Airbus Military again assures on SA A400M work – but just


Airbus Military officials have again sought to assure South Africa about the security of its A400M work packages. Programme head Cedric Gautier says there are “no plans to remove any packages on our own initiative” at present.

He was speaking Tuesday at an Airbus Military trade media briefing (TMB) – attended by defenceWeb – in Sevilla, Spain, where the large airlifter is built. Airbus Military CEO Domingo Ureña made a similar pledge at the TMB last year, just months after some work was diverted away from the state arsenal, Denel. But he modified that yesterday, noting that the packages were tied to the South African Air Force’s 2004 purchase of eight of the airlifters.

South Africa ordered eight of the aircraft for €837 million (then about R9.6 billion) in December 2004. Delays in the programme and alleged cost overruns that became known during the 2009 recession caused the South African government to cancel its order in November 2009 to popular acclaim. The cost claims, on which Cabinet may have made its decision has proven exaggerated: now sacked Armscor CE Sipho Thomo claimed the cost to South Africa had escalated from R17 billion to R47 billion, but this was repudiated by defence minister Lindiwe Sisulu as well as Airbus, the latter insisting that the €837 million figure remained accurate.

The buy followed South African interest in becoming a risk-sharing partner in the programme. Then-transport minister Jeff Radebe and public enterprises minister Alec Erwin spoke glowingly of the project’s prospects at the September 2004 edition of the Africa Aerospace & Defence exhibition, announcing the Cabinet decision’s to purchase eight with an option of six more. The order was duly signed in December 2004 and the workshare agreement – by then-defence minister Mosiuoa Lekota – in April the next year. Denel Saab Aerostructures (DSA) and Aerosud duly became risk-sharing partners in the programme while Armscor, Saab SA and Omnipless (now Cobham) were appointed contractors.

The US news service, Bloomberg, quoted French newspaper Le Tribune as valuing the SA workshare at €400 million (R4.4 billion), while in May 2007, Engineering News reported that “Airbus Military has calculated that the A400M programme will add R859-million to South Africa’s gross domestic product each year for the next 15 years or €750-million over 20 years. Former DSA CE Lana Kinley said her company spent some R400 million in a facility upgrade to prepare for the production of its workshare. The National Treasury in October 2009 announced that it would make R192 million available to DSA year to help pay for this tooling, and a further R181.3 million in October last year. Ureña last year added that his company had invested more than €300 million in the SA aviation industry to support the programme.

DSA is exclusively responsible for the production of so-called top shells for the centre fuselage section of the A400M, which it had also designed and developed. Engineering News’ Keith Campbell has picturesquely called these as being equivalent to roof panels. DSA says this is one of the largest composite-metallic hybrid structures on the aircraft. “This part’s main function is to provide aerodynamic efficiency over the wind box, as well as protecting critical aircraft systems.” The company is contracted to produce two top shells for each aircraft – one in front and one behind the wing box that joins the wing to the fuselage. In addition, it is making very large wing-to-fuselage fairings, manufactured mainly from composite materials but including aluminium parts.

Each fairing is 15m long, 7m wide, and nearly 3m high.

The Department of Public Enterprises in October 2009 said the A400M contract was awarded to DSA as part of a business exchange plan, set up with Airbus when the SA government signed “a deal to purchase the military aircraft as part of the South African Air Force’s renewal programme”. The department in a joint statement with the DSA noted the design of the A400M structure “has raised South Africa’s engineering skill base.” They added the “DSA has also developed a composite facility to global standards – with world class accreditation which will allow South Africa to position itself in advanced manufacturing and in obtaining further contracts in the aerostructures industry.”

Dr Ian Phillips, the late Special Advisor to Radebe in a 2004 press statement noted that this was the fulcrum of SA’s participation in the programme. Phillips – then a Denel board member – avered that the government, through the Departments of Trade and Industry (DTI), Public Enterprises and Defence, had been since “at least 2000” developing a strategy for the long-term development of South Africa’s high technology aerospace sector.

In addition to the wing-to-fuselage fairings and top shelves, DSA was also contributing the ribs and spars for the tail fin as well as centre wing box structural components. It is the tail fin packages that were taken from DSA last year. The delays in the A400M programme has cost DSA and its staff dearly. The company posted a loss of R452.6 million for the year to March 2009, and some R328 million for the year to March 2010, while close to 500 staff have been laid off in three rounds of retrenchment.

Following the November 5 decision to cancel the A400M purchase, Kinley and Sadik were adamant this would not immediately affect the company. “The impact of the … cancellation … will have little impact in the immediate future on DSA as the aircraft is still in development phase.,” Kinley told defenceWeb. “DSA is the design authority for two parts – the Wing-to-Fuselage Fairing and the Top Shells – and both have reached a mature stage of development. If Airbus cancelled this contract, the cost of redesign, production readiness and certification for an alternate supplier would be significant,” she said. But in February 2010 Denel CE Talib Sadik admitted to Parliament that Airbus would be within its rights to cancel DSA’s workshare. There was at the time no indication it would do so.

Aerosud has to date not commented on the impact of the decision on its workshare that includes manufacturing nose fuselage linings, cargo hold and cockpit linings as well as the cockpit rigid bulkhead, the wing tips, and the nose fuselage galleys. Defence analyst Helmoed-Römer Heitman said in November 2009 he doubted that EADS or Airbus Military would pull any work from Aerosud, “which is a long-standing supplier to Airbus”. He said they “would not want to spoil a perfectly good relationship, and it would make no sense at all to do so. I also doubt that EADS/Airbus Military would pull the design work from DSA at this point in the project,” he said. That would only serve to incur further delay, cost and risk, which would make no sense in a project that is already over-budget and over-schedule.”

In addition to DSA and Aerosud, Armscor providing engineering services to the project, Cobham, in Cape Town, is providing satellite communications antennas and Saab SA is providing health and usage management systems (lifetime monitoring systems) for the aircraft. “When suppliers fulfill requirements, it is very difficult to remove their workload and transfer the work. It can’t be done. I don’t believe this is the time to do it. That is why the work packages will continue for a considerable time,” Ureña said at TMB 2010. However, he pointed out, new work packages that would have gone to the South African companies will be subject to tenders, the Engineering News reported at the time. “The best bids will win. That is the situation.”

Speaking to South African journalists at this year’s TMB in Madrid yesterday, he said negotiations were still underway with the South African government. Should these fail, the packages could be stripped from the South African companies and allocated elsewhere. He added the talks could not last indefinitely but when asked stressed there was no deadline yet. Ureña also emphasised that neither he nor Airbus Military had anything against either Aerosud or DSA, with whom they had longstanding supplier agreements and cordial relations, but strongly hinted that without an A400M buy South African firms could not hope to benefit from the programme as every supplier’s workshare was conditional and proportional to their government’s purchase.

Urena said he had noted comments by Minister of Defence and Military Veterans Lindiwe Sisulu in February as well as last month that the talks, from the SA point of view, were aimed at recovering the R2.9 billion paid to Airbus Military.