It has been said that all modern aircraft have four dimensions: span, length, height — and politics.
As Airbus engineers make the final preparations for the first test flight of its A400M military transporter next week, they will be hoping that the sight of the plane taking wing will help persuade European governments to commit to the program and shoulder some of its rapidly rising costs.
Nearly four years behind schedule, several tons overweight and as much as 7 billion euros ($10.6 billion) over budget, the A400M has become a financial albatross for Airbus and its parent company, European Aeronautic Defense and Space. The company has already written off 2.4 billion euros in costs for a project that continues to expend cash at a rate of around 100 million euros each month.
Under the terms of the original contract in 2003, EADS agreed to supply Belgium, Britain, France, Germany, Spain, Luxembourg and Turkey with 180 of the planes for a fixed price of 20 billion euros — with the understanding that any overruns would be swallowed by the manufacturer.
But faced with billions of euros in additional bills linked to another troubled plane, the A380 superjumbo passenger jet, EADS told the governments last year that the A400M contract would need to be renegotiated or the plane could not be built. The governments agreed in June to suspend the contract and vowed to reach a deal this year on a new financing arrangement and delivery schedule.
As that deadline draws nearer, analysts said, the milestone of the plane’s first flight gains in symbolic importance.
“A first flight gives the program a lot more security,” said Alexandra Ashbourne, an independent aerospace consultant in London. “It’s a lot easier to kill something if it hasn’t flown yet.”
Military officials from the countries met Wednesday in Berlin as part of a final push to reach a common negotiating position on how much additional development costs they were prepared to shoulder and how long they were prepared to wait for the planes, which would replace aging transports like the American-made Hercules C-130 and the French-German Transall.
Analysts and industry leaders say they are confident the program will be saved, given the enormous financial and political costs of abandoning it easy payday loans. Canceling the A400M would require EADS to return the 5.7 billion euros in deposits it has already received from the governments — wiping out the bulk of its roughly 8 billion euros in cash reserves and costing thousands of European jobs. The governments, moreover, would have to find alternative transport lifters elsewhere to meet their NATO commitments in crisis zones like Afghanistan.
“I am not working on a Plan B,” Louis Gallois, the EADS chief executive, said during an interview in October.
That said, expensive military aircraft programs have been halted before. The TSR-2, a supersonic bomber developed by British Aircraft, was canceled in 1965, barely six months after its first flight, after its costs rose to more than £750 million, or about $14.2 billion at current exchange rates and after accounting for decades of inflation, from a budget of less than £100 million. The initial flight test plane was bequeathed to a British artillery unit, which used it for target practice.
Inside EADS and Airbus, there is a growing sense of exasperation about the slow pace of the talks — complicated by the recent national election in Germany and the anticipation of new elections next year in Britain — and concern that they could extend beyond the Dec. 31 deadline.
“Our company needs to go back to a decent accounting,” said one EADS executive, who requested anonymity because he was not authorized to discuss the matter. “We can’t afford to prolong the uncertainty.”
But some said the governments’ various distractions, while outside the control of EADS, also offered a modicum of reassurance about the A400M’s future.
“The good thing about pan-European programs is that it is so hard to get everyone to agree to cancel,” said Nick Cunningham, an analyst at Evolution Securities in London. “We are really very deep into herding cats at the moment.”
Hopes for Costly Plane Are Riding on a Test Flight
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