New chance for Europe's A400M transporter

PARIS, July 24 (UPI) -- Seven European members of the NATO alliance have agreed to give European plane-maker Airbus another chance to deliver the much-delayed A400M military transporter. The heavy transporter aircraft, originally due for delivery in 2009, has been portrayed as a symbol of Europe's bid to forge a distinct and united military identity and capability.

That identity should be strengthened by the formation of a joint procurement agency -- comprising Germany, France, the United Kingdom, Spain, Turkey, Belgium and Luxembourg -- which will renegotiate the terms of a contract with Airbus Military's owners EADS. Defense ministers from these seven countries met in southern France Friday under the chairmanship of French Defense Minister Herve Morin to hammer out a joint position.

Beset by technical problems with the new aircraft's engines and plagued by massive cost overruns, canceling the project could have exposed EADS to liabilities of some $8 billion to repay the funding received from European governments. The European Aeronautic Defense and Space Co. was formed in 2000 through merger of DaimlerChrysler Aerospace AG of Germany, Aerospatiale-Matra of France, and Construcciones Aeronauticas SA of Spain.

The new terms -- to be renegotiated over the coming half year -- could still include penalties for EADS. Embarrassingly for a European project, this could include the cost of stop-gap measures for the United Kingdom and France to rent American transporter planes from Boeing and Lockheed Martin. EADS has already acknowledged potential liabilities, writing more than $2.5 billion in charges into its profit and loss accounts.

In a statement issued to coincide with the defense ministers' meeting in Southern France today, EADS pledged its full commitment to finding an agreement that is technically and contractually acceptable to both sides. Given the tangled commercial and political history of the project, that may be easier said than done. Earlier this month French President Nicolas Sarkozy and British Prime Minister Gordon Brown issued a joint declaration that the financial costs of delivery delays must be borne by EADS.

The United Kingdom -- weighed down by its financial commitments in Afghanistan at a time when public spending is being squeezed by the current recession -- threatened earlier this year to pull out of the project. The government is thought by some analysts to have used the threat as a lever to get more political and financial support for its operations in Afghanistan. The U.K. government is under intense domestic pressure over its apparent inability or unwillingness to provide adequate equipment -- in particular helicopters -- for its operations in Afghanistan's Helmand province.

EADS now hopes to deliver the first A400M planes with a transport capacity of up to 35 tons over a distance of some 7,000 kilometers by 2013. But a new deal between the European procurement agency and the company has yet to be done.

Morin, who chaired Friday's ministerial gathering, said he was convinced the project would be relaunched. Britain, France, Germany, Belgium, Luxembourg and Turkey ordered a total of 180 of the new planes in 2003 in a deal that represented a record cross-border European contract. Malaysia and South Africa have ordered 12 A400M's with export orders seen as possible.