A440M’s future saved by EADS customers.
EADS and the defence ministers of its customer nations have reached what the aerospace giant describes as “a principle agreement” to amend the contract covering its troubled A400M military transport aircraft. The intention is to amend the original contract in the coming weeks, says EADS.
The statement has set out the four commitments now offered by customer nations, who have agreed that:
- the price of the contract will be increased by €2 billion;
- all liquidated damages related to current delays will be waived;
- an additional €1.5 billion will be provided in exchange for a participation in future export sales; and
- they will accelerate pre-delivery payments in the period of 2010 to 2014, a new schedule which will be finalised in the amended contract;
Based on this agreement, an estimate at completion of updated revenues and costs including an assessment of risks, reviewed by the EADS Board of Directors, leads to an increase of the A400M loss provision of € 1.8 billion pre tax for the full year 2009. EADS expects EBIT and net income will be negative in 2009. EADS results will be released at its full year 2009 disclosure on 9 March, 2010.
EADS will provide further details of the amended contract once the negotiations are finalised.
The A400M cash flow profile for the coming years is still to be negotiated in the contract amendment and all parties say they are willing to mitigate negative cash impacts as far as possible.
“EADS considers that this agreement provides a sound basis for a successful evolution of the A400M programme,” says the manufacturer’s statement.
EADS shares closed up 2 percent at euro15.96 ($21.72), their highest close since September.
EADS unit Airbus has complained that the program is draining money and valuable resources better used elsewhere. The program’s proponents say the program is a key test of Europe’s ability to assemble a badly needed military airlifter, and to tout its export potential.
The four-engine turboprop A400M is seen as inhabiting an important niche market between the Lockheed Martin C-130J Hercules and Boeing’s C-17 Globemaster III.
The program was launched seven years ago with an order for 180 aircraft at a project cost of € 20 billion. EADS is expect to publish its 2009 results tomorrow.
Germany leads the order book with 60 aircraft, which were scheduled to begin delivery this year. France was originally due to begin receiving 50 aircraft last year, as was Turkey with 10 aircraft. The UK’s 25 units were also to have started delivery this year, with 27 for Spain in 2011. Luxembourg was to receive one aircraft in 2017, and Belgium seven in 2018.
