Airbus considering dropping A400M military plane

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PARIS (AP) — Airbus on Tuesday increased pressure on European governments to agree a new contract for the troubled A400M military plane, saying it is considering scrapping the project just weeks after its maiden flight.

Airbus spokesman Stefan Schaffrath said the company has prepared lists of engineers working on the A400M who could be transferred to civilian programs instead if the military plane project “continues to contribute to a loss.”

He urged the governments involved in the program to reach a decision on whether to continue financing it by the end of this month.

The A400M had its maiden flight last month in Spain.

The program was launched six years ago with an order for 180 planes from seven governments — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey. The project is running at least three years late and over budget.

The original price was euro20 billion ($29.5 billion), but a preliminary report by auditors PricewaterhouseCoopers said parent company EADS might need an extra euro5 billion — inflating the final bill by 25 percent.

Defense ministers from the seven countries agreed in July to re-negotiate the contract after EADS missed a March 31 contract deadline for the first flight.

Cash-strapped governments have balked at paying more for the planes, and negotiations have so far failed to find a compromise — notably over EADS’ demand for more money.

EADS hopes governments will either pay more for the planes or reduce the number of planes on order. Other options on the table include reducing the specifications, or spreading increased payments out over time.

Union leaders expressed concern about possible job losses if the project ends — a possibility they say has already been raised by Airbus CEO Tom Enders.

“Mr. Enders told me himself that he seriously considers backing out of the A400M,” said Bernhard Stiedl, a spokesman for Germany’s powerful IG Metall union. “He said the project cannot be realized cost-effectively and is therefore not profitable for Airbus,” Steidl said.

Abandoning the project would cost EADS euro5.7 billion ($8.4 billion) in advance payments it would have to return to governments — and would dent its credibility. It has already put aside euro2.4 billion in provisions against losses related to the plane.

EADS reports its full year results on March 10 and analysts will be looking for more certainty on how much the program is going to cost the company.

Enders has said that he would prefer to end the project than let it continue hurting the company.

“Better an end with horror than a horror without end,” he was quoted as saying in German media last year.

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Associated Press Writers Angela Charlton in Paris and Kirsten Grieshaber in Berlin contributed to this report.

Tags : airbus corporate news eu financial performance france germany government business and finance government programs industries military plane politics
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