Airbus A400M
European buyers have given their formal backing to a €3.5billion (£3.1bn) rescue deal for the troubled Airbus A400M at a signing yesterday.
The bailout from seven NATO nations is the result of a roller-coaster political battle to prevent Europe’s largest single defence project from collapsing under the weight of cost overruns and delays with the loss of 10,000 jobs.
Since the deal was first agreed in March 2010, Europe has been sucked into a growing budget crisis and the bailout was threatened by new objections from the British coalition government, amid sharp defence spending cuts.
Turkey also put forward last-minute demands as delegates tried to turn the tentative agreement into a legal contract.
The confirmation will come as a relief to for staff working on the A400M at the Airbus plant in Filton where the wings and the landing gear for the plane are built.
The A400M was designed to give Europe autonomy in military transport, which is dominated by the Lockheed Martin C-130 Hercules turbo-prop and the Boeing C-17 jet aircraft.
But technical problems and mismanagement kicked the project four years behind schedule and €7.6bn over budget.
Under the rescue plan, the seven key buyers agreed to a €2bn increase in the total price of the transport planes. Part of this will be financed by taking fewer aircraft for the same price, reducing the total order to 170 from 180.
Germany has cut its order by seven planes to 53 and Britain will take 22 planes instead of the 25 initially ordered.
Airbus’s next priority will be to try to win back South Africa as an export customer after the country cancelled an A400M purchase.
The Airbus A400M is a long-term replacement for the Hercules which has been around, with various modifications, for over 50 years and there's no reason to doubt that an aircraft as sophisticated and advanced as the A400M won't provide equally long service. In addition, the technology used in the A400M will bring huge benefits to the civil aircraft market.
New aircraft are never profitable in the early stages because of the development costs but, as the engineering and design costs diminish and the manufacturing costs stabilise, they become profitable. The A400M will be no different and will more than pay for itself over its lifetime. There are already over 150 on order.
The Hercules fleet is aging and it would be a lot worse for the UK economy to continue trying to maintain it, or to buy an alternative rather than designing and building a European replacement.
All of which is actually very good news for the economy, for Airbus and its employees, for its suppliers, for the RAF, for British Service men and women and very definitely for the British taxpayer.
This story shows the lies involved in the old 'defence jobs are good for the economy' line we've been spun for decades.