AircraftNews.Com

The long running saga of the Airbus A400 moves slowly to what seems to be the only logical conclusion which is that the customers will have to cough up much more for considerably less. Various spokespersons for the interested parties have been talking tough but taking it all together there seems no other logical outcome. The customers particularly France and Germany have no other viable alternative and international affairs are moving in the direction of more and more requirements for foreign powers to intervene in global situations requiring massive airlift. If for instance Germany were to not go ahead with the a400 acquisition it would face enormous cost to refurbish its current fleet and still end up with a very much inferior product. The issue then seems to be simply one of who will cop how much of the cost overruns. Certainly there seems to be something systemic about the cost over runs as almost no modern aviation program has been finished on time and on budget. This is something which surely the responsible parties know and can plan for so one wonders if it is not just a game of very high stakes poker. Pressure Mounts for Deal for Airbus Military Plane

By JUDY DEMPSEY and NICOLA CLARK NYT

BERLIN — Military officials from the European countries with orders to buy the Airbus A400M military transport plane tried and failed again Friday to resolve differences over how to share billions of euros in cost overruns, but said they would resume negotiations this coming week in Berlin in the hope of meeting a Jan. 31 deadline.

Many of the participating countries need the aircraft urgently as they play a greater and more demanding role in peacekeeping missions. The repeated delays — the A400M is now more than four years behind schedule — represent a big setback for European military cooperation.

Military procurement ministers from the seven customer nations met until late into the night Thursday with top managers from Airbus and its parent company, European Aeronautic Defense & Space.

“We will meet again early next week here in Berlin,” a German defense ministry spokesman, who asked not to be identified, said Friday. “All of the participants do want a solution to this problem.” Two people with direct knowledge of the negotiations said they would likely take place Tuesday.

Alexander Reinhardt, a spokesman for EADS, said nailing down the critical details of how to finance the program remained a thorny issue.

“The negotiations have been difficult, as expected,” Mr. Reinhardt said. Seven countries — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey — together ordered 180 A400Ms in 2003 for €20 billion, or $28.2 billion. Last year, EADS and Airbus asked them to help cover an additional €5.2 billion in costs and to accept significant delivery delays. The company has asked the countries to agree to an additional 25 percent payment, or around €5 billion, according to people with direct knowledge of the negotiations. The Airbus chief executive, Thomas O. Enders, warned this month that without an agreement soon, the project might have to be abandoned, placing as many as 40,000 European jobs at risk.

But while France said it would consider paying more, Germany has been more than reluctant. It has ordered 60 of the 180 aircraft, while France has ordered 50.
France was supposed to receive the first deliveries of the A400M transport aircraft late last year and Germany in 2010, but the plane made its first test flight only last month. Both countries will now have to wait several years more, according to the German Defense Ministry.

Germany, however, has little room to maneuver. With 4,300 German troops based in northern Afghanistan, Berlin needs access to such aircraft for transporting not only troops but also such heavy equipment as tanks, armored personnel carriers and helicopters. Without the A400M, it must either modernize at huge expense its Transall aircraft, which are more than 30 years old, or lease Russian Antonov aircraft.

“We want the A400M but not at any price,” the German defense minister, Karl-Theodor zu Guttenberg, reiterated during an interview with the Bayernkurier newspaper to be published Saturday. “Our willingness to compromise has its limits.” Britain, too, is furious about the delays, especially given its big role in Afghanistan. The German Defense ministry official said that cost was not the only issue still on the table, but range and payload as well. The A400M is currently several tons over its specified weight.

An audit of the A400M program by PricewaterhouseCoopers, which was commissioned last year by the governments, has blamed a significant portion of the cost over-runs on EADS and Airbus for failing to put proper budget controls in place. It also said the manufacturer had consistently underestimated development costs.

The auditor’s report, which was leaked to several European media this past week, estimated that the A400M was roughly €7.6 billion over budget.

EADS and Airbus have rejected the findings of the audit, but have so far failed to provide their own cost estimate for the program, now four years behind schedule.

EADS has already written off €2.4 billion in costs for a project that continues to expend cash at a rate of around €100 million each month.

The seven countries failed to meet an year-end 2009 deadline to agree on a new delivery schedule and financing arrangement for the contract, and last month set a new deadline of Jan. 31.

With the financial crisis and recession straining budgets across Europe, the governments have been reluctant to come up with more money.