EADS Strikes A400M Finance Deal

25.02.2010 Joint Ventures

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European aerospace giant EADS has reached a deal with seven governments over how to share cost overruns for the A400M military plane, Spanish Defense Minister Carme Chacon said Feb. 24.
"I can tell you with great satisfaction that we have reached an agreement in principle between the seven partner countries and EADS," she told reporters at the arrival of a meeting EU Defense Ministers in Palma de Majorca.
EADS has threatened to pull the plug on Europe's largest defense project unless the seven NATO countries that ordered 180 of the aircraft for 20 billion euros ($27 billion) stump up more cash to cover cost overruns of about 5.2 billion euros.
Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey have been involved in difficult negotiations in recent months over how to share any additional funding between client states and the European manufacturer.
Chacon refused to give details of the agreement, only saying that some "technical details" that still remained open would be discussed and finalized Feb. 25 by participating Ministers at the meeting. "The success that the plane already was is now a success of European industry," she said.
The seven nations had offered a total of two billion euros in additional financing to cover the cost overrun by reducing the number of aircraft that will be built combined with paying a higher price for the planes.
France then suggested that the seven nations provide EADS with an additional 1.5 billion euros in credit guarantees. It said it was willing to provide 400 million euros in credit guarantees.
Last week EADS said it was ready to put up 800 million euros on top of the 2.4 billion euros that it has already invested in the military carrier built by its subsidiary Airbus. That would still leave a shortfall of 900 million euros.
The A400M is a highly innovative aircraft, which can carry troops, armored vehicles and helicopters. The project is three years behind schedule mainly due to problems with the construction of its huge turbo-prop engines.
The aircraft, built to replace ageing military cargo carriers in several European air forces, carried out its first test flight in Spain in December.
With a list price of about 100 million euros, the A400M can fly as high as 40,000 feet (12,000 meters) and can land on short, unprepared runways.
European Aeronautic Defence and Space Company (EADS), which faces stiff competition from its arch rival US aerospace giant Boeing, designed the plane to compete with, and eventually to replace, existing transporters such as the Boeing C17 and Lockheed Martin C130J Hercules.
The A400M was first agreed in 2003 by the seven nations.
The maiden flight was first scheduled for 2008 and air forces were to take their first deliveries at the end of 2009. The first deliveries are now not expected until at least early 2013.
South Africa dropped its order in November - a move which stunned Airbus - because the agreed cost of $1.2 billion five years ago had grown to $6.1 billion.
 



 
 

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