Eight nations agree to build military aircraft By Alexander Nicoll, Defence Correspondent Published: April 12 2002 19:05 | Last Updated: April 12 2002 19:08
Europe's plans to build the A400M military transport aircraft have been given the green light following an agreement among defence ministers of eight countries that plan to buy it.
Ministers have agreed to accept a formula under which seven countries will be financially compensated if the German parliament does not vote the funding that would permit the purchase of all 73 aircraft that Berlin wants.
Defence ministers are signing a side letter to a memorandum they agreed last December. Their signatures will activate an E18bn ($15.8bn) production contract signed in December with Airbus, which will be building a military aircraft for the first time.
Alain Richard, French defence minister, signed the letter on Friday. The UK ministry of defence said Geoff Hoon, defence secretary, would sign it imminently.
The agreement rebuffed a last-minute lobbying effort by Boeing and Lockheed Martin, makers of rival transport aircraft, to kill off the flagship European project, which has been under negotiation for 15 years.
European governments see the A400M as central to their efforts to build up defence capabilities so that European armed forces can be deployed much more quickly to the world's crisis spots.
However, the project has been delayed by pre-election jockeying between political parties in Germany, where each major defence procurement project must be individually approved by parliament.
Parliament has voted E5.1bn, enough to buy about 40 aircraft.
But instead of voting the remaining E3.6bn, members approved a statement of intent to allot the additional funding after September's general election - all big parties support buying all 73 aircraft.
Other governments did not accept this as an adequate guarantee, but Berlin was unable to improve upon it. Under the mechanism now agreed, Germany will pay a penalty to the other governments out of the already-voted E5.1bn if it cannot buy 73 aircraft.
This would reduce the number of aircraft that Germany could buy to well below 40, and would be so disadvantageous for Germany that parliament would have a strong incentive to approve the second tranche of funding.
The financial safeguards are important because the price of each aircraft would rise sharply - and would have to be renegotiated with Airbus - if total orders dropped below 180. At present, orders stand at 196, with Germany at 73, France 50, Spain 27, Britain 25, Turkey 10, Belgium 7, Portugal 3 and Luxembourg 1. Italy pulled out.
Airbus has promised to deliver the first aircraft within six years of the contract taking effect, though Britain has delayed entry into service until 2010.