European Nations Discuss Fate Of Airbus Military Plane

Seven European governments that launched the troubled A400M military transport plane were meeting to discuss project's future amid further media reports about spiraling costs.

BERLIN (AP) -- Officials from the seven European governments that launched the troubled A400M military transport plane met Wednesday to try to overcome a deadlock that could still ground the challenging continentwide project.

Plane maker Airbus is preparing for a maiden flight next week, even as the A400M's fate depends on the outcome of the ongoing talks in Berlin.

EADS, Airbus' parent company, asked nations to re-negotiate the project as costs spiraled and delays mounted. Defense ministers have given themselves an end-of-year deadline to decide whether they want EADS to continue with the project, and if so, who will pay for the extra costs.

Back on the table are technical specifications, price, and delivery schedule.

The A400M is one of Europe's most ambitious joint military-industrial undertakings — and it is running at least three years late, with first delivery not foreseen before 2012.

The A400M program was launched in 2003 with an order for 180 planes from seven governments — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey. The original price was euro20 billion, but recent media reports suggest the final cost could be as much as 40 percent higher.

The governments with planes on order have sent negotiators to Berlin "to find a common position" on the project, a spokesman for the German defense ministry said Wednesday, speaking on condition of anonymity in line with department policy.

Wednesday evening, after the meeting was over, a ministry spokesman said that the officials of the seven countries had discussed the future course of action and had decided to continue their talks.

"A high-ranking group of experts from the (seven) nations has been tasked to continue further talks with the industry," the spokesman said.

Airbus ministers are seeking to overcome a deadlock between countries such as France and Britain, whose militaries need the aircraft urgently, and other countries, such as Germany, that have budget concerns.

"It's urgent" that a solution be reached, said Winfried Becker, an analyst with Oppenheim Research GmbH. "If they take much more time the risk is slowly growing that it becomes more and more negative for Airbus and for the whole EADS group."

Seeing the airlifter fly next week could be "an important point" in helping governments decide, he said.

EADS already has put aside euro2.4 billion in provisions against losses related to the A400M, and it may have to repay as much as euro5.7 billion to governments if the project is canceled.

Defense-procurement agency OCCAR, which has been representing the governments, hired accounting firm PricewaterhouseCoopers to audit the program.

This week, German news magazine Focus Online quoted an evaluation by PricewaterhouseCoopers as saying the original costs could rise by as much as euro5.3 billion. French daily Les Echos said the project will cost an extra euro7.4 billion, 40 percent above the first estimate.

Governments are debating whether to raise the budget or cut the number of planes, a person familiar with the talks said on condition of anonymity, as he is not authorized to speak to reporters.

Germany has proposed using commercial loans to fund the extra development costs — a compromise that would allow governments to stick to their budget for 180 planes. The proposal has not found unanimous backing, the person said.

Barbara Kracht, a spokeswoman for Airbus Military, declined comment.

In June last year, Airbus rolled out the hulking, gray aircraft with a black nose and four black propellers with curved blades, but without functioning engines.

The turboprop engines proved trickier to develop than expected. They were finally installed and tested last month.

The A400M is designed to replace Lockheed Martin Corp.'s aging C-130 Hercules cargo aircraft used by the U.S. Air Force as well as the retired C-160 Transall transport aircraft developed by a French and German consortium.

It should almost double its predecessors' cargo capacity and have a range of up to 4,000 miles (6,400 kilometers).

Airbus could make up for lost profits through export orders, but South Africa recently pulled out of an order for eight A400Ms, leaving Malaysia as the only export customer.

Vandore reported from Paris.

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