Revised A400M Contract May Slide Into 2019

Airbus is currently retrofitting A400M transports to add capabilities not available at the time of the original delivery, and to replace their engine main gear box. This French Air Force aircraft is now being upgraded at the Getafe plant, near Madrid. (Twitter photo)

PARIS --- Ongoing talks between Airbus and the A400M customer nations on a new contract may not be completed by Nov. 30 as currently planned, and may slide into 2019.

Announcing the company’s third-quarter result this morning, Airbus Chief Executive Officer Tom Enders said “On the A400M, …. contract amendment discussions are advancing, but a bit slower than planned.”

This confirms comments made by Joel Barre, France’s director-general of armaments, during an Oct. 10 hearing by Parliament’s defense committee, in which he confirmed that “We have run into some difficulties in the negotiations between OCCAr and Airbus, and between OCCAr and the six participating nations.” OCCAr, the European defense procurement agency, is the executive agency for the A400M program.

Barre added that, “to be quite open, Airbus thinks we are withholding too many of its payments, and pushing them too far into the future, but are doing that to ensure it will fix the program as soon as possible.”

Airbus, OCCAr and participating nations were supposed to renegotiate the production contract, and especially the delivery and payment schedules, in January, but when that proved impossible a Declaration of Intent (DoI) was signed in February as an interim solution. It is valid until Nov. 30, and should be replaced by a new contract by then.

The original production contract, already amended once, was due to be renegotiated after Airbus threatened to stop the program unless it obtained more financial flexibility from the governments.

“Airbus says it has lost €8 billion so far on the program, and we have also lost money, if only because we had to buy C-130 replacements,” Joel Barre told lawmakers during the hearing. Governments are taking a hard line because this is the second time the company has asked to renegotiate the contract, while Airbus is unwilling to continue losing money on each aircraft it delivers because governments withhold payments.

“On the A400M programme, Airbus is progressing on the military capabilities and with the delivery and retrofit plan,” the company said in today’s press release on its 3rd Quarter financial results.

“Airbus is delivering against the objectives set in February 2018 as part of the Declaration of Intent (DoI) framework which was agreed with OCCAR and the Nations, but progress to convert the DoI into a contract amendment is a bit slower than planned.

“Risks remain, in particular on the development of technical capabilities, securing sufficient exports on time, on aircraft operational reliability in particular with regard to engines, and on cost reductions as per the revised baseline.”

Click here for the full financial statement, on the Airbus website.

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