Airbus’ A400M Aerial Transport: Delays and Development

Airbus’ A400M is a EUR 20+ billion program that aims to repeat Airbus’ civilian successes in the full size military transport market. A series of smart design decisions were made around capacity (35-37 tonnes/ 38-40 US tons, large enough for survivable armored vehicles), extensive use of modern materials, multi-role capability as a refueling tanker, and a multinational industrial program; all of which leave the aircraft well positioned to take overall market share from Lockheed Martin’s C-130 Hercules. If the USA’s C-17 is allowed to go out of production, the A400M would also have a strong position in the strategic transport market, with only Russian AN-70, IL-76 and AN-124 aircraft as competition. To date, 174 orders have been placed by Germany (now 53 + 7 options), France (50), Spain (27), Britain (now 22), Turkey (10), South Africa (8), Belgium (7), Malaysia (4), and Luxembourg (1). Chile has expressed an unfinalized interest in 3 planes, but is now likely to buy Brazilian KC-390s instead.

EADS’ biggest issue, by far, has been funding for a project that is more than EUR 7 billion over budget. The next biggest issue is timing, as A400M delivery penalties and Lockheed Martin’s strong push for its serving C-130J Super Hercules cast a pall over the A400M’s potential future. The entire project was under moratorium for over a year as all parties decided what to do, but it’s now moving forward again. This DID Spotlight article covers the latest developments, as the A400M Atlas moves into production.

The A400M Program

History

The original EUR 16 billion A400M Letter of Intent was signed in December 2001 for development and production of 196 aircraft, with a 1st flight in 2006 and initial deliveries in 2008. A EUR 20 billion contract was eventually signed between the EU’s OCCAR agency and Airbus Military in May 2003, for 180 planes. June 26/08 saw the first A400M aircraft rolled out at the final assembly line in Seville, Spain, but aircraft weight growth became a critical issue, testbed issues slowed engine certification, 1st flight slipped to December 2009, and March 2013 is now being discussed as the realistic initial delivery date.

The beginning of deliveries is a key milestone, and its lateness escalated into a significant issue. In September 2008, EADS CEO Louis Gallois reportedly sent a letter to the governments of 7 countries who had ordered the A400M, asking them to waive the contract’s built-in penalties for late delivery. Their alternative was a freeze in production from Airbus. Their core customers refused to budge, the freeze came to pass, and it took until November 2010 before a revised OCCAR contract got the project moving again.

A 2009 French Sénat report report estimated that A400M production would ramp up only in 2014, and that it would take until 2020 to clear the backlog introduced by development delays, assuming acceptable settlement of contractual and development issues. Current costs per A400M aircraft are placed at at EUR 145 million.

A lack of serving aircraft to act as an example and qualification, and a backlog of almost 200 planes, have already cost Airbus potential opportunities in Norway, Canada, and India. Lockheed Martin is using that time to solidify the C-130J variant’s position as a transport and Special Operations aircraft, and Embraer’s jet-powered KC-390 is putting its own plans and customer base together on 2 continents.

A400M: Tech Specs and Issues

According to the February 2009 report from the French Sénat, serious development problems and delays have arisen in the aircraft’s digital engine controls, navigation and low-level flight systems, horizontal tail surfaces, and the definition of the wing design. The November 2010 agreement involves an interim standard that would not be capable of the more sophisticated flight modes, until avionics issues have been resolved.

The key specifications change to date involves base weight estimates that have risen by 12t/ 26,500 pounds. Airbus is not proposing to change the aircraft’s 37t carrying capacity, which implies a new maximum landing weight of 134t instead of 122t. That means that the most likely performance changes will be to speed (300 knots target), unrefueled range (3,450 nm target for 20t C-130J class payload; 1,780nm target at maximum 37t), and to the length of runway required for takeoff (914 m/ 3,000 feet target) and landing (822 m/ 2,700 feet target) when fully loaded.

A cruise speed of Mach 0.68 – 0.72 would have approached the C-17 strategic transport’s Mach 0.74 – 0.77, and significantly bettered the C-130J’s Mach 0.56 – 0.59. Testing of production aircraft will reveal where the A400M ultimately ends up, and how much of a competitive advantage it can retain. After 2015 or so, the jet-powered Embraer KC-390 will put even more pressure on the A400M to offer competitive performance in this area.

Takeoff and landing distances are also worth watching. Some customers and potential customers may have issues if performance changes extend those runway lengths extend too far, and begin to exclude a number of bases currently in use by Lockheed’s competing C-130 family.

A400M: Industrial Team

Technically, the OCCAR contract is with Airbus Military Sociedad Limitad (AMSL). AMSL includes various divisions of EADS (90%), Turkish Aerospace Industries (5.6%), and Belgium’s Flabel (4.4%). Industrial roles include:

The A400M Program: Dilemmas & a Deal

The Dilemmas

EADS CEO Louis Gallois has been quoted as saying all expected profits from the initial 180 orders are already invested, adding that the A400M is “a heavy lossmaker” which was creating problems for EADS’ financial performance. He reportedly added in his September 2008 letter that the present position was “untenable”, unless a deal is agreed that “keeps everyone happy.”

That took until November 2010, and involved a production freeze from Airbus along the way. Why were they so willing to confront so many customers over this issue?

EADS is currently facing several major investment sinks. One is the ongoing effort to address issues with its A380 super-jumbo, which has cost the firm billions of euros. Another is the decision to develop the A350XWB as a major new technology project, after existing customers told Airbus that its plan for incremental improvements to existing designs would not be able to compete with Boeing’s 777. Then there’s the market for “single-aisle” airliners like Airbus’ A320 family, which makes up the bulk of Airbus’ orders. With Boeing working on a 737NG project to bring the next generation of aircraft to market in that class, Airbus had to invest billions of its own to create the A320neo, or face the prospect of a serious strategic setback.

The A400M’s issues flew the project directly into this financial storm. Project delays are already costly, and a November 2007 release from EADS reported a EUR 1.2 – 1.4 billion charge to earnings flow (up to $2 billion) as a result of the delays to that point. Payment of the EUR 1.2 billion penalty clauses on its first 180 aircraft would make those figures much worse, and might even have made it impossible for the A400M project to ever hope to turn a profit.

With anticipated A400M profits already invested, every dollar of profitability slashed would have to be replaced with investment dollars, during a major downturn for the airline industry, at a time when multiple investment projects were already straining Airbus’ capacity. All without any assurance that the A400M’s initial margin issues would be made up with enough subsequent orders at full rate to create an acceptable average return.

Worse, Airbus’ classic resort to government subsidies for investment dollars was constrained by a trade dispute with the USA over that exact issue, at a time when a $35 billion aerial tanker contract that Airbus had originally won hung in the balance.

Outright A400M cancellation is not possible without customer unanimity, and that will never be forthcoming. Liquidated damages may be possible for individual governments, however, if they refuse to accept late aircraft. That gave both parties considerable leverage in the run-up to the November 2010 contract.

The Deal

Under that deal, EADS ended up funding EUR 4.2 billion of the EUR 6.2 billion cost overrun to that point. That meant another EUR 1.8 billion write-down.

In exchange, EADS received 4 concessions that justified resuming production. The 1st was another EUR 2 billion for system design & development funding from the 7 partner nations: Belgium, Britain, France, Germany, Luxembourg, Spain, and Turkey. Each country would contribute funds in proportion to their number of orders. The 2nd contribution was another EUR 1.5 billion paid to Airbus as an Export Levy Facility quasi-loan, repayable by Airbus Military if the A400M wins enough exports beyond the initial group of 7 partner nations to reach 280-300 aircraft ordered over a 30-year period.

The 3rd concession involved a new project baseline, and a full waiver of the EUR 1.2 billion in late penalties based on the old project baseline. The 4th concession accelerated pre-delivery payments from 2010-2014, in order to help Airbus’ cash flow.

Overall, A400M deliveries will be an average of 3.5 years late, with an initial plane for France in March 2013, and 4 planes delivered that year (3 French, 1 for Turkey). Germany and Britain reduced their orders slightly by converting some planes into options that will almost certainly never be exercised, while France and Spain decided to space the same number of planned aircraft over a longer delivery time.

Contracts & Key Events

Jan 15/13: MSN7, the 1st production A400M, rolls out of the Seville hangar in French air force colors. It’s scheduled for delivery around mid-2013. Airbus Military.

Dec 10/12: Airbus Military has successfully completed the 300 hours of Function & Reliability (F&R) flight-testing, which had been interrupted by engine troubles. This is the last major step toward full certification. Airbus Military.

Aug 31/12: Engines. Airbus Military re-confirms that it will deliver the expected 4 A400Ms in 2013, though France’s 2nd plane will be a bit late within the year.

They also discuss the engine problems that kept them out of Farnborough air show (vid. July 4/12), which also suspended EASA full Type Certificate (TC). The problem was apparently a crack of a cover plate isolating elements within the Propeller Gear Box (PGB), and Europrop is currently validating a new design. As a consequence, the civil Type Certification and military Initial Operating Capability (IOC) will now move into Q1 2013.

July 9/12: Training. Britain places a GBP 50 million order for its first A400M Full Flight Simulator (FFS) and Simulator Support System (SSS), to be co-located with the A400Ms at RAF Brize Norton. It will be delivered in spring 2014, ahead of the first delivery to the Royal Air Force later in 2014. The FFS will be maintained by a joint venture consisting of Airbus Military and Thales UK’s Training & Simulation Ltd (TTSL). The 2 firms have been working on these simulators since 2007, with Airbus providing the data and software package to faithfully simulate its A400M, and Thales providing the simulator.

These simulators are developed and produced in Crawley, UK, and this is actually the 4th FFS. Airbus Military’s International Training Centre in Seville, Spain ordered the 1st, and France and Germany ordered #2 and 3. UK Prime Minster’s Office | Airbus Military.

May 29/12: Engines. Flight International looks at the TP400-D6 turboprop engine sub-program’s progress and history. EPI President Simon Henley describes it as designed “for a civil-standard life, with all of the commercial reliability and availability aspects you’d design, but in a military environment.” Other key excerpts:

“An in-flight shutdown in June [2011] led to redesign of the engine’s idler gear, while the inlet vane was tweaked after the discovery of high-pressure compressor blade fatigue… In the course of bringing the TP400-D6 to series production, assembly was consolidated at MTU Aero Engines’ Munich facility and pass-off testing at MTU’s site in Ludwigsfelde, near Berlin… Having the TP400-D6 line at Munich was seen as a route to greater efficiency for MTU, which could move manpower between different lines – commercial and military… ramp-up plans provide for annual production to reach a peak of 120 in 2015. EPI aims to reduce the time to assemble and test a TP400-D6 from an initial 60 days to 30 days. The engine is flat-rated at 10,000shp (7,460kW) at sea level, and has an uprated take-off capability of 11,000shp for hot and high conditions.”

May 30/12: South Africa. Denel Aerostructures (once Denel Saab Aero) is still losing money, and has pushed expected profitability back to 2016/17. They’re on track to deliver their first A400M parts this year, reportedly losing money on producing A400M parts, but have renegotiated with Airbus and raised prices. They’d better, because Airbus appears to be their only large customer. They just received a R700 million (currently about $82 million) capital injection from the National Treasury. IOL BusinessReport | Mail & Guardian.

March 30/12: High altitude testing. Airbus Military announces that A400M “Grizzly 2″ recently visited La Paz, Bolivia, to perform high-altitude tests from an airport located more than 13,000 feet above mean sea level.

The firm also used the trip to do some promotion, showing the plane at the FIDAE airshow in Chile, and visiting Lima, Peru. Chile had an option for up to 3 A400Ms, but seems set to order Brazil’s KC-390s instead. Peru may prove to be more promising.

March 22/12: Prop certified. The European Aviation Safety Agency grants United Technologies Hamilton Sundstrand subsidiary Ratier-Figeac a FH385/386 propeller system type certificate. This is an important certification milestone for the platform, and for the 11,000 hp engine that drives the 8-bladed, all-composite, 17.5 foot diameter propellers.

This is the largest all-composite propeller in production, which handles twice the power of any existing in-service propeller. The firm says that it offers a thrust efficiency peak close to 90% at high cruise speeds, and each wing features a pair of clockwise and counter-clockwise rotating propellers for added aircraft stability and control.

In addition to the propeller system, Hamilton Sundstrand and its subsidiaries supply the A400M’s Secondary Electrical Power Distribution Center (SEPDC), Auxiliary Power Unit (APU), Ram Air Turbine (RAT) emergency power system, Trimmable Horizontal Stabilizer Actuator (THSA), and the Throttle Control Assembly (TCA). Hamilton Sundstrand.

Oct 12/11: MRO. The head of France’s DGA, Laurent Collet-Billon, has told the Assemblée Nationale’s defense commission that Airbus’ maintenance proposals have not been satisfactory, “…notably as regards to the engine.” Without a negotiated maintenance contract, the DGA is threatening to refuse to accept the planes, which would hold up the associated payments.

France is due to be the plane’s 1st operational customer, in March 2013. That requires a first-increment maintenance contract, until Britain begins to receive its planes and a joint maintenance contract can be signed. Les Echos is reporting that the price gap in current negotiations is around 20%.

Kepler Capital equity analyst Christophe Menard also points out that European MRO budgets are set to decline on average by 3.8% per year between 2010-2015, which helps explain the DGA’s drive for savings. On the other hand, Airbus can’t afford to bleed a lot more cash on the A400M project, and they can’t agree to another unrealistic plan like the A400M’s ruinous design phase. To make matters worse, ongoing distrust between Airbus and Europrop appears to be pushing Airbus to seek a significant margin of financial safety, before they will commit to a maintenance contract that includes the A400M’s engines. Aviation Week | Dow Jones | Les Echos and Commission de la défense nationale et des forces armées [both in French].

Sept 17/11: Testing. A400M “Grizzly 1″ performs the grueling “high-energy rejected take-off test.” That means it was loaded to the maximum take-off weight, then made a take-off run that was aborted at the V1 decision speed – the maximum speed at which the pilot has to decide whether to continue a take-off. Grizzly-1 blew out 3 tires stopping the plane, which isn’t unusual under the circumstances, and the test was considered a success. Airbus Military.

June 12/11: Marketing. Aviation Week talks to Airbus Military SVP of commercial business, Antonio Rodriguez Barberan. He sees the A400M as dominant by default within a decade, as Boeing’s C-17 line shuts down. Airbus Military’s estimate is 2,450 heavy transport aircraft around the world that are on average 26 years old. 1,015 are in North America, followed by Russia with 475:

“Barberan and his team know which countries to target when they ramp up marketing next year: those with major air forces and a large number of old transport aircraft – such as C-130s, C-17s and Ilyushin Il-76s. “In the next 10 years Asia will be a major market,” he says, except for China… Other candidates include Saudi Arabia and the United Arab Emirates… “In the medium-to-long term the U.S. market is huge and there is a capability gap which the A400M would fill in due time.” This is also true for Australia, which recently procured C-130s, “but in 20 years, when these are becoming old, we will be there.” No presentations have yet been made to India, “but due to the size of the market the A400M would be perfect,” he says.”

March 24/11: Testing. The A400M completes Vmu tests for the lowest feasible takeoff speed. Airbus Military.

March 16/11: Aviation Week reports that the qualified progress between OCCAR and Airbus Military could lead to agreement between the Europrop International (EPI) TP400-D6 engine consortium and Airbus Military, to settle conflicting compensation claims over engine-related delays. Airbus wants EUR 500 million in damages from EPI, and EPI counterclaims EUR 425 million from Airbus. The overall program’s limbo has had a predictably chilling effect on settling this issue.

Former Europrop EVP Jacques Desclaux, who left in January 2011, says the firm is already working according to the broad terms of the OCCAR-Airbus agreement, and believes the OCCAR deal will finalize “within a few weeks.” Meanwhile, engine FADEC software is now flying on 2 of the 4 development aircraft, with software and A400M civil certification planned for the end of 2011. European Aviation Safety Agency engine certification wasn’t really set up for turboprops, just turbofan jets. EASA certification is expected soon, however, and initial production deliveries of the 11,000 shp engines are expected to start in April 2012, with 8 (2 aircraft sets) delivered by the end of 2012, and 16 by the end of 2013. Production won’t really take off until 2014, in part as a result of lessons from the A380 to go slow and incorporate changes that emerge from testing.

Desclaux does say that in at least one instance, debris ingestion during a test of unprepared/rough runway performance forced a safe shutdown, without internal failures in the engine, and subsequent engine removal. That’s not alarming, but it is a good example. The A400M is supposed to handle those conditions, and depending on what engineers find, there could be design changes.

March 9/11: ELF payments. France pays EUR 417 million into the Export Levy Facility, as its share of the EUR 1.5 billion total. The money will be paid back as (or rather, if) the plane reaches specific export targets outside the consortium.

Meanwhile, consortium member Belgium has paid EUR 200 million to Airbus so far, of its EUR 891 million bill for 7 A400Ms to replace its current fleet of 11 C-130s. L’Express | Belgium’s 7 Sur 7.

March 9/11: Leadership. EADS announces that the first 4 production (non-test) A400Ms will be produced in 2012, adding that the production rate will gradually be ramped up to 2.5 aircraft per month by the end of 2015.

They are also replacing program head Rafael Tentor, who has led the programme for the last 4 years, with EADS Sogerm President & CEO Cedric Gautier. Tentor will in turn take over all other Airbus Military programs, covering the C212/ CN235/ C295, as well as the A330 MRTT and all other tanker conversions.

March 7/11: Reports surface that last-minute negotiations with Britain and Turkey have prevented the A400M consortium deal from unraveling, but as of March 9/11, A400M production is restarting without agreement from those 2 countries. Defense News | Reuters.

March 3/11: Testing. Airbus Military has successfully completed the number of required simulated flight-cycles on a full scale test airframe to achieve European Aviation Safety Agency (EASA) civil type certification for the A400M.

The MSN5001 test specimen at Dresden has undergone 1,665 cycles, about 5 times the maximum number of flights expected to be recorded annually by each A400M in service. By mid-2012, 25,000 simulated flights will be performed – about 2.5 times the A400M’s design-life. See also Jan 18/11 entry. Airbus Military.

Feb 8/11: Testing. The A400M does initial cold weather trials in Kiruna, Sweden, accompanied by an Airbus A340-300 carrying support equipment and the test team. It will experience further cold weather testing in Kiruna and at other locations this winter and next. Flight International.

Jan 25/11: 40 for Germany? The governing German Free Democrats’ deputy caucus leader, Juergen Koppelin, says that Germany will stick to its pledge of 53 A400Ms plus 7 options. On the other hand, the options are dead, and Germany now plans to retain a fleet of only 40, and resell 13 on the global market. AP | Defense News.

Jan 20/11: Training. CAE announces a contract from Airbus Military to design and manufacture an A400M cockpit maintenance operation simulator (CMOS) based on CAE Simfinity virtual maintenance trainer (VMT) technology, to support maintenance technician training. The training device will feature virtual displays of the A400M aircraft, cockpit and maintenance accessible areas to provide familiarization, troubleshooting and procedural training for maintenance technicians.

The A400M CMOS will be and will be delivered to the Airbus Military training centre in Seville, Spain in 2012. The base contract includes options for CAE to develop additional A400M CMOS devices, as well as other A400M training systems for maintenance technicians. The contract’s value is cloaked by its presence within a scattershot set of announcements worth a total of “more than $140 million.”

Jan 20/11: Germany. Lawmakers from Germany’s Free Democratic Party symbolically delay their approval of Germany’s EUR 500 million share of the A400M loan agreement. German approval is seen as the last hurdle to signing the program’s contract changes. The vote is now on the Budget Committee’s agenda for next week, where it is expected to pass. Bloomberg.

Jan 18/11: Testing. Airbus Military announces that:

“Major fatigue testing of the Airbus Military A400M has begun on schedule in Dresden in January (see attached photos). The test airframe, known as MSN5001, will be subjected to a punishing regime of loads, 24 hours per day, for an initial four weeks, eventually simulating 160 flights per day. The first 1,665 simulated flights are required for European Aviation Safety Agency (EASA) type certification of the A400M, but over the next 18 months a total of 25,000 simulated flights will be performed – equating to 2.5 times the A400M´s design-life. Static testing of another A400M test airframe, MSN5000 was completed in Madrid in September 2010. That airframe continues to be used for further fatigue tests of composite structures which will last until early 2012.”

Dec 20/10: Testing. “Grizzly 4″ makes its first flight, and the fleet of A400M development aircraft completes just over 1,000 hours flight-time and 300 flights n 2010. The overall flight test program will include 5 aircraft and over 3,700 flight hours. Airbus Military

Nov 13/10: CEO jump. A 10-man team of project staff jumps from A400M “Grizzly 3′s” ramp over the La Juliana drop-zone near Seville, Spain. Talk about pressure: it includes Airbus President and CEO Tom Enders, and OCCAR’s A400M Programme Manager Bruno Delannoy. Both men are experienced skydivers, and the team of 10 had 35,000 previous descents between them.

A stunt? A lark? Both – but also a compelling and dead-serious way of putting oneself behind the company/ team’s products, so soon after the very 1st jump. Color us impressed. Airbus Military.

Nov 12/10: Malaysia. Malaysia’s official Bernama press agency reports that Malaysia remains committed to its order for 4 Airbus A400Ms, adding that “It was reported last year that Malaysia, which would receive the planes in 2013, would not have to fork out extra money for the four air-lifters it ordered in 2005.”

Nov 4/10: Testing. “Grizzly 3″ is used for the A400M’s first paradrop, as 6 freefall paratroopers from the UK armed forces (2), French armed forces (2), and the French Centre d’Essais en Vol (2) jump in separate passes from 6,000 feet, at the Fonsorbes drop zone near Toulouse, France. Four of them jumped from the left-hand side door, and two from the ramp.

The paratroopers reportedly liked the A400M as a jumping platform. That may be related to the plane’s low 110 kt/ 203 kmh stable air speed, and also to a pair of small deflectors installed ahead of the side door, after previous tests with balloons and dummies noted turbulence and noise problems inside. Airbus Military | Flight International.

Aug 4/10: Testing. Airbus Military announces that the A400M’s all-composite wing has passed stress tests that subjected the design to 150% of the maximum bending load expected during the type’s operational life, which moved the aircraft’s wingtips upwards by 1.41m/ 4.6 feet. Airbus Military | Flight International.

July 29/10: Program update. During an investors’ briefing, EADS reports a more than 50% decrease in profit in first half underlying earnings compared to 2009, “weighed down mainly by exceptional negative foreign exchange impacts.” They also had this to say:

“The percentage of completion methodology was resumed on the A400M programme. In the second quarter, based on the allocation of internal milestones, around [EUR] 300 million in revenues were booked on the programme. Customer Nations and EADS continue working towards a contract amendment. In the meantime, the A400M flight test programme is progressing better than expected; however, the development of the Flight Management System is on the critical path, with more challenges than expected. Risk mitigation actions are being undertaken. Management assumptions of March 2010 underpinning the A400M provision calculation remain valid. As previously indicated, reassessment of these assumptions could have a significant impact on future results. “

See EADS | Defense News.

July 19/10: A400M-T Grizzly. The A400M gets a name: “A400M Grizzly,” after the North American bear. The name has been in unofficial use by the aircraft’s flight test crew for some time. “Atlas” was one of the more commonly-floated alternatives. Slyer suggestions included “Airavata,” the name of the Indian deity Indra’s white elephant. Technically, this designation applies only to the 5-plane test aircraft fleet. Airbus Military had this to say:

“The new name is not the product of an expensive marketing study, nor something devised by a team of branding experts, nor the result of months of debate among the sales team. Instead it is the affectionate nickname given to the aircraft by the close-knit group of flight test pilots and engineers who first saw it safely into the air… The Flight Test Team seized on the resemblance between the mighty airlifter’s hunched appearance and the muscular shoulders of the grizzly bear… By the time of the first flight on 11th December, the name had stuck sufficiently firmly that it was adopted as the aircraft’s radio callsign – Grizzly One.

Furthermore, a little-known fact is that the first flight also carried a party of non-human passengers – teddy bears to raise funds for the EADS-sponsored charity Aviation Without Borders – a nice reminder of the Grizzly’s future role in civic and humanitarian missions. The name rapidly spread throughout Airbus Military and beyond, and at the ILA Berlin airshow in June 2010 an informal Grizzly One logo appeared on MSN1 when it made its first public airshow appearance.”

July 11/10: South Africa. South Africa canceled its 8-plane order in November 2009, but the exact terms must be negotiated. A January 2010 deadline has passed, and the South African government has put Airbus on legal notice to recover its deposit. Airbus Military has already canceled one of South African A400M supplier orders (to Denel Saab Aerostructures) and expressed its intent to cancel its other orders and industrial offset investments without South African orders. It has also reportedly made an offer to supply 4 A400Ms at ZAR 4.3 billion (about $570 million), without the first 2 years’ maintenance costs, with credit given for South Africa’s ZAR 2.9 billion deposit. IOL.

July 7/10: Germany. Germany is reportedly considering dropping its A400M orders from 60 to 53, and taking 15 of its aged 83-plane C160 transport fleet out of service, as part of EUR 9 billion in long term cuts. That could be challenging, as the new agreement allows for a 10-plane cut, and Germany and Britain together would take up all 10. That may create resistance, if partners like Spain also wish to cut their orders. Reuters.

July 7/10: France. A parliamentary defense committee hearing gets initial details from defense minister Herve Morin re: future programs. Morin said that the French A400M orders would go ahead as planned, as would its Barracuda nuclear-powered fast attack submarine, Felin advanced infantry set, FREMM multimission frigate, Rafale fighter and VBCI armored vehicle.

Plans to field 14 new A330 MRTTs to replace France’s C-135FR aerial tankers would be delayed, and so would a EUR 700 million life extension and air defense upgrade for France’s Mirage 2000D strike aircraft, a major upgrade to the national airspace command-and-control system, and elements of the Scorpion land systems modernization program. Defense News.

July 7/10: Testing. Test aircraft MSN 3 makes its first flight, joining MSN 1 & 2 in the air at the same time. The fleet passes the milestone of 100 test flights and 400 flight hours. Airbus Military.

June 8/10: 1st public flight. As ILA 2010 kicks off in Berlin, the A400M made its first public flight – but German Defense Minister Karl-Theodor zu Guttenberg chose not to attend. Bloomberg reports that despite the March 2010 financing agreement:

“Since then, the two sides have failed to produce a written contract, as European states grapple with the fallout from deficit crises gripping the region… [The agreement] allowed the ordering countries to cut the total number of planes by 10. The U.K. took up the offer first, saying it would take as many as three fewer A400Ms. Germany has also said it will likely take fewer than 60 units. Negotiations remain difficult because of the number of countries involved and the challenging economic climate, Domingo Urena, who heads Airbus Military, said at the show today. Urena oversees the A400M, the A330 tanker and smaller transport planes. “I cannot deny that the economic situation is making things more difficult,” he said.”

See also OCCAR pictures and video of the flight demonstration.

March 29/10: UK. The UK MoD announces that its still in the A400M program, but may be buying fewer aircraft than the 25 originally planned:

“…Following discussions between Partner Nations and Airbus Military, an agreement in principle has been reached… which will provide the basis for a formal contract amendment in the coming months. Under the revised agreement, Airbus Military will deliver at least 22 aircraft.”

Though this is not yet set in stone, Aviation Week wonders about Germany in particular as it asks: “Who Will Cut A400M Next??”

March 24/10: France. French DGA head Laurent Collet-Billon tells a French parliamentary defense committee that the A400M contract is expected to be finalized in June 2010. The 10% increase in cost per aircraft can be handled within existing budgets, but France’s EUR 400 million contribution to the export levy will come from the general budget, appearing after 2020 and being staggered over several years. Exact numbers won’t be clear until the 2010 -2014 payment plan becomes clear.

In order to keep the base program within France’s budgets, delivery delays mean that the Armée de l’Air will have just 35 A400Ms by 2020. Meanwhile, its 51 Transall C-160s, 14 C-130Hs and 19 Casa CN-235s can only meet 25% of the freight target set by France’s most recent defense white paper.

France is in talks with Britain and Spain on a common A400M maintenance program, but Germany has opted to go its own way. Defense News.

March 12/10: Marketing. Airbus says that it expects production of the A400M’s limited operational configuration to begin in 2010.

It also has visions of selling 210 A400Ms to the US government, despite the now-entrenched position of Lockheed Martin’s C-130J in the USAF and SOCOM fleets, and the object lesson of being shoved out of the KC-X aerial tanker competition. Associated Press | Dow Jones | Business Week

March 10/10: Testing. A400M MSN1 performs a test flight from Seville, Spain, then flies on to Toulouse, France for further testing. The humidity associated with Seville’s recent weather had been affecting the instrumentation on the turboprop blades.

So far, MSN1 has logged 39 flight hours, flying up to 30,000 feet and reaching its maximum operating speed of 300 knots (555 km/h) and Mach 0.72, and down to its stall warning speed. MSN2 has been handed over for flight tests with the same heavy test instrumentation as MSN1; MSN3 is in production ground tests, and is slated for flight testing with medium instrumentation in mid-2010; and MSN4 is in final assembly and scheduled to begin flights with medium instrumentation by the end of 2010. The 5th aircraft, MSN6, will be the first built to production standards, and fitted with light instrumentation. Airbus Military release.

March 6/10: MSN2. Test aircraft MSN2 is handed over. Source.

March 5/10: Negotiations – initial agreement. EADS officially announces that an agreement has been struck to continue the A400M program. Governments will add an additional EUR 2 billion in funds, and EUR 1.5 billion in loans that would be repaid as exports are booked – and presumably not repaid if exports flop. In addition, the agreement waives all late penalties, and will accelerate pre-delivery payments from 2010-2014 – a form of stealth contribution due to net present value considerations, whose exact amount have not been finalized. Formal approval by European defense ministers is expected March 8/10.

The A400M will also enter service with reduced capabilities. Cargo capacity will go down by “several hundred kilograms,” but the Germans will not budge on their insistence that the A400M be able to transport their 31.45t/ 34.667-ton Puma IFVs in Class A armor configuration. They have reportedly relented on their unique requirement for a sensor-coupled autopilot system that would handle the dangerous task of very low-level flying, in order to assist with special forces insertions and remain below hostile radars. The A400M’s air-air refueling capabilities have not been scrapped, but they have reportedly been pushed back to a future upgrade.

In response to the deal, EADS is raising its FY 2009 loss provisions for the A400M to EUR 1.8 billion pre-tax, turning its EBIT and net income negative. EADS’ 15% shareholder Daimler AG may also face a writedown, in Q1 2010. Exact results will be released at EADS’ Full Year 2009 disclosure on March 9/10, but this addition to previous write-downs would reportedly push EADS’ realized losses to EUR 4.2 billion.

As an additional industrial twist, Reuters reports that Spain has submitted a written proposal to relocate jobs, tools and machinery from Filton, UK to the final assembly site at Seville, Spain, if Britain weakens its purchase commitment in the next defense review, or balks over its share of additional costs in the re-negotiated agreement. Britain has yet to agree on what form its extra financial commitment should take. The key manufacturing obstacle would involve transferring Filton’s massive jigs that hold the wings in place. There are reports that Spain’s government, already hurting from Greek-level annual deficits and depression-level unemployment, would pay for their disassembly and transport. EADS release | French DGA [in French] | AP | AP re: capabilities reduced | Aviation Week | BusinessWeek | UK’s Daily Telegraph | Defense News | Deutsche Welle | Flight International | Sweden’s The Local | NY Times | Reuters | Reuters re: Spain vs. UK | Seattle Post-Intelligencer | Wall St. Journal | WSJ re: Daimler.

Feb 15/10: Negotiations. EADS receives a new offer from the A400M’s 7 member governments. There are reports that it includes another EUR 1.5 billion in loan guarantees and EUR 2 billion in additional payments, which falls short of the EUR 4.4 billion in additional government costs that EADS had sought. At the same time, the German government has been forced to deny reports that it would tap guarantees from the Deutschland Fund state aid pool and loans from the KfW state development bank, in order to make its contribution.

Financial Times Deutschland reported that options on the table from Airbus’ end may include a stripped-down initial version of the A400M that seeks only civil certification, with subsequent upgrades to the full military version.

EADS spokesman Alexander Reinhardt says the company is now studying the offer and “we will answer it in due time.” EADS has said it needs a decision so it can book its share of the cost overruns in its 2009 financial results to be released on March 9/10, rather than carrying them over into 2010. AP | Aviation Week Ares | Bloomberg | Capital Business | Defense News | New York Times | Reuters | Straits Times.

Jan 1-7/10: Negotiations. Airbus spokesperson Stefan Schaffrath admits that a cancellation of the A400M project has become a realistic scenario, and appeals to customer nations to reach a financing agreement by the end of January 2010. Defense representatives of the 7 European partner governments are expected to meet on Jan 14/10, in order to discuss this issue.

Reports also surface in newspapers like Financial Times Deutschland that cost overruns are now estimated at up to EUR 11.3 billion total over the original EUR 20 million program cost, with EUR 5.3 billion (currently about $7.62 billion) sought as additional customer funding. While various unions are lobbying their member governments to keep the program, reports indicate that Airbus may be offered less than this amount, and Airbus head Thomas Enders reportedly sees odds of an agreement as only 50-50. He has recommended sacrificing the A400M if continuing it will continue to hurt Airbus’ profitable civilian aircraft business, by bleeding its available cash and engineering talent. More to the point, Airbus spokesman Schaffrath confirms that Airbus has developed detailed plans to move all of the A400M program’s engineers to important civilian projects like the A350XWB.

On the flip side, Airbus would have to repay EUR 5.7 billion in development funding, over and above losses already taken. The additional financial impact would be that payout, minus any future loses the company would avoid by canceling the project. If European governments decide to lowball EADS, therefore, it’s likely to be finely calculated to have EADS lose just a bit less than it would lose under a contractor cancellation scenario. With estimates of up to 40,000 direct and indirect jobs depending on the program in Europe and the UK, however, and European prestige on the line, Airbus has some leverage of its own in these negotiations. Financial Times Deutschland [in German] | Agence France Presse | AP re: SAS union | Bloomberg | Der Spiegel | Deutsche Welle | UK Financial Times | Handelsblatt [ in German] | UK’s The Independent | Reuters | UK’s Telegraph | defpro ope-ed | UK’s Times Online. See also Leeham News: “Outlook for Airbus, Boeing in 2010“.

Dec 2/09: Negotiations. Officials from the 7 European governments that launched the troubled A400M military transport plane met to try to overcome the program’s contract deadlock. Despite reports that EADS is consideration cancellation of the aircraft, EADS CEO Louis Gallois says that there is no “Plan B”. Meanwhile, the 7 European countries involved in the program will create a panel of industry experts with members from each contract country, in order to advise them as they work toward a new contract. Forbes | NY Times | Reuters | UPI | Wall Street Journal.

Nov 25/09: Negotiations. EADS issues a release that reiterates the Nov 16/09 statement, and:

“…explicitly cautions against the misinterpretation of figures taken out of their context as long as negotiations with the customer OCCAR and the launch nations are ongoing.”

Nov 18/09: Engines. Airbus starts the A400M’s engines at its Seville, Spain facility using the built-in Auxiliary Power Unit instead of external sources, and runs all 4 Europrop International (EPI) TP400 engines on a production aircraft. This is a first for the program, and follows dry and wet cranking the propellers, and tests of the APU.

The engines on aircraft MSN01 were successfully run at low power settings in ground-idle and flight-idle modes for 4 hours. After the first full run, during which the engines performed flawlessly, the engine cowls were opened and inspections showed that there had been no hot-air or fluid leaks. Tests running the engines up to maximum take-off power are planned soon, in line with promises that the aircraft’s first flight would occur by the end of 2009. Airbus Military release.

Nov 16/09: Negotiations. An EADS disclosure statement says that:

“Under a continuation scenario, which is deemed the most probable, the A400M provision for which [EUR] 2.4 billion in charges have already been accrued has a wide range of possible outcomes depending on the negotiation process and could substantially alter the financial statements of EADS in the future.”

Nov 6/09: Agence France Presse reports that Malaysia still intends to remain a customer, but delivery will be delayed by at least 3 years to 2016 or even 2017.

Sept 25/09: Negotiations. Aviation Week reports that Airbus has come to an agreement in principle with A400M launch customers to restructure the contract for the airlifter, and is keeping to its objective of performing a first flight in 2009.

Aug 28/09: South Africa. Denel Saab Aerostructures is one of the partner firms being hurt by A400M program delays. South Africa’s Engineering News quotes Denel Saab Aerostructures (DSA) CEO Lana Kinley:

“This is a high fixed costs business… You need to bring in revenue. We are not doing particularly well at the moment. Essentially, it is all about getting more order cover. “The A400M delays have created a big hole in our work. We expected to be in pro- duction by now, and we’re not. We’re still doing design work on the A400M.”

July 28/09: $$$. EADS announces its first half 2009 results. On the bright side, the 1st A400M development aircraft is being prepared for engine fitting, the 2nd aircraft is assembled and has entered systems testing, and final assembly has begun for the 3rd. The C-130 flying test bed for the Europrop engine has successfully performed 12 flights with more than 35 flight hours, and a first version of the revised engine software FADEC is showing good initial results in testing.

On the flip side, EADS is taking further writedowns related to the A400M project (all Euro symbols replaced by EUR):

“Due to the continuing high level of uncertainty on the programme, EADS retained the early stage accounting treatment of this programme

• . This resulted in an EBIT* impact of EUR -191 million for the first six months… -120 million taken in the first quarter. Substantial negative income statement impacts may still have to be booked in future periods… Airbus Military revenues accounted for EUR 855 million (H1 2008: EUR 898 million) of the Airbus total benefiting from an increase in tanker as well as medium and light activities. This was more than offset by the difference between the absence of the Power On Milestone – booked in the first quarter of the previous year – and the revenues booked as the recoverable part of the A400M costs. Accordingly, EBIT* stood at EUR -36 million (H1 2008: EUR -20 million).”

See: EADS: First Half 2009 results | EADS release.

July 27/09: $$$. Thales Group announces a EUR 102 million write-down connected to the A400M project, and says that it will seek compensation from Airbus for the project’s delays. Thales makes the A400M’s avionics and flight management system.

The firm actually caught both barrels in this financial report, as Boeing’s 787 Dreamliner delays also delivered a blow to their profitability. Thales: First Half 2009 Results | Reuters | London Telegraph

July 24/09: Negotiations. The A400M partner nations relax the negotiation timeline, and move the decision back from end of July to the end of December 2009. Britain’s change of mind is key to that agreement, and is partly influenced by a major “root and branch” review planned for all defense programs. That review could not possibly be complete by the end of July, and a first draft is due in early 2010. That fits far better with the proposed French and German end of 2009 timeline. Agence France Presse | BBC | BBC re: UK defence review | Deutsche Welle | NY Times | Seattle Post-Intelligencer. EADS release.

June 22/09: Negotiations. The Ministers of Defence of the 7 program partner nations (Belgium, Britain, France, Germany, Luxemburg, Spain, Turkey) met to receive and analyze the “Group of Experts” report analyzing the A400M program and its way forward. The official release notes that:

“A number of issues still need to be resolved, before a negotiation phase can be entered. Therefore, in order to ensure ourselves that the conditions offered by industry fully satisfy the Nations, it has been decided to allow, in agreement with industry, an extension to the standstill period, with a decision being taken by Partner Nations by the end of July.”

Defense-Aerospace reports that France and Germany had been pressing for an extension of the moratorium period to the end of 2009, but Britain vetoed that proposal. In the end, the moratorium was extended only to the end of July 2009. A technical committee will now examine all aspects of the aircraft’s production plans, which will lay the groundwork for key decisions, and re-negotiation on production, delivery and financial schedules. Defense-Aerospace | Joint A400M partners release: PDF format [in English] Spanish Ministry of Defense [in Spanish].

June 13/09: Negotiations. Defense-Aerospace reports on a Le Bourget 2009 briefing by EADS CEO Louis Gallois, Airbus CEO Tom Enders, and other EADS executive. Gallois said that EADS has already spent all EUR 5.7 billion in A400M development funds, and has lost EUR 2.8 billion on the initial contract for 180 aircraft, with an ongoing burn rate of “over 100 million euros” of its own money every month.

EADS is reportedly betting on future exports beyond the initial European nations, in order to justify the program. EADS North America CEO Ralph Crosby reportedly confirmed that the A400M had been offered to the US Air Force, though those rumors were mostly tied to a special operations contract won by the MC-130J Super Hercules.

Operationally, EADS has launched an initiative, overseen by Airbus COO Fabrice Bregier, to enhance program management throughout the group. The A400M’s first flight is tentatively scheduled for late December 2009, but could slip slightly into early January 2010. EADS CEO Louis Gallois hopes that can coincide with the end of contract re-negotiations. He adds that Britain is taking part, saying:

“We need the UK, we want to have the UK with us… but I don’t think it would kill the contract if the UK withdrew.”

June 5-15/09: France. With a fleet of aging C-160 and Lockheed Martin C-130H tactical transports that continue to see heavy demand, France is looking at the one option its government had said would not be considered. French Defense Minister Herve Morin is quoted as saying that the government has expanded its stopgap options to include lease or purchase of some C-130Js; and Bloomberg reports that France has officially requested C-130J availability and performance data for review. France has also approved the modernization of its 10 newest C160 Transalls so they can remain in service until the first A400Ms arrive, which is now expected to happen in 2014-15.

Other possibilities for France include stepped up per-hour leasing of Russian AN-124s under NATO’s SALIS pool, per-hour C-17 leasing under NATO’s SAC pool, acquisition or lease of EADS’ smaller C-295Ms, or advancing their planned Airbus 330 MRTT aerial tanker & transport buy.

These interim options group themselves by tradeoffs. Some contenders (C-295M, A330 MRTT) lack the reinforced floors required for dense tactical loads like armored vehicles. Others (AN-124, A330 MRTT, C-17s to lesser extent) require longer runways, which removes some of their utility as front line delivery aircraft. Range and refueling capability are potential issues for some (C-295M, some C-130Js), while maintaining overall fleet strength and front line airlift availability is a concern in other cases (AN-124, C-17, A330 MRTT to some extent). The C-130J offers less capability than the A400M, but it sits in the middle of many of these tradeoffs, which may be why it has climbed back into interim consideration. Aviation Week | Defpro | Bloomberg News.

March 30/09: Negotiations. Airbus CEO Thomas Enders sits down for a feisty interview with Germany’s Der Spiegel, and talks about the A400M. The firm later issues a release reiterating its commitment to the A400M, which is obvious from reading the interview but bears repeating in these situations. Key excerpts:

“Objection! If we can manage to get the program back on course now, the A400M will be a success story. That is what we want — but not at any price. In any case, we cannot build the plane under the conditions that we’ve had up to date… Our American competitors would never have accepted such conditions. We’ve made big mistakes, and errors have also been made on the customer side. We should now rectify these together.

…We submitted a few proposals back in December. This basically concerns three issues. First, …the risks and opportunities are appropriately shared by the customer and the industry… Airbus will no longer carry the risks alone of engineering the engine… Engineering, flight tests and the start of production have to be optimized… to minimize the risks of series production. And third, studies need to be conducted… It could save everyone a great deal of time if [some promised capabilities] were only introduced step by step…”

Enders also stresses the “enormous financial and industrial challenges” presented by the A350 XWB and A380 super-jumbo programs, as a key consideration when deciding how much A400M program risk Airbus is willing to accept. Full Der Spiegel interview | EADS release.

March 17/09: France. Laurent Collet-Billon, the DGA’s recently appointed Director General, says that France is looking at the possibility of leasing or buying alternative transport aircraft to meet the shortfalls created by late A400M delivery. The DGA is also contemplating refusing at least some of the late A400M aircraft. Collet-Billon:

“It is one of the alternatives which we have to examine. We have not yet finished examining the capacity gap and that could lead to a reduction in the target (of 50 aircraft).”

That is partly because France has multi-year military budgets, so paying for bridging capabilities means subtracting money from something else. While Lockheed Martin’s C-130J is completely ruled out as a bridging solution, France does have options that include buying more flight hours of Russian AN-124s and IL-76s under NATO’s SALIS program, joining NATO’s SAC pool of C-17s, or accelerating buys of Airbus tanker-transport aircraft to pick up some of the load.

Meanwhile, a 3-month program moratorium imposed by OCCAR will allow all parties re-visit the technical specifications, the schedule, price, and project organization. Reuters | Aviation Week.

March 5/09: UK. Britain’s RAF is under strain, trying to sustain an aerial supply bridge for 8,000 deployed troops in Afghanistan. With its 20 C-130Ks (C1/C3) being forced toward retirement, Aviation Week reports that Britain is looking at the possibility of leasing 5 C-130Js as a potential “bridge” until the A400Ms can begin to arrive, and/or finding ways to add to their 6-plane C-17 fleet [DID: Britain ended up buying 2 more C-17s, and cut its A400M order by 3].

Senior British Defense Ministry officials are believed to have met on March 4/09 to examine proposals for the ministry’s next “Planning Round 09.” Airlift and budget issues would have been prominent within those discussions.

Feb 9/09: Negotiations. Britain’s Financial Times reports a “major row” over the integration of Airbus Military in Spain, and the parent company’s efforts to bring the A400M project under direct control. It adds that “There have been mounting tensions between Tom Enders, Airbus chief executive, and Carlos Suarez, head of the military division,” and hints at accompanying national political complications. Mr. Enders declined comment when asked about this, but the Financial Times article also quotes an EADS statement:

“EADS is not aware of any political issues with the Spanish government over the integration of the military division. Carlos Suarez is still fully in charge. We are still in the process of integrating our military division into Airbus.”

Meanwhile, Reuters UK reports that first delivery will not happen before the end of 2012, and quotes a report from Le Figaro that places the expected overall cost to Airbus at EUR 5 billion total (about $6.45 billion). It could be higher, according to French Senator Jean-Pierre Masseret, who notes that the terms of the initial contract contain a release clause that allows the governments to pull out if the plane hasn’t flown 14 months after a stipulated milestone. EADS’ reported plans for first flight in 2010 would miss that April 2009 deadline.

France’s Sénat is issuing a report which argues that the program is critical to Europe’s aerospace industry. That argument is likely to fly with major customers like France, Germany, and Spain, though it offers a strong opportunity for expanding NATO’s SAC C-17 pool as a interim step. It may carry less weight with customers like Britain, however, who already fly their own C-17As and competing C-130J-30 Hercules, and who might see a contractual exit as a cost-savings measure. Financial Times | CNN | Reuters UK | EADS general release re: A400M program.

Jan 24/09: Negotiations. An EADS release formally denies any intent to withdraw from the A400M program.

Jan 14/09: Defense Aerospace’s “EADS Draws Battle Lines for A400M Negotiations” discusses key elements of the firm’s position, based on statements made during EADS annual press conference. Referring to John Hutton’s statements, EADS CEO Louis Gallois states that:

“We share his frustration… We signed the contract, and have our share of responsibility, but we were not alone to have underestimated the program… [the governments and EADS] thought [the A400M] was a flying truck, but in fact it is a civil aircraft certified by civil aviation authorities and a military aircraft, with full military capabilities… it is more complex than Rafale or Eurofighter… We have to discuss risk sharing [and a split of costs over expected amounts] with our customers.”

In return for joint sharing of financial consequences, the article also reported that EADS would offer affected governments a partial bridging solution involving other Airbus aircraft. The A330s mentioned could not carry tactical vehicles, but they could serve to ferry personnel long distances.

Jan 12/09: Negotiations. British Defence Secretary John Hutton tells Parliament that:

“We cannot accept a three to four year delay in the delivery of these aircraft. It is going to impose unnecessary and unacceptable strain on our air assets and we, along with all of our partner nations, will have to consider very carefully indeed what the right response now to this problem is as we go forward…”

For Britain, the most likely course of action would involve additions to its fleet of 6 C-17s, involving either additional purchases or participation in NATO’s SAC C-17 pool. A speedup of its FSTA public-private partnership involving 14 Airbus A330 MRTT aerial tanker/transporters is another likely response. Britain also operates Lockheed Martin’s C-130J, however, and could decide to augment that fleet instead if other options prove difficult to execute, or too expensive for its budget. A report in The Guardian quotes Lockheed Martin representatives as saying that the A400M’s delays could spur sales of “dozens more” C-130Js to various nations.

The markets also reacted poorly, as EADS shares fell 5% on the news. Evolution Securities analyst Nick Cunningham is quoted as saying that Airbus could face as much as $6 billion in total cost overruns on the program, a figure that could rise further if the company has to pay damages to customers over the late deliveries. Meanwhile, Merrill Lynch analyst Charles Ermitage estimates that EADS may have to take an additional writedown of EUR 2.6 – 3.9 billion, which produces a figure of EUR 4.3 – 5.6 billion (about $5.8 – 7.5 billion) when added to the EUR 1.7 billion 2008 writedown. Reuters UK | Marketwatch | defpro op-ed and analysis | The Guardian re: Lockheed Martin.

Jan 9/09: A New Deal? Airbus Military and EADS have proposed a new program approach for the A400M, as well as “changes to other areas of the contract including in particular certain technical characteristics…” Outside reports are pointing to likely changes in aircraft rage and lifting capacity. Range has some room for movement, given the plane’s installed mid-air refueling capability. Payload could become very problematic if payload falls below 33 tonnes/ 36 tons, as a number of armored vehicle programs are already in motion that will depend on this capability.

Negotiations are taking place with the respective governments through Europe’s OCCAR joint procurement agency, which manages the A400M program. With respect to costs, Airbus Military and EADS will not commit to figures until a finalized industrial plan, “including the availability of systems,” is complete and OCCAR has reacted to this proposal. EADS also continues its public friction with the Europrop consortium by adding:

“Airbus Military is still working with the engine consortium to firm up a date for the first flight.”

Airbus continues to hold to its position that series production should resume only when “adequate maturity is reached, based on flight test results.” This prevents future contract issues around upgrades of the initial aircraft to production configuration, but delays delivery. Indeed, EADS itself admits that first delivery of the A400M would not occur for 3 years after first flight – a flight that has yet to happen.

The net result of these changes is that the A400M project is effectively in limbo until these issues are resolved. Analysts are beginning to see 2013 as the likely first delivery date, a date that will stress the aging tactical transport fleets of many of the A400M’s partner countries.

Nov 14/08: $$$. EADS releases its Q3 2008 results, which include considerable discussion of the A400M. Key excerpts:

“The pressure on the A400M programme remains… EADS is more determined than ever to get this complex programme under control… In the A400M programme, the unavailability of a committed and reliable schedule for the propulsion system, which compounds unresolved issues with certain equipment supplies as well as equipment and systems integration, will lead to further delays… EADS has started to discuss with its main customers to define next steps. Once a schedule update is achieved, EADS will resume the milestone accounting and further update the A400M charge, for which [EUR] 341 million have been recorded in the third quarter of 2008… [an additional revenue boost of EUR] 803 million resulting from the move to the early stage accounting methodology in the A400M programme applied in Q3 2008… revenues include the A400M Power-On milestone revenue recognition – shifted from 2007 and worth around [EUR] 400 million.”

“As the outcome of the A400M construction contract cannot be estimated reliably, EADS can currently not comply with all requirements to account for the contract under the estimate-at-completion accounting methodology… EADS has suspended the application of estimate at completion methodology accounting ["milestone accounting" for the A400M project] and has then recognised contract costs incurred to date as an expense directly in the income statement as well as corresponding revenues as far as such contract costs incurred are expected to be recoverable under the “early stage” method of accounting. The loss-at-completion provision was then updated only to cover additional losses under the contract which EADS was able to estimate reliably.”

Oct 29/08: Negotiations. In the wake of cabinet approval for France’s 6-year defense planning law, Reuters quotes French defense minister Hervé Morin:

“I told (EADS CEO Louis) Gallois I agreed to look at things with regard to penalties. With the explicit condition that if one day we were ready to close our eyes to a certain number of penalties, EADS commits itself to a precise, firm and definitive delivery date.”

Sept 25/08: Engines. Safran Group, part of the EuroProp International consortium building the A400M’s TP400-D6 engines, issues a release in response to EADS. It says:

“SAFRAN, along with its partners in EPI, the European consortium in charge of the engines for the A400M military transport, would like to clarify the following points.

1) The eight TP400 turboprop engines for the first two A400M flight test models have been delivered to Airbus Military.

2) The control software for these engines, also covering control of the propeller and the nacelle, which are the responsibility of Airbus Military, are currently in the final phase of compliance with civil aviation standards. However, prior to the first flight of the A400M, this software will integrate adjustments following the completion of engine test flights on a C-130. These tests, which are under the responsibility of Airbus Military, have not yet started; EPI delivered the test engine in late 2007, and received flight readiness approval for the engine and associated software on the C-130 in April 2008.”

Translation: if there are program delays look to EADS Airbus, not EPI.

Sept 25/08: Engines. An EADS release confirms that the A400M’s first flight will be delayed, but will not commit – yet – to early 2009:

“…because of the unavailability of the propulsion system. The first flight actually depends on the results of the test campaign to be done on the flying test bed, which should start in the coming weeks, and on the readiness of the propulsion system. Only after this and further discussions with customers, the financial, technical and schedule implications can be reliably assessed. The 2008 guidance of the group is not changed at this point.”

Nov 5/07: $$$. EADS announces major financial charges, related to its “reassessment” of A400M delivery delays:

“While the calculations are not yet finalized, EADS now believes it will need to expense between € 1.2 billion and € 1.4 billion, of which more than € 1 billion for Airbus. This estimate is the best that can be established at this point of the programme development, and is consistent with the delays of 6 months, with a risk of a further slippage of up to a half year, that were announced on 17 October 2007. This figure does not include new potential issues… [and] forces EADS to discontinue its EBIT

• guidance for 2007, which will be replaced by an updated guidance on 8 November, along with the disclosure of third quarter earnings.”

April 26-27/07: Delays. A Reuters news agency report quotes an official from A400M supplier Zodiac company as saying that the A400M deliveries will be delayed for 3 months, and may be delayed for 15. EADS responds by citing private decisions within the consortium and says:

“This re-adjustment to the production programme has been undertaken in order to ensure optimum flow-through of assemblies and sub-assemblies to the Final Assembly Line in Seville. The customers were duly informed of the decision and are satisfied that the measures will not affect the aircraft delivery schedule. It is categorically denied that a further twelve months’ delay is or has been contemplated and any such comments by outside parties are speculative and without foundation.”

In light of subsequent events, the kindest thing that can be said about this official statement is that it was mistaken. EADS.

Additional Readings

• Airbus Military – A400M: The Versatile Airlifter
• EuroProp International – Official site for TP400-D6 engine.
• Rolls Royce – TP400-D6
• Reuters – Timeline: Fraught journey of A400M transport aircraft. From 1982 to June 2010.
• DID – Europe’s Air Transport Command Agreements. The A400M is likely to be heavily involved in this aircraft pool, which may extend to cover maintenance and certification.
• Flight International (May 29/12) – IN FOCUS: EPI’s bid to ramp up A400M engine production
• Forecast International (Feb 3/11) – A400M, KC-390 Will Reshape Transport Market
• Leeham News and Comment (Jan 4/10) – Outlook for Airbus, Boeing in 2010. Aerospace analysts at Leeham look at a number of programs, including the A400M, and set them in context with respect to the firms’ overall transport/passenger aircraft portfolios.
• Financial Times, London (Sept 21/08) – Berlin snubs EADS plea. “The reply from Berlin, which officials said was made after consulting with partner governments including France and the UK, is bad news for Mr Gallois, who has said the A400 will never make a profit under the seven-year-old contract.”
• Agence France Presse, via Yahoo! (Sept 20/08) – EADS could freeze A400M production amid late-delivery row
• Reuters (Sept 20/08) – UPDATE 1-EADS pleads not to be fined for A400M delay -FTD
• South Africa’s Engineering News (Sept 19/08) – SA aviation company admits to challenges with A400M. Cites weight growth issues, and adds: “South African aircraft components manufacturing and aircraft assembly company Denel Saab Aerostructures (DSA) has had to redesign some of the components it is producing for the multinational Airbus Military A400M transport aircraft project, owing to a number of critical factors affecting the basic design. DSA is also considering joining the [DID: C-130 sized] Embraer C390 military transport aircraft project…”
• Flight International (Sept 17/08) – A400M gets a boost, as TP400 engine hits full power. First time achievement on the testbed aircraft. The engines are designed to generate 11,000 shp.
• Aviation International News (Sept 16/08) – Testbed Problems Add To A400M Delay. “AIN understands that the problems have included vibration in the fuselage from the eight-blade propellers, and the need to protect the C-130′s rear wing and flap from the much greater heat produced by the TP400…In the 14 weeks since the TP400 was first ground-run on the C-130, only six hours have been logged. Program officials previously said that 30 hours of ground running would be required before the testbed could fly, and 50 hours of flight time would be required before the A400M could make its first flight.”
• EADS (June 26/08) – First A400M Military Transporter Rolled Out
• DID (Nov 5/07) – Airbus A400M Program Delayed 6-12 Months. Expected first flight moved from January 2008 to summer 2008. It will later be moved again.
• domain-b (May 28/03) – EADS signs [EUR] 20-billion contract for A400M military aircraft. Also a contract between Airbus military and OCCAR.
• Defense Daily (Dec 19/01) – $16 Billion A400M Contract Signed by Airbus Military and Klaus von Sperber, the director of Europe’s Joint Organization for Armaments Cooperation (OCCAR).
• Flight International (April 12/01) – French twist partners’ arms on A400M contract
• DID Spotlight – SALIS’ Sibling: NATO’s C-17 Pool Inaugurates In-House Heavy Lift