EADS Accepts A400M Financing Offer

26.02.2010 Europe

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EADS accepted an offer from seven NATO clients to finance the over-budget A400M military transport plane in a deal that would save Europe's biggest defence project.

The aerospace giant had threatened to pull the plug on the project unless the seven governments stumped up more cash to cover cost overruns of about 5.2 bn euros (7.0 bn US$).
The Airbus A400M programme is meant to show Europe's independence from US defence suppliers and employs 10,000 people,

The seven NATO nations (Belgium, Britain, France, Germany, Luxembourg, Spain, and Turkey) offered a total of two bn euros in additional financing as well as an additional 1.5 bn euros in credit guarantees.

"We received a response yesterday night from EADS to the letter sent a few days ago by the participating states. There are no more financial demands on the part of EADS," French Defence Minister Herve Morin said Thursday.

"EADS does not demand a further step beyond these two billion. It is a major advance," he added on the sidelines of an informal meeting of EU Defence Ministers held on Spain's holiday island of Majorca.

The deal to finance the long-delayed A400M, which can carry troops, armoured vehicles and helicopters, and land on short, unprepared runways, could be signed in Paris on March 8, a spokesman for France's Defence Ministry said in Paris.

Under the agreement, Airbus parent company EADS will book another 1.7 bn euros (2.3 bn US dollars) in charges for the cost overruns on top of the 2.4 bn euros it has already booked.

EADS said last week it was ready to book only 800 million euros in additional charges.

Before the deal is finalised, EADS wants to ensure that the seven nations do not sharply reduce their orders for the aircraft, Morin said.

The participating countries ordered 180 of the highly innovative planes which can carry troops, armoured vehicles and helicopters for 20 bn euros.

Britain has already announced that in plans to reduce its order to 22 planes from 25 aircraft while France will maintain its order for 50 planes, Morin said.

Another detail which still needs to be ironed out is how the seven nations will divide up the additional 1.5 billion euros in credit guarantees which they have agreed to provide.

Morin pointed out that while Belgium, Luxembourg and Spain confirmed they will contribute, so far only France has specified how much it is willing to provide -- 400 million euros.

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