Spain reports deal in principle to save A400M in Majorca

PALMA
PARTNERS in the delayed A400M military transporter plane have reached an agreement in principle to pump billions of dollars into Europe's largest defence project, in a bail-out preserving 10'000 jobs.

Spanish Defence Minister Carme Chacón said on the opening day of the informal meeting of EU Defence Ministers in Palma yesterday that the long-awaited deal between the partner nations and planemaker Airbus's parent EADS would be fleshed out today, although Germany, the biggest potential contributor, said EADS had not yet formally replied to the offer.

A source familiar with the matter had told Reuters late on Tuesday that EADS and the government buyers had reached the “basis of an agreement” for a 3.5 billion euro bail-out expected to be announced on the sidelines of a meeting this week of European defence ministers.

Spiralling costs and delays have threatened the project and left EADS facing a potential 5.2 billion-euro loss, prompting it to campaign for aid to keep alive hopes of having a European-made air transport fleet and saving defence jobs, whereas critics say the A400M has become a wasteful adventure. “I am able to tell you with great satisfaction that we have reached an agreement in principle between the seven countries participating in the A400M programme and the EADS company,” Chacón told reporters at the start of the two-day meeting of European Union defence ministers here in Majorca.

Defence sources said statements were being drafted and preparations made for a news conference on behalf of Britain, France, Germany, Spain, Belgium, Turkey and Luxembourg today. But after months of tortuous negotiations and false deadlines there were no guarantees against a further slippage in talks. “We have still not received a written answer from the company on the final A400M offer,” a German defence ministry spokesman said.
Under the deal outlined to Reuters, buyers would raise the price of each plane by 10 percent by pumping in the equivalent of 2 billion euros to help stem losses on the A400M.

Several nations are expected to deliver this in the form of temporary cuts in the number of planes on order, rather than new cash. Other planes would stay in budget limbo until next decade.

A further 1.5 billion euros would be made available as financial support in such a way that EADS should be able to set this against losses and cap its provisions for losses below 2 billion euros, the source familiar with the matter said.

The 20-billion-euro A400M project span out of control due to problems in building the West's largest turbo-prop engines.