Crisis Over A400M Airlifter as EADS Threatens To Stop Work

 - January 18, 2010, 6:28 AM
Crisis Over A400M Airlifter as EADS Threatens To Stop Work

At a dramatic new year press conference held beneath the second A400M in the final assembly building in Seville, Spain, the chief executive officers of EADS and Airbus declared that they would stop funding the program at the end of this month. EADS CEO Louis Gallois said the group could not continue to spend €100 to €150 million ($145 to $217 million) of its own money each month, without an agreement with the seven partner nations over future funding of the A400M.

A moratorium on payments for the troubled airlifter was agreed last spring, and has since been extended twice. “The whole of Airbus is now in jeopardy,” added Airbus chief Tom Enders. EADS has already made a €2.4 billion ($3.49 billion) provision against losses on the A400M, and is reported to want an extra €5.3 billion ($7.69 billion) from the partners. It would then absorb the remaining estimated shortfall of €3.6 billion ($5.22 billion). Gallois refused to confirm these figures, but told journalists that the company would not be making any money on the 180 aircraft that it is supposed to produce for the partner nations. In 2003, the nations signed a fixed-price development and production contract with Airbus Military that was worth €20 billion ($29 billion) in 1998 prices.

Airbus claimed that the A400M would still be “the best value for money tactical and strategic airlifter” even after the price increase that it is seeking, which takes the unit cost to nearly $140 million each. (According to Airbus, a stretched C-130J-30 costs $100 million and a C-17 just over $250 million).

As the EADS deadline loomed, defense procurement ministers from the partner nations met in London to discuss their response. British minister Quentin Davies said afterward that the program had made some good progress, but the question of additional funding had to be resolved. “All nations remain committed to the program, but not at any price,” he added. The ministers will invite EADS/Airbus Military to a meeting within days to try to settle the issue. Earlier, Germany was reported to be taking the hardest line over the contract. The UK was reported to be willing to accept 19 or 20 aircraft for its money, rather than the 25 originally planned.