Airbus Risks A400M Penalty Claims By Partner Nations
(Source: Defense-Aerospace.com; published March 06, 2015)

By Giovanni de Briganti
BORDEAUX, France --- The uneasy truce between Airbus Group and the A400M partner nations over delayed deliveries and performance shortfalls has flared up after a late February meeting in Berlin failed to provide a satisfactory response to outstanding issues.

Airbus “had nothing to tell us about deliveries or about the missing military capabilities,” French defense procurement chief Laurent Collet-Billon said here March 4. “We will have to hit them with penalties and interest charges to make them understand just how unhappy we are.”

Airbus, the prime contractor for the A400 program, has been running late on deliveries as it struggles with an underperforming supply chain and with quality control issues at its own production plants as well as its final assembly lines at Seville, Spain. It is also late in qualifying the aircraft for military capabilities beyond the basic transport mission, which severely limits the productivity of the aircraft already delivered.

At the Berlin meeting, Airbus failed to provide the main A400M partner nations with a revised schedule for future deliveries and for expanding military capabilities.

“We are also not happy with the performance of Airbus on the A400M deliveries, and we are working hard with them and with the other nations to solve the problems and avoid other problems in future,” a spokesperson for the German defense ministry said March 6.

No-one was available to comment at Occar, the Bonn-based European armaments cooperation agency that manages the A400M program on behalf of partner nations. Occar’s Toulouse-based A400M program manager was travelling and out of contact.

Tom Enders, chief executive of Airbus Group, said Feb 27 in Munich that the company would deliver 15 or 16 A400Ms to customers this year. “That means one-third fewer deliveries” than planned, and “We will probably only get two aircraft instead of four this year,” Collet Billon said. “And one is due in December, so you can imagine how that will turn out.” Airbus delivered eight A400Ms to four nations in 2014.

Enders was speaking during the company’s financial results conference, when it announced that it has taken a charge of €551 million for the A400M program in its 2014 accounts.

The consensus is that the “nations are no longer ready to accept non-compliant performance and missed deadlines,” a European government official told Defense-Aerospace.com, adding that “penalties are provided for in the contract, and they are now on the table.” However, financial penalties are not the only course of action, and “some countries may prefer other forms of compensation.”

Airbus says that the delay in providing partner nations with an updated delivery schedule will be short. “A meeting with OCCAR is scheduled for this week, and then we will present the new schedule,” a spokesman for Airbus Military Aircraft division said March 5. “The Berlin meeting was scheduled too early,” he added.

The problems with the A400M show that developing a military aircraft with commercial aircraft procedures doesn’t work, whatever claims were made in the past, Collet-Billon said. “They should come here to see how it’s done: in France, all of our contracts are fixed-price, and there are no come-backs.” Collet-Billon was speaking at Dassault Aviation’s main factory, on the sidelines of a visit by French President François Hollande to mark the first Rafale export contract with Egypt.

The partner nations fear that Airbus might ask for more time and for money, five years after the program was last restructured in 2010. At the time, governments agreed to pay an additional €3.5 billion and to delay deliveries by 4 years. To date, Airbus has in addition taken charges of €4.7 billion on the program, including €551 million in 2014.

In its Feb 27 statement on its 2014 financial results, Airbus Group said that it took “A fourth quarter net charge of € 551 million due to delays on the A400M programme as outlined in the nine month 2014 results. The sequence of progressive military enhancements and associated deliveries are under negotiation with customers to reflect the revised programme baseline and delivery schedule. In the last quarter of 2014, management reviewed the programme evolution mostly driven by military functionality challenges and industrial ramp-up together with associated mitigation actions. Significant management actions have been launched to secure future deliveries and the programme continues to be closely monitored.”

The delivery delays will create a major operational problem to the customer nations, and especially to France, which is operating on two foreign theaters and needs the aircraft to keep its troops supplied. “Our A400Ms are being used in Africa, and we urgently need more as our Transall [transport aircraft] are not getting any younger,” Collet-Billon said.


Story history
-- March 6, 2015:
1. corrected date of publication to March 6;
2. added explanatory sentence to top of next-to-last paragraph on 2014 results.


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