Airbus Threaten To Cancel A400M (by Daysleeper Jan 7 2010 in Military Aviation & Space Flight)
is over 300 posts long, and since Airbus is no longer threatening to cancel the A400M, and since the other thread has drifted off topic, let's start a new one to discuss the ongoing A400M contract negotiations.
EADS and the A400M customers have signed a basic agreement, but both parties say that contract will be amended within weeks or months, and there are many complex open issues that will be addressed via amendments.
In the last thread, Lumberton posted the following news:
|Quoting Lumberton (Reply 308):|
AW&ST has an update on the details still to be worked out on the "agreement". One of the unresolved issues is how many airframes will be canceled.
Settling A400M Contract Issues To Take Months
In summation, the article points out:
A) Even though a basic agreement has been signed the following issues still need to be resolved:
* Exactly how many A400Ms each country is buying
> FR is fully commited to 50
> UK is considering cutting 2-5 frames
> DE says it could weeks or months till they settle their total
> EADS is urging that the cuts be no more than 10 frames
* Exactly how legal labilities between the prime contractor and its suppliers will be resolved
> There is a dispute over EUR 500M between Airbus and EPI
> EPI is claiming EADS was late in delivering data needed for the FADEC development
> EADS CFO Ring hopes these can be resolved now that the basic agreement is in place
> EADS CEO Gallios warns discussions could drag out well beyond 2011
* Exactly who will be contributing to the EUR 1.SA)">5B "export levy facility"
> Government and industry sources put the A400M export potential at 300 units
> "Gallois suggests intense talks are underway with South Africa to get the former export customer back on board"
* Exactly what the repayment scheme will be for the EUR 1.SA)">5B "export levy facility"
> Money must be repaid but if the royalty payments are too high they will hurt export sales
* Exactly where the money will come from for the EUR 1.SA)">5B "export levy facility"
> France is considering creating a EUR 400B bond issue or tapping an existing aerospace fund
> No word on the other participants
* Exactly how much the accelerated predelivery payments will be
* How much military certification will cost
> The basic agreement only covers civil certification
> The military certification is more challenging than the civil certification
* Exactly what the aircraft delivery schedule will be
> FR gets 7 by end of 2014, 35 by end of 2020, 50 by end of 2024
> DE gets its first in 2014
* Exactly what the delivery schedule for enhanced capabilities will be
> There are three different deliveries planned largely based on delivery of more capable software
B) The impact on EADS:
* EADS is taking an EUR 4B loss on the core 180 unit program
* Auditors suggest another EUR 3.6B in program risk, but EADS feels they can manage the risk
* EADS will be subject to delay penalties if they do not meet the schedule in the revised agreement
C) Current testing status
* The first A400M is now splitting time between Toulouse and Seville in part to meet contract workshare requirements
* The second A400M is just about ready to join the flight test program
The things I found most interesting were the continued exposure EADS has with regards to vender lawsuits, managing risk to eliminate costs the auditors identified, the indeterminate number of frames to be bought, and future penalties should they not meet the newly agreed schedule.
Also the final shape of the "export levy facility" could be problematic. Much about its composition and funding remains to be determined. Basic math says EUR 1.SA)">5B over 300 frames is EUR 5M per frame, but repayment over 300 frames is mighty generous of the customers. Just the fact that Gallois is mentioning the efforts to get back the 8 SA frames shows how important even a small advance towards the 300 frame goal is.
The customers will be exposed if EADS does not meet the newly agreed schedule and if costs for military certification are not clearly spelled out.
[Edited 2010-03-16 11:46:55]