Airbus threatens to scrap A400M

Steyr

http://www.guardian.co.uk/business/2010/jan/05/airbus-considers-scrapping-military-plane-costs-row

Airbus threatens to scrap A400M military plane in row over costs

Airbus owner EADS says European governments must pay more for the delayed aircraft or it could be cancelled.

Airbus is considering scrapping its much-delayed A400M military plane project in a row over costs with the seven European governments, including Britain, which have agreed to buy the aircraft.

Airbus owner EADS hopes the governments will agree to pay more for the plane, which is at least three years overdue, and over budget. Other options include cutting the number of planes on order, reducing the specifications, or spreading increased payments out over time.

The seven governments agreed to renegotiate the original contract, which Airbus CEO Tom Enders claims is badly drawn up and requires the plane maker to shoulder too many cost overruns. But negotiations have stalled over how much they should pay. Airbus spokesman Stefan Schaffrath said ending the project was "a scenario" if it continued "to contribute to a loss".

"We are suffering from a stagnation," Schaffrath said. "The loss-making is serious. This needs to be urgently resolved."

He urged the governments involved – Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey – to reach a decision on whether to continue financing it by the end of this month.

A source close to the plane maker said Enders was growing impatient because of the impact of the crisis on the firm's jetliner business. "Tom Enders is not willing to put the civil aviation business at Airbus at stake for the A400M," the source said.

The A400M completed its maiden flight in Spain last month – with the first delivery due in three years. The programme, launched six years ago with an order for 180 planes from seven governments, has been dogged by problems with its engines. The original price was €20bn (£17bn), but auditors say this could rise by €5bn. Airbus would incur billions of pounds of penalties if it cancelled the planes.

For Britain and France, cancellation would have consequences both for jobs and military requirements. The countries need the airlift capacity for military and humanitarian missions in rugged areas.

There are other planes, such as the US-built Hercules and the Boeing C-17, but none fulfil the requirements set out by European air staffs. The C-130J turboprop carries only half the payload of the A400M, and the more expensive C-17 jet is considered too large and lacks the tactical versatility of the Airbus design.

While it was waiting for the A400M, the RAF acquired six C-17s, and it has flown them out of its air base at Brize Norton in Oxfordshire to Iraq and Afghanistan.

Defence ministers from the seven countries agreed in July to renegotiate the contract after EADS missed a 31 March deadline for the first flight.

Steyr

http://www.flightglobal.com/articles/2010/01/08/336878/eads-running-out-of-patience-on-a400m-refinancing.html

Defence
DATE:08/01/10
SOURCE:Flight International

EADS running out of patience on A400M refinancing
By Andrew Doyle

EADS is warning the Airbus Military A400M customer nations that time is running out to save the troubled airlifter, which programme sources say is costing the company more than €100 million ($143 million) a month to sustain.

"We are negotiating," says EADS. "We cannot take the burden all alone. We need to share the burden."

Sources close to the programme rate the chances of a refinancing deal for the A400M being agreed before EADS's end-of-January deadline at "50:50".

The project, running around two years late with the prototype having finally achieved its maiden flight in December, requires another €11.4 bllion of funding to complete. EADS has already made a €2.4 billion provision, leaving additional costs of around €9 billion that need to be covered by the seven partner nations and industry.

EADS declines to comment on reports that it is seeking another €5.3billion from the nations. Representatives of the customer nations will reportedly meet EADS officials for further talks in London on 15 January.

Germany, the biggest A400M buyer with an order for 60, has taken a hard line, warning it is not prepare to contribute more than a further €650 million to cover inflation and surcharges, as set out in its contract. France and the UK have taken a more conciliatory approach, saying that they expect deal to be reached to continue the programme.

Steyr

http://www.flightglobal.com/articles/2010/01/12/337025/a400m-cannot-continue-without-more-funding-warns-airbus.html

Defence
DATE:12/01/10
SOURCE:Flightglobal.com
A400M 'cannot continue' without more funding, warns Airbus CEO
By Murdo Morrison

EADS chief executive Louis Gallois says the A400M programme cannot continue beyond the end of the month without a commitment by European customer governments to fund the increased costs of developing the military airlifter.

Speaking at an event in Seville today, Gallois said the European giant was spending between €100-150 million ($145-217 million) a month on the programme, which is running two years behind schedule. "We cannot continue beyond the end of January without knowing where we are going financially," he said. "I am sending a message of urgency to governments. We are ready to negotiate at any time."

Gallois said EADS had made a "mistake in accepting a fixed price contract on a programme with huge technical challenges and an unrealistic schedule". He said there were "responsibilities on both sides" for the delay, which has left EADS with a shortfall of €2.4 billion.

"It was the nations who pushed the production sharing between countries, including some choices with engines," he said. "We must find a solution for sharing the burden with them...if we want to protect the capacity of the group, we can't add losses to losses without clear limits."

However, Gallois refused to detail what EADS might do if no further agreement is secured by the end of the month. "Can you leave us room to negotiate with our customers?" he said.

Tom Enders, chief executive of Airbus, which now has direct responsibility for the Airbus Military business, backed his boss's threat. "We cannot continue without a significant financial contribution from our customers. If we don't press for that it will jeopardise the whole of Airbus. The A400M as it is set up today will put the whole of Airbus in jeopardy and I will not go down that road.

Pressure on defence budgets as a result of rising deficits has added to frustration over delayed deliveries among A400M customers, who include France, Germany, Spain and the UK, and politicians in all these countries have warned that taxpayers ought not to have to fund the rising costs of the programme.

Steyr

http://www.flightglobal.com/articles/2010/01/14/337141/airbus-prepares-to-ground-first-a400m-to-fit-additional-test-kit-including.html

Defence
DATE:14/01/10
SOURCE:Flight International

Airbus prepares to ground first A400M to fit additional test kit – including rockets
By Max Kingsley-Jones

Airbus is about to briefly ground its first A400M flight-test aircraft to install additional test equipment, including rockets to assist with stall-testing, before continuing with trials in February.

Flight-testing of aircraft MSN001 began on 11 December, and the aircraft had made five flights by 13 January, all from Airbus Military's final assembly plant near Seville, Spain. Airbus's flight-test chief Fernando Alonso says the A400M's flight envelope was cleared in the early test flights: "We've flown it at its VMO and MMO of 300kt [555km/h] and Mach 0.72."

Alonso says MSN001 is due to be grounded shortly after an expected seven flights, to undergo installation of additional test and calibration equipment. As it is tasked with aircraft handling testing, it will also be equipped with rockets to assist in emergency recoveries during stall tests.

"The rockets are an alternative to the [aircraft] parachutes sometimes used when stall-testing T-tailed aircraft," he says. "They will be able to give us a 'push up the butt' if it gets into a high nose-up attitude."

After the equipment upgrade, MSN001 will be positioned to Airbus's main flight-test centre in Toulouse, France, where it is due to be based for the bulk of its tasks along with MSNs 003 and 006.

Preparations are under way to fly the next A400M, MSN002, which is due to get airborne in March and will be tasked with performance and powerplant tests. This aircraft and MSN004 will be based in Seville for testing, although Alonso says all test aircraft can operate from either centre to obtain the optimum weather conditions.

Steyr

http://www.flightglobal.com/articles/2010/01/18/337222/comment-too-big-to-fail.html

Defence

DATE:18/01/10
SOURCE:Flight International

Comment: Too big to fail
By

Are current bosses of EADS and ministers from seven countries that ordered the A400M responsible for their predecessors' sins? The debacle over the airlifter shows how far Europe's bold journey to create an aerospace champion has gone in the 10 years since EADS was formed - and the distance it still must travel.

EADS was an attempt to replicate with its four partner countries' defence and space capabilities what these nations had begun three decades earlier with Airbus - to create an industrial powerhouse with the critical mass to compete with US primes, and sustain a domestic defence capability extending down the supply chain and creating high-value employment.

All laudable aims. However, the conflict EADS's bosses have had is how free they have been to act as conventional corporate executives and how much politicians have tied their hands.

Just as EADS has matured from a politically inspired enterprise into a market leader in airliners and civil helicopters and an emerging global force in space technology, defence and security, its leaders today behave differently than their predecessors a decade ago.

It was the latter who signed the fixed-price contract to deliver the A400M from 2009, and agreed under pressure to buy the engines from a four-nation European consortium that EADS chief executive Louis Gallois now describes as the "most baroque organisation" he has come across. Gallois and Airbus's Tom Enders say they would never have signed that contract and that politicians at the time should not have pushed it as they knew they were handing EADS a Herculean task.

On one hand their stance is a blatant abrogation of corporate responsibility. In what other business could executives get off with washing their hands of poor decisions made by their recent predecessors (banking is a possible exception)? Imagine Airbus penalising A380 customers because the superjumbo was late, rather than finding funds to compensate them for the delay.

On the other hand, the threat to terminate the programme without further government funds is pragmatic and courageous. The pain of governments having to dip into growing deficit budgets to bail out EADS is far outweighed by the risk of damaging Airbus commercially at a time when it needs to fund the A350 programme, destroying thousands of jobs and forcing the seven governments to buy American for their airlift needs.

Like the banks, it seems that - whoever's fault it is - the A400M is simply too big to fail.

Steyr

http://www.flightglobal.com/articles/2010/01/18/337142/high-stakes-as-a400m-nations-decide-stick-or-twist.html

Defence

DATE:18/01/10
SOURCE:Flight International

High stakes as A400M nations decide: stick or twist?

By Murdo Morrison

As a game of poker, the stakes do not get higher. With just one A400M having flown, EADS has threatened to scrap the airlifter unless its seven European launch customers can agree by 31 January to stump up funds to keep the programme on track.

Barring a surprise consensus from governments during meetings in London late last week, its act of brinkmanship could go to the wire.

The European aerospace group - parent of the aircraft's manufacturer Airbus Military - has been complaining for over a year that it cannot afford to continue developing the A400M without a fresh injection from governments to help cover the additional costs of building the aircraft. EADS has already written off €2.4 billion ($3.4 billion) to cover losses from the project, and says it cannot risk any more of its cash.

In a "'who-blinks-first" stratagem, EADS chief executive Louis Gallois last week defied warnings from a series of ministers in customer nations that more taxpayer money would not be used to bale out a programme that is more than two years behind schedule, by stating: "We cannot continue beyond the end of January without knowing where we are going financially."

Speaking in Seville, Spain, Gallois said the company is spending between €100 million and €150 million a month on the A400M. "I am sending a message of urgency to governments. We are ready to negotiate at any time."

He also repeated a previous assertion that EADS had made a "mistake in accepting a fixed-price contract on a programme with huge technical challenges and an unrealistic schedule". However, there were "responsibilities on both sides" for the delay, he said.


"It was the nations who pushed the production sharing between countries, including some choices with [the Europrop International TP400-D6] engines," he added. "We must find a solution for sharing the burden with them. If we want to protect the capacity of the group, we can't add losses to losses without clear limits."

Tom Enders, chief executive of Airbus, which now has direct responsibility for Airbus Military's business, raised the stakes further, stating: "We cannot continue without a significant financial contribution from our customers. The A400M as it is set up today will put the whole of Airbus in jeopardy, and I will not go down that road."

Gallois stopped short of detailing what EADS might do if an agreement is not secured by the end of the month. "Can you leave us room to negotiate with our customers?" he said.

Pressure on defence budgets as a result of rising deficits has added to frustration over delayed deliveries among A400M customers, which include France, Germany, Spain and the UK.

Politicians in all these countries have warned that taxpayers ought not to have to fund the rising costs of the programme. Deliveries should have started in October 2009, but are now not expected until around December 2012.

European defence ministers were scheduled to meet representatives from the OCCAR procurement agency in London to discuss the latest proposals to save the project, with reports having suggested that EADS could require in the region of an additional €6 billion to deliver on the A400M, above its original €20 billion contract with the nations.

Previously one of the fiercest critics of the troubled project, the UK government appears to have adopted a more conciliatory position than that voiced by its previous defence secretary John Hutton, who last year said that no additional funds would be provided.

Current defence secretary Bob Ainsworth told Flight International that the UK needs the A400M, and described the ongoing contractual disquiet as a sign of "tough love".

Additional reporting by Craig Hoyle in London

LAUNCH NATIONS:

1. BELGIUM:7

2. FRANCE:50

3. GERMANY:60

4. LUXEMBOURG:1

5. SPAIN:27

6. TURKEY:10

7. UNITED KINGDOM:25