An aerial view of an Airbus A400M aircraft during the 52nd Paris Air Show at Le Bourget Airport near Paris, France, June 21, 2017. REUTERS/Pascal Rossignol
February 7, 2018
SINGAPORE (Reuters) – Airbus said on Wednesday it was considering increasing a provision for losses on a contract for the troubled A400M military transporter after its European NATO buyers neared a deal to negotiate a new delivery schedule and contract terms.
The A400M – ordered by Belgium, Britain, France, Germany,
Luxembourg, Spain and Turkey – has been hit by engine gearbox problems and delays in fitting parachuting capacity and advanced defences.
Airbus said: “An increase to the Loss Making Contract provision on the programme, which may be material, is under assessment for the full year 2017 results which will be disclosed on 15 February 2018.”
The company has been urging the seven countries to cap its exposure to fines and payment delays triggered by technical delays on the programme. Airbus had been keen to reach a deal before it reports earnings on Feb. 15.
Airbus confirmed a Reuters report earlier on Wednesday that an agreement to rebaseline the project was being finalised.
The company said the buyers had agreed on Wednesday to work
on a number of contractual elements including a revamped delivery plan as well as a roadmap for the development and completion of military capabilities for the A400M.
“This agreement with our customers is an important step to further mitigate risks remaining on the A400M programme,” Airbus chief executive Tom Enders said in a statement.
Airbus last year cited “huge losses” on the project and warned of “significant risks” ahead. The programme was initially valued at 20 billion euros but its cost has ballooned to well over 30 billion, sources told Reuters last year.
NATO buyers agreed in principle to revamp the delivery schedule and requirements for the plane during a meeting in London on Monday.
The buyer countries agreed with Airbus to sign the Declaration of Intent to re-baseline the A400M project, a ministerial communique issued on Wednesday said, adding that Monday’s meeting had been “productive”.
“The discussions focused on the progress and the next steps on the A400M programme which is already delivering much welcomed initial operational capability to several of the Partner Nations Air Forces,” the communique said.
Airbus must still work out the exact terms and conditions with each of the individual buyers, a source familiar with the decision said.
The countries acknowledged during the meeting that the programme’s problems were caused in part by fresh demands imposed by the buyer countries.
One industry executive said the agreement would provide some relief for Airbus and its suppliers after years of mounting tension between buyer nations and the companies.
(Reporting by Reuters bureaus. Editing by Tim Hepher, Clarence Fernandez and Jane Merriman)
