Turbulence at Airbus Europeans Won't Back Away from A400M
European aerospace group EADS is breathing a sigh of relief this week: The European countries planning to purchase the Airbus A400M military transport appear to be backing away from threats to cancel their contracts to purchase the aircraft.
At a meeting in France on Friday, July 24, defense ministers are expected to withdraw their threat to terminate their purchase contract at the end of July. They had previously threatened to take the dramatic step because EADS has not yet filled the orders due to significant technical problems in development of the aircraft.
Last week, Germany, France, Great Britain and the four other partner countries agreed to present a united front, saying they were still committed to the project.
While the ministers' meeting is likely to be little more than a formality, the bargaining position of EADS subsidiary Airbus -- which has been plagued by massive delays on the delivery of new aircraft in recent years -- is expected to be strengthened as a result of the decision not to pull out.
Management Errors and Technical Problems
The development of the military transporter has been plagued by management errors and technical problems. European arms procurement agency OCCAR has already announced that the A400M will not be able to meet previously agreed criteria, having a reduced carrying capacity and a more limited flight range than planned.
The company is attempting to pass the burden for part of its billions in heavy losses to taxpayers by demanding both more money from its clients and a waiver of fines it would be hit with if the planes are delivered late.
Participating countries are determined to be "tough" with the aircraft manufacturer in negotiations expected to run until the end of the year. According to a clause in the contract, if the A400M still hasn't made its maiden flight by then, the countries will have another opportunity to pull out of the project.
Still, the chances of that the buyers -- perceived at this point as very lenient -- actually making using of this clause is becoming increasingly unlikely. However, if they did decide to pull out, Airbus would be forced to pay back almost €6 billion in cash advances to the countries who ordered the plane.
There are currently 192 orders in place for the A400M, worth a good €20 billion. Germany's Bundeswehr armed forces alone has ordered 60 of the military transport planes.