EADS Draws Battle Lines for A400M Negotiations
(Source: defense-aerospace.com; published Jan. 14, 2009)

By Giovanni de Briganti
NEWPORT, Wales --- Airbus, EADS and the participating partner nations all underestimated the complexity of the A400M program, and thus should jointly shoulder the financial consequences, according to EADS chief executive Louis Gallois.

Referring to a Jan. 12 statement on the A400M by British State Secretary for Defence John Hutton, Gallois said that “We share his frustration…We signed the contract, and have our share of responsibility, but we were not alone to have underestimated the program.” He implied that the additional costs of A400M development should be shared between Airbus Military, the prime contractor, its partners and subcontractors and the eight partner nations. “We have to discuss risk sharing with our customers,” he said.

Hutton told the House of Commons that “the A400M programme is now likely to be subject to considerable delay because of problems that EADS is having in producing the aircraft….We cannot accept a three or four-year delay in the delivery of those aircraft. That would impose an unnecessary, unacceptable strain on our air assets. We, along with all our partner nations, will have to consider very carefully what the right response to the problem is.” He noted that Britain might buy additional Boeing C-17s.

Gallois said EADS is offering governments “a bridging solution to help them with lack of capacity” using a mix of “Airbus A330 and other available aircraft” that he declined to identify.

Gallois also revealed that the reorganization announced Dec. 16, which merges the EADS Military Transport Aircraft Division into Airbus, was requested by customer nations. “The governments requested that we change the [program] organization, and we have changed the organization,” he said, as proof that EADS did not ignore its customers’ concerns.

But he deflected a question on what incentives EADS could offer to convince governments to change the A400M contract, which was signed in December 2001. Worth about 18 billion euros, it covers both development and production of 196 aircraft; it scheduled first flight for 2006 and initial deliveries for 2008.

As the program now stands, the “FADEC (Full Authority Digital Engine Controls) is the critical point for the first flight; when we receive the FADEC in the shape we expect, we can fly one month later,” Gallois said. He declined to estimate when this would happen, or how much the proposed further delays would cost. EADS has already taken charges of 1.75 billion euros for the A400M.

Gallois was speaking to reporters at EADS’ annual press conference held here, where the company has just inaugurated a new technology center. He also mentioned that EADS has a cash pile of 9 billion euros, which partner nations might feel is enough to comfortably absorb additional A400M development costs.

Subject to the result of ongoing negotiations with OCCAR, the program’s international executive agency, and the partner nations, Gallois said the A400M should proceed under “a new industrial process, where we launch series production only after reaching maturity gates based on flight tests and, last but not least, on amended relations with our customer based on a contract recognizing more the military nature of the program.”

Recognizing the A400M’s “military nature” is shorthand for new contractual terms allowing industry more money and more time. For example, Gallois specifically excluded launching production before flight testing had begun, as planned in the current contract.

Gallois blamed most of the program’s ills on the fact that all involved parties had “thought [the A400M] was a flying truck, but in fact it is a civil aircraft certified by civil aviation authorities and a military aircraft, with full military capabilities…it is more complex than Rafale or Eurofighter.”

While stressing that ultimately “the A400M will be a fantastic aircraft… the benchmark in its field” Gallois said that some specifications as defined in the present contract may be needlessly ambitious. “We feel there is a margin for discussion for some performance [goals] that are extremely risky,” and which could be reduced without compromising the aircraft’s effectiveness. “But we are not downgrading the aircraft at all,” he stressed.

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