EADS chief says A400M contract poorly negotiated

By AFP

July 15, 2010 Updated Jun 15, 2009 at 6:01 AM CDT

The head of European aerospace giant EADS criticised the contract to build the A400M military transport plane for leaving the company's Airbus unit bearing all the risk, in an interview on Monday.

Louis Gallois told Germany's Sueddeutsche Zeitung ahead of the opening of the Paris Air Show at Le Bourget on Monday that the agreement to build the now much-delayed aircraft had been poorly negotiated.

Asked what he had learned from the difficult talks, Gallois said: "that one cannot sign civil contracts for military programmes like this one."

He said: "A military programme entails major technological risks. But we have agreed a contract in which we bear all the risks."

The A400M plane has been hit by delays in building its massive turbo-prop engines, putting the 20-billion-euro (28-billion-dollar) project at risk.

Spain, Belgium, Britain, France, Germany, Luxembourg and Turkey are participating in the programme.

It was initially scheduled to start being delivered at the end of 2009 but the programme is suffering from a delay of at least three years and clients have threatened to cancel their orders.

The seven countries initially had the possibility to cancel their orders as of April 1 because of the delays but EADS negotiated a three-month extension to present a new delivery timetable which expires at the end of the month.

"We are in an intensive phase (for the project). We are discussing the timetable, delivery dates, that of the first flight, technical aspects of the aircraft. And of course, we are also talking about money," Gallois said.

Gallois noted that Airbus had already earmarked 2.3 billion euros (3.2 billion dollars) "for the supplementary costs and the losses, which are now very high."

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