The Airbus A400M: a late project, the facts, the causes (dossier)

(BRUSSELS2) The Airbus A400M plane was delayed. It hasn't been a secret for several weeks. Between three and five years, depending on the sources. EADS confirmed, at the beginning of January, a delay “of at least 3 years for the first delivery”. This means delivery towards the end of 2012 instead of 2009. And yet this is the first device. Production in the first year is of the order of one or two devices in a first standard (without certain advanced software functions), it takes in fact 2014-2015 for a real mass delivery.

Cost slippage

Added to this slippage in the delivery schedule is a budget slippage. The additional cost could be around between 2 and 5 billion euros depending on the sources. An amount denied by the management of EADS. " No indication can be given to date as long as a binding industrial plan, including the availability of the systems, has not been stabilized and the
discussions with the Organization for European Armaments Cooperation (OCCAR) have not been completed This would have already provisioned an amount of 1,785 billion euros in its accounts.

Note: The program represents between 20 and 26 billion euros depending on the price reference examined. The price of the plane is, in fact, indexed according to a formula
calculation, which leads to an annual price adjustment of 2% on average

Operational consequences

This delay leads to serious operational difficulties in France and the United Kingdom, particularly which have old aircraft and a tradition of high-intensity engagement in difficult terrain (Iraq, Afghanistan, Africa) putting their air fleet to the test. If the difficulty is quite relative for strategic transport (long distance) because palliative solutions, although expensive, can be found (for example Antonov with the Salis contract, C17, etc.), it is more critical for tactical transport (on the theater of operation) because there is no other aircraft available, apart from the Lockheed C-130J (Hercules). But the design is already old, dating from the 1950s and 60s, and its hold does not allow you to carry modern equipment.

Contractual consequences

Indemnity. In the event of an excusable delay, the sponsoring government may, for each day of delay, apply a penalty payment of 0,02% of the base price of the A400M. The compensation for delay is limited to a maximum of 6%, ie for a fixed price of 78,21 million euros per machine (excluding tax and commissioning), approximately 4,7 million euros per machine. If certain States (France for example) have shown their willingness to give up their right to compensation in exchange for the announcement of an intangible and clear delivery schedule; others are less flexible. Germany, for example, is not prepared to give up its contractual right (to compensation) as the government explained to the Bundestag.

Breach of contract. The delay is such that it has now become possible for States to be able to withdraw from the program, without having to pay a penalty. The contract signed by OCCAR provides, in fact, that if the first flight is delayed by more than 14 months, the States can abandon the program by recovering the sums paid: the first flight having been scheduled for January 2008, this means that such an eventuality becomes possible from April 2009.

The termination of the contract, however, has a direct consequence on the economics of the program and the compensation negotiated by each Member State. In Germany, it is estimated that approximately 10 jobs depend on the A000M programme: 400 direct jobs and 3 indirect jobs.

Taken measures

Program review. OCCAR has been asked to carry out a program review – the first results of which should be known in March.

moratorium. A three-month moratorium was proposed to EADS by the Defense Ministers of the countries participating in the program, meeting on the sidelines of the informal meeting in Prague on March 12. Objective: to allow the sponsoring countries to engage in discussions with the manufacturer to try to take stock of the state of the program, its difficulties in implementation and the question of possible financial penalties, in a peaceful atmosphere. And thus postpone until mid-July any decision on the revision (or termination) of the contract. The situation was, in fact, beginning to become critical: the desire to reduce orders transpired from several Member States (United Kingdom, Germany, etc.). " Any
State will not make a decision without discussing this issue with the other explained Hervé Morin, the French Defense Minister.

Positions in the face of the crisis

Several solutions exist: abandoning certain late payment indemnities or revising the price of the device upwards (to facilitate the return to financial equilibrium), revising certain specifications downwards (to speed up delivery), or terminating the contract and opt for another alternative (assuming it exists).

• EADS considers, according to the report of the French Senate (1), that certain specifications should be reviewed or even eliminated. The manufacturer thus recommends revising the FMS downwards. As for the two systems specific to the A400M, the TRN and the TM-LLF, they are " to date technically unfeasible; the first for reasons of reliability relating in particular to the imperfections of the sensors, the second because of a complexity incompatible with the on-board computing capacity ". EADS also pleads for a revision of the methods of indexation of the price of the device which not to lose money.

• The France is ready to “not to require certain financial penalties provided for in the contract. In return, EADS must commit to a firm delivery schedule “, specified Hervé Morin in Brussels on December 2, during a session of the Foreign Affairs Committee of the European Parliament. " It is also necessary to revise downwards certain specificities. We may have asked too much. We may have wanted to make a plane that was a little too complicated. The States majors were not reasonable. ».

• TheGermany to ' need for transparency according to Franz-Josef Jung, Minister of Defence, who was speaking in Prague on March 12. " We still need the A400M for its armed forces said a few days earlier Thomas Raabe, spokesman for the Ministry of Defence. " What matters to us is the delivery date, not the first flight. We want transparency and clarity from the company ". In fact, Germany is unwilling to review the contract. Whether it's for certain specifications or to waive compensation, "the government is unwilling to waive its contractual right"said the government before the Bundestag.

• The United Kingdom publicly raised the possibility of an alternative solution. Gordon Brown's defense minister, John Hutton, told parliament in January: " We cannot accept a delay of 3 to 4 years for the delivery of this aircraft. This would place unnecessary and unacceptable pressure on our air assets and, together with all our partner states, we must consider very carefully what the right answer to this problem is now, as we move forward "(*). The House of Commons report, on military equipment (2), also raised the question whether it would not be preferable "to abandon (the program) and make (other) decisions to buy or lease other aircraft in order not to let a capacity deficit in air transport arise ».

• TheSpain is above all concerned with the preservation of a strong defense industry. " We all want the European defense industry to weigh underlined Carme Chacon, the Minister of Defence, on March 12. " For Spain, one thing is clear, the strengthening of European defense is fundamental ».

For further:

(1) "The Airbus A400M on the critical path of Defense Europe", French Senate report No. 08-205 (February 2009).

(2) "Defence Equipment 2008", annual report of the House of Commons Defense Committee (March 2008), download

“Defence Equipment 2009”, annual report of the House of Commons Defense Committee (February 2009), download

(*) Hutton: We cannot accept a three to four year delay in the delivery of these aircraft. It is going to impose unnecessary and unacceptable strain on our air assets and we, along with all of our partner nations, will have to consider very carefully indeed what the right response now to this problem is as we go forward

© Nicolas Gros-Verheyde / Europolitics

(photo credit: EADS Airbus Military)