Spain Aims to resell half A 400M fleet

Spain has moved to halve its planned fleet
of Airbus A400M military transport planes
by offering the rest for export, casting a
fresh shadow over Europe's largest
defence project as the long-awaited plane
goes into service, Reuters reported.

The move is the latest sign of pressure on
crisis-hit European nations that bought the
delayed troop carrier, which itself had to
be rescued in 2010 because of a cost
blowout blamed on technical, management
and political errors.
After a four-year delivery delay, the first
A400M flew to its new operating base in
Orleans, south of Paris, on Friday.

The aircraft was designed to meet a
looming shortfall in military transport
capacity among seven European NATO
nations: Belgium, Britain, France, Germany,
Luxembourg, Spain and Turkey.
But the 20 billion euro ($26 billion) project
went more than 5 billion over budget,
forcing buyers to agree a price hike and a
cash injection to be repaid from future
export royalties.
After reviewing its needs, Spain has
reduced its requirement to 14 aircraft
instead of 27, a defence official told
Reuters.

It has told Airbus Military that the 13
remaining A400M aircraft it has ordered
would be available for export. European
buyers have ordered a total of 170
A400Ms, reduced from 180.
Although the 2010 rescue package
prevents buyers from cancelling further
orders outright, the largest customer,
Germany, is expected to release 13 of its
53 aircraft for export as a condition of
parliamentary approval for the purchase.

Others including France are studying
whether they can do the same, defence
sources said. But doing so raises thorny
issues over export royalties and would
require all partners to agree.

Airbus Military is seen as keen to avoid a
premature stampede towards export
markets as it seeks to keep factories
running to support exports after securing
domestic production.
So far Malaysia is the only foreign buyer
with 4 on order.
After writing off a total of 4.2 billion euros
for its share of losses on the domestic part
of the programme, Airbus aims to kickstart
a fresh export campaign now that the
A400M is in use.

"Export of the A400M is key for the
profitability of the programme,"
spokeswoman Maggie Bergsma said.
"We estimate a market of around 400
aircraft over the next 30 years on top of
the current 174 orders."

The prospect of some nations jumping in
front of others to export will fuel a debate
about when the first royalties would be
paid and whether the market would be
damaged for others.
But experts say it is unlikely to cause a
repeat of the politically explosive
discussions of several years ago.

"The economic situation is such that this is
the best face-saving opportunity for the
nations concerned and I think the
programme is now so far down the line
that I don't see how it can unravel," said
UK-based consultant Alexandra Ashbourne-
Walmsley.

"It is just another bump in the road and will
take
effort to smooth out, but the history
of European programmes suggests … it is
the most elegant solution for short-term
difficulties."

The Spanish official said no changes would
be made until "there's an agreement with
all of the partners".

Spain's economy has teetered in and out of
recession
since 2008, and while financing
conditions have improved since it moved
away from the brink of a full European
bailout, it remains under pressure to cut
public spending and a big budget deficit.
France unveiled a six-year defence
spending plan on Friday that includes 15
A400M aircraft between 2014 and 2019
but failed to remove uncertainty over the
remaining 35 it has on order.

Defence minister Jean-Yves Le Drian said
France would still need 50 military
transporters of all types in 2025, but left
the door open to keeping some older
planes longer than expected.

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