Ministers decide for the time being to continue troubled A400M programme

06:03 GMT, July 27, 2009 defpro.com | Only a short time ago, when talking about the A400M military transport aircraft, Thomas Enders, President and Chief Executive Officer of Airbus, used the German proverb “Better a horrible end than a horror without end!” Well, in the case of the A400M it obviously won’t end quickly but, rather, later than originally anticipated. Friday’s joint decision by the Defence Ministers of the seven European contracting nations for the A400M to continue to support the troubled defence programme was accompanied by the announcement that the estimated delay in delivery has increased from three to four years.

However, EADS, the European aerospace and defence giant, will certainly be relieved after the much-discussed decision on the A400M was made in favour of the defence programme, respectivly in favour of a renegotiation of the contract. A termination of the programme would be a financial disaster for the parent company of Airbus, as some €5.7 billion ($8.1 billion) in commissions would have to be returned to the contracting governments. And it still is not sure if in the end a financial disaster can be avoided. Louis Gallois, CEO of EADS, recently said: “We have already set aside reserves of €2.3 billion ($3.27 billion) for the first 180 aircraft. I reckon that this money is lost. The first 180 machines will certainly not be profitable.” This means that, in commercial terms, the A400M will only be a success for the company if it can win significant export orders. So far, the following orders have been placed:

* Germany: 60 aircraft
* France: 50 aircraft
* Spain: 27 aircraft
* United Kingdom: 25 aircraft
* Turkey: 10 aircraft
* Belgium: 7 aircraft
* Luxembourg: 1 aircraft

Furthermore, South Africa ordered 8 aircraft in 2004 and Malaysia ordered 4 aircraft in 2005. In 2005, Chile had also planned purchasing 3 aircraft, however, has since cancelled this order. Currently, ordered aircraft amount to an expected revenue of approximately €20 billion ($28.42 billion).


Tough renegotiations in sight

Obviously, the majority of the initial seven contracting countries’ leaders are convinced the A400M will be an export success. "I am convinced this programme will be re-launched, which will be good news for the trade balance of our countries, because I am convinced it has enormous export potential," said French Defence Minister Herve Morin. Gallois is even more confident and says the aircraft will prove its uniqueness as soon as the technical flaws have been resolved and that it then may even enter the US market.

In Germany, the controversy on the procurement of the A400M, accompanied by periodically arising news of delays and probable technical shortcomings, lead to demands from different political camps to reduce the country’s order to 50 or even 40 aircraft, as well as even calls for a complete termination of the deal. Set amidst the global financial crisis and increasing budget controversies in most countries, the A400M programme has not chosen the best of moments to produce turbulences of its own. For the time being, the decision on which the seven countries agreed, after a meeting in Le Castellet, France, will keep the programme running. As UK’s Defence Procurement Minister, Quentin Davies, was quoted by the BBC on Friday afternoon, the participating nations “hope to save the programme. We have decided to open a renegotiation." German Defence Minister Franz-Josef Jung emphasised that the contracting nations still have the option to cancel their orders, however, he said “our current state of examination is such as that we may jointly reach the decision in Nice [France] to further support this project.”

Those renegotiations won’t be the easiest in EADS history. As EADS indicated in the past, it would like to increase the price per aircraft due to the unexpectedly high development costs. But will the company be able to negotiate a higher price while delivery remains overdue by up to four years? The EADS subsidiary Airbus Military Societada Limitada (AMSL), which is responsible for the programme, will certainly engage these negotiations with two weighty arguments: The most significant argument will be the job cuts that would follow the programme’s termination. In Europe, some 40.000 people are working on the A400M project, of which approximately 11.000 work in the largest contracting country, Germany. A further argument would be the loss of European industrial know-how and capabilities in the field of military transportation. Disregarding the fact that there currently is no alternative to the A400M (all other available transport aircraft are either larger, such as the Antonow An-70 or the Boeing C-17, or far too small), both these arguments will most probably be knock-out arguments, as has been proven in other defence programmes in the past.

Since March 2006, NATO and EU countries have bridged the current gap of military transport capability, especially for the ISAF operation in Afghanistan, by leasing Antonow An-124-100’s from the Russian-Ukrainian company Ruslan SALIS GmbH. Within the framework of the Strategic Airlift Interim Solution (SALIS), six of the giant transport aircraft (150 tons/330,000 pounds capacity) are being made available at the Leipzig/Halle airport in Germany. The allocation of the transport capacity for the participating nations is being supervised by the NAMSA NATO agency. However, this was never scheduled to be a long-term solution, which it now has become with the first A400M presumably being delivered in 2013. And it will take even longer until NATO members are provided with enough A400M’s to take over the required transport capacity for all missions abroad (military and humanitarian) from the Antonows.


What it’s all about

The A400M has been referred to as the most modern and ambitious military transport aircraft programme. It was launched in 2003 and is designed to replace the main NATO military transport aircraft, the aging but proven Lockheed C-130 HERCULES (first flight in 1954) as well as the C-160 TRANSALL (first flight in 1963). The first aircraft was originally scheduled to be delivered in October 2009. So far, the A400M has not even accomplished its maiden flight. The greatest success so far has been the roll-out of the first complete A400M from the Final Assembly Line facility in Seville, Spain, under the eyes of King Juan Carlos I in June 2008. Since then, one backlash after the other has shaken the programmes progress, even leading to the first doubts within the EADS leadership which eventually threatened to cancel it, should its clients not drop penalty clauses for late delivery (see: http://www.defpro.com/daily/details/129).

One of the key capabilities of the aircraft – its speed of 750 km/h (405 nm), which will be provided by its four 10.000 horse power engines, has been a substantial source for the delay: complications with the engines’ software and the wiring lead to the additional three to four years which it will take to introduce this transport aircraft into service. As the Munich-based engine manufacturer MTU has announced, the problems with the computer programme were solved, yet, the trouble with the aircraft’s wiring apparently remains. Another shortcoming reportedly affects the planned load capacity which originally was to amount to 37 tons, with a maximum cargo volume of some 272 m³. Yet, it so far remains unclear what the exact capacity will be.

The phenomenon of the delays in aerospace and defence programmes is not new. And, as in the past, all involved parties have equal shares in the origins of the programme’s troubles. The EADS and Airbus have overreached itself in terms of technological capabilities combined with the estimated required time for development and production; and the contracting nations have contributed by making increasingly higher demands concerning the aircraft’s capabilities. The political component of such European or international defence programmes must also be considered, with each involved nation claiming “adequate” national industrial participation, often leading to inefficient industrial structures and workflows.


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by Nicolas von Kospoth, Editor


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