EADS faces penalties even if A400M project saved

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Airbus parent EADS could have to pay up to €1.4 billion in penalties for delays to its A400M military plane, even if European nations reaffirm the troubled programme, according to its annual report.
Reuters adds EADS is negotiating with seven nations to prevent a cancellation of the €20 billion transporter aircraft project over production delays, something it has already said would force the aerospace group to pay back €5.7 billion in advances.
Under agreements signed in 2003, buyer nations can only cancel the entire programme unanimously, but individual nations can cancel their orders plane by plane once they are more than 10 months late, which is already the case.
“Under the current scenario of a continuation of the A400M programme, significant penalties based on contractual clauses could also be notified for a cumulative amount of €1.4 billion, due in case each aircraft delivery would be delayed by more than 10 months from the original contractual timetable,” the annual report said.
“Based upon the current probable minimum delivery delays, this penalty clause would apply at least to a significant number of aircraft, but would be subject to future discussion with customers,” EADS said, adding that provisions taken so far on the A400M project included its best guess on these payments.
The programme is running three to four years late due to development problems that Airbus blames on engine manufacturers.
A400M nations led by Germany and France have agreed a three-month moratorium before deciding whether to cancel Europe’s biggest military contract, which they could otherwise have torn up on April 1, claiming back the advances.
Germany and Britain have threatened to cancel their orders for 60 and 25 planes, respectively, out of 192 originally ordered, but only Britain is seen by most defence analysts to be seriously questioning whether to go ahead with the project.