Industrial Nervousness mounting

07:52 GMT, March 5, 2009 In a recent interview with Reuters, Thales Chairman and CEO Denis Ranque said his company will not make any financial contribution to help EADS Airbus unit reduce its financial exposure due to the troubled A400M military transport aircraft programme.

Airbus is facing several serious problems causing extended delays and extra costs in the programme and is now trying to win suppliers and customer-nations to assist in assuming the additional risk. Some of these technical problems are also in the electronic elements built by Thales, such as the navigation system and the Flight Management System (FMS).

Ranque said, during a news conference, that the company would not make a contribution as part of any deal to ease the financial burden for EADS. He also said that EADS had received significant cash advances from the A400M customer countries to develop the aircraft, but had failed to pass any of this on to suppliers such as Thales.

"EADS has kept all the cash. They are being financed like a military programme but we are being financed like a civil programme. We have not received any cash from EADS," he told reporters.

The difference between civil and military programmes is that in civil contracts, suppliers tend to develop technology at their own expense, sometimes in return for a share of revenues, while military contracts often involve lower risk for companies since governments support both the development as well as the production of the system.

However, EADS has compared its own contract for the A400M to a civil contract, rather than a military one, Reuters reported. This is because the final price was set in stone and cannot be altered to absorb increases in development and/or production costs.

According to a French Senate report, which was translated and published by defpro.com (see: http://www.defpro.com/daily/details/249/), EADS has already received €5 billion from its customer-nations. According to Denis Ranque, last year Thales took €80 million in A400M charges.

The uncommonly sharp comments by Denis Ranque seem to reflect a mounting nervousness in industrial circles as the momentous deadline for a final decision on the fate of the A400M programme is rapidly approaching. The OCCAr Agency, which is managing the programme on behalf of the customer-nations, is due to present its own report on the status of the programme in the next few days. And by April 1, as the delay in the aircraft’s first flight reaches 14 months beyond the contractual date, customer-nations will be legally empowered to collectively or individually abandon the programme and ask EADS to return their money.