supplied by Col A.H (Riaan) Louw Foreign Militaty Attaché
By Kevin Done
the A400M military transport aircraft project could cost
EADS €5.7bn (£5.2bn) in repayments to European governments,
Europe's leading aerospace and defence group warned
Europe's biggest collaborative defence project, taken as a
fixed price contract in 2003, has cost EADS more than €1.7bn
in charges and is running years late. EADS said A400M
problems had reduced group operating profits last year by
The group said its failure to achieve the first flight of
the A400M by the end of this month meant its customer Occar,
the European procurement agency, had the right to terminate
the A400M contract from April 1.
Cancellation would mean the need to reimburse customer
governments pre-delivery and other payments.
The A400M was agreed in 2003 with launch orders for 180
aircraft from seven European governments, led by Germany
with 60 and France with 50. Deliveries were to begin in late
2009 and run to 2020 and the giant turboprop aircraft was
set to play a role in meeting Europe and Nato's strategic
and tactical needs.
Development of the aircraft is in trouble, with EADS unable
to agree a new schedule with governments. It said talks with
Occar were due to start "in coming weeks".
It warned that the revised industrial plan to complete the
A400M could lead to a "significant charge" against 2009
earnings depending on negotiations with customers and
Under the latest EADS proposals, first delivery will not
take place for at least three years after the first flight.
But six years after the programme started, EADS is unable to
set a date for that flight.
Series production work has been frozen until EADS can
negotiate with governments and suppliers a way to continue
the €20bn programme. EADS said the A400M contract could only
be terminated "with a unanimous mandate of all launch
Louis Gallois, EADS chief executive, said "we think it is
very unlikely there will be a unanimous consent to
cancellation at the end of March". Germany and France wanted
to negotiate, and Spain was likely to be of the same view.
The UK had not stated its position, he said.
EADS said each of the launch nations could cancel any
individual aircraft which became "substantially delayed".
The disarray has left EADS unable to provide forecasts for
the group's financial outlook.
Copyright The Financial Times Limited 2009.