subsidiary Airbus and its suppliers.

Talks to finalize the deal, which could affect how quickly Airbus returns to profit after the delays blew a hole in its 2009 accounts, have taken longer than expected as Britain and Germany grapple with major defence cuts, Reuters reports.

Several sources familiar with the negotiations said a deal was close and that the major points of the plan to bail out just under half of Airbus parent EADS’s projected losses on the plane had been agreed subject to a handful of technical points.

France has invited the six other core A400M nations — Britain, Belgium, Luxembourg, Germany, Spain and Turkey — to talks at the planemaker’s headquarters city of Toulouse in an effort to refresh the political momentum for a final deal.
“There will be a meeting in Toulouse tomorrow, which (French Defense Minister) Herve Morin will attend in view of the importance he has attached to every stage of the negotiations,” the French government source said.

Companies involved in the project declined comment.

If the event goes ahead as planned, the meeting will be followed by a 1400 GMT news conference, the source said, adding it was too early to say if a final deal on the entire funding plan would be ready by then. Some ministers may not attend.

Airbus Chief Executive Tom Enders said in July Airbus should return to profit in 2010 assuming it reached a final deal with European nations over the rescue package.

The EADS unit posted a 1.32 billion-euro loss in 2009 after writing off 1.8 billion in addition to earlier A400M provisions.

Talks have also been slowed by elections in Britain earlier this year. French media say Morin could meanwhile be moved in a reshuffle by conservative President Nicolas Sarkozy this month.

RISK-SHARING HURDLE

The A400M was ordered in 2003 to meet a looming shortfall in military and humanitarian airlift.

By reducing dependence on U.S. makers Boeing Co (BA.N) and Lockheed Martin Corp, the 20-billion-euro project was conceived as a pillar of European defense ambitions.

But delays in making the West’s largest turbo-prop engines put the A400M back four years to 2013 and sent costs out of control. Buyers say it is urgently needed in Afghanistan.

Two sources close to the discussions said partners had agreed the main points of a proposed funding deal including the number of orders, which should be cut to 170 planes from 180.

Britain has said it will cut its order to 22 planes from 25 and Germany is expected to take 53 planes instead of 60.

The single biggest obstacle left to an accord concerns a battle over who should be responsible for financial risk if an ambitious terrain-following navigation system ordered by Germany for its A400M fleet is not ready on time, several sources said.

The system would allow the transporters and their 37 tonnes of troops or heavy equipment to hug the landscape at low level to evade attack but depends on an elusive leap in technology.



French arms company Thales is at the center of those discussions along with its role in producing the plane’s flight management system which is over-budget, the sources said. A Thales sopokesman did not have immediate comment on the talks.