The A400M comes out of the tunnel: terms of the agreement and future “clouds”

(BRUXELLES2/ Synthesis) The Member States and EADS have almost agreed on the terms of what must be called a "new contract" for the A400M.

A discussion that will leave traces

End of negotiation rounds

The final agreement foreseen in Palma de Majorca (1) therefore materialized in Berlin, on March 5, during a meeting between Secretaries of State and the Director Generals of Armaments of the 7 partner countries of the program (Germany, France, Spain, United Kingdom, Belgium, Luxembourg, Turkey). And further meetings are no longer necessary. However, the agreement will only be ratified in several weeks, a new contract must now be written and checked, line by line, which will take another 2 or 3 months.

From the discussion

The discussions were very, very hard until the end " as summarized, before the press in Berlin, the German Minister of Defense, Karl-Theodor zu Gutenberg, qualifying the methods of the aeronautical industrial group of " blackmail ". It is necessary " learn the lessons “For the future, said, softer, his French counterpart Hervé Morin, who held a press conference in Paris on Monday.

Increased monitoring

The States have, in fact, sworn to each other that they would not be caught up in it again... The progress of the A400M program will henceforth be monitored by customers " in a reinforced way clarified Hervé Morin. In other words: no more question of discovering at the last moment, additional slates or delays... More generally, said the French Minister of Defense, we must " reflect in the upstream phases of military programs, avoid a stacking of requests and needs, strengthen project management and have regular and detailed reporting elements from manufacturers, even when they are committed to fixed-price contracts ».

The terms of the agreement

Several dealerships

Customers (States) give 2 billion euros more, in proportion to their initial commitment. Amount that can be paid in cash or by decreasing orders. But they have pledged not to lower their current order book (180 planes) by more than 10 planes (details below). The States are waiving their late payment compensation (which is not nothing = 1,2 billion euros).

A system of export credits

The States also grant, outside the contract, 1,5 billion euros in advances, reimbursable on exports; EADS hopes to sell 200 to 300 more than those that have already been sold (i.e. 400 to 500). A sum distributed equally, more or less proportionally: 400 million for France, 250 for Spain, etc... It is this last point which required the most negotiation at the technical level, Germany refusing, on the substance, to pay (a contract is a contract) and, in form, any State aid. Finally, the formula found is “ Export Levy Facilities ", an export credit formula which is not assimilated to State aid and should pass the bar of the WTO (this is not the time for EADS to pay for a complaint from a competitor before the organization in Geneva).

Details to "refine"

A final point remains to be clarified: the question of covering the rise in wages and the cost of raw materials. EADS requests that the rate of the progression clause be increased from 2% to 3%. Which represents half a billion euros all the same. It is also necessary to specify how the " maintenance in operational condition (MCO) » by the manufacturer once the aircraft have been delivered (and at what cost).

Decreasing technical capacities

Some of the complex technical capabilities will not be developed right away, including the aircraft's automatic ability to follow terrain contours at very low altitude to avoid enemy radar (useful for commando operations especially). Capacity required especially from the German customer. " One wonders why quipped a senior French official from the Ministry of Defense (probably referring to the lack of too much offensive commitment by the German soldiers in Afghanistan in particular). There will thus be 4 standards which will be staggered according to the production release: SOC (transport capacity), SOC1 (+ airdrop capacity), SOC2 (+ in-flight refueling), SOC3 (+ advanced navigation functions). The updating of devices already delivered without the appropriate functions will be carried out by the manufacturer at his own expense, should it be specified. The plane also loses a bit of weight: about 500 kgs (on different positions).

Revised delivery schedule

The aircraft delivery schedule has been reviewed, with a delay of 4-5 years. Instead of 2009 for the first A400M in service, the French Air Force and the British RAF could touch their first A400M in 2013 (three years after the first flight) which would be spread out until 2024 (7 planes 2014 , 25 at the end of 2020 and the last in 2004), the German Luftwaffe in 2014. It will still take a few more months for them to be operational.

Invoice cost

EADS takes responsibility for 1,8 billion euros which, added to the 2,5 billion euros already provisioned by the manufacturer, totals an accounting loss of 4,3 billion euros. In total (customers + industrial), the program of 20 billion euros at the start has now reached 27,7 billion euros (+ 7,7 billion, or + 38%). The audit firm PriceWaterCoopershouse (PWC) had estimated the amount needed to complete the program (without denying any technical capacity) at 31,3 billion euros.

Palliative measures

To make up for the delay, France has decided on several measures. At the tactical level, it will extend these C-160 Transall from 2015 to 2018 (approximately 100 million euros) with an operational restoration. It will also acquire 8 Casa C235s. At the strategic level, the Salis contract will be extended after 2010. What will be done, at least in the immediate future, " without changing the military programming law ”says one in Paris (the additional expenses coming to replace expenses of purchase of A400M which will come only later). But overall, it involves some additional addition (for future generations). In view of the social and industrial benefits, however, this remains limited.

The hypothesis of a reduction in A400M orders from Germany is now publicly considered

L'employment weighed in the balance

This project is fundamental for many countries not only in strategic terms. The program already occupies approximately 14.000 jobs – including 6.000 in Germany – and should generate 40.000 in the long term, by 2013, including 12.000 in France and 10.000 in Germany.

Parliamentary consent required

This agreement still has to go through some national parliaments. Delicate subject, particularly in Germany, where the Bundestag has always been very sensitive to budgetary issues. FDP budget official Jürgen Koppelin (the liberal party allied to the government in the CDU-CSU and of which Defense Minister zu Gutenberg is a member) said that the “ Ministry of Defense had to explain ... about this additional burden almost impossible to justify on a budgetary level ". And his Greens counterpart, Alexander Bonde, said the deal was "not not acceptable (2). Thus the hypothesis of a reduction in German orders for the military aircraft is now publicly considered. The Airbus A400M may not be done with twists and turns (3).

• Order status. Germany ordered 60 aircraft, France = 50 (unchanged), Spain = 27 (unchanged), UK = 25 initially (22 according to
  new contract), Turkey = 10, Belgium = 7 (unchanged) and Luxembourg 1 (unchanged). Added to this is Malaysia, which has ordered 4 aircraft (in exchange for some industrial benefits). On the other hand, South Africa abandoned its order for 8 aircraft (4).

(Nicolas Gros-Verheyde)

(1) The "final details" to be settled for the Airbus A400M
(2) Die Grünen are in opposition today. But they have always been against the A400M project, even when they were in government
(3) The Airbus A400M: a rebounding program and contract (case)
(4) Hard blow for Airbus, South Africa cancels its orderA400M ...

(update: Monday 17 p.m.)