France and Germany said Thursday that they were giving themselves another six months to decide whether to proceed with Airbus’s troubled A400M military transport plane, prolonging the agony — and the costs — for the European aircraft manufacturer, which is already grappling with the worst industry downturn in decades.
The airlifter — the single biggest financial threat to the Airbus parent European Aeronautic, Defense & Space — is years behind schedule and has already cost Airbus some €2.4 billion, or $3.4 billion, in write-downs since 2006. The company missed a March 31 deadline for achieving its first flight, and would be exposed to €5.7 billion in penalties if the seven governments backing it decide to write the project off. The deadline for their decision had already been extended once, to the end of this month...
But it was unclear whether the delay had been cleared with London. Britain’s Ministry of Defense said only that it still expected a decision to be reached by the end of June.
The A400M’s top four customers have requested 162 of the aircraft, with Germany ordering 60, France 50; Spain 27 and Britain, 25.
But Britain, its finances severely strained by the financial crisis and a deep recession, has already tried in vain to cut its order for Eurofighter combat jets. If it backed off the A400M, that would raise the cost for the other countries and threaten the project’s viability...
Airbus looks likely to have to foot the bill for the A400M’s further development, which analysts peg at roughly $2 billion a year. Costs and order numbers are likely to be discussed this weekend at a meeting, called by the French defense minister, Hervé Morin, with fellow ministers from Germany, Spain, Britain, Turkey, Belgium and Luxembourg.
“I still believe this project is doomed,” said Howard Wheeldon, a senior strategist at the brokerage firm BGCPartners in London, and long a skeptic of the project on the grounds of cost, risk and its lack of export orders.
Doug McVitie, chief consultant of Arran Aerospace in Dinan, France, calculates the tipping point at roughly 120 of the key 162 orders before the project ceases to be feasible.
The need to protect some 10,000 direct and indirect jobs in Spain means Madrid, although stung by losing responsibility for the airlifter earlier this year, is likely to reaffirm its order, analysts say...
--I wonder what the Brits will do:
