Costs, Delays Scupper Airbus A400M Sale To S.Africa
November 5, 2009
USD$ 520,000,000,000 for eight aircraft? Give me a break! AviatorSouth Africa has cancelled a USD$5.2 billion contract to buy eight Airbus A400M military transport aircraft due to rising costs and delivery delays, cabinet spokesman Themba Maseko said on Thursday.
The move is a setback for the European planemaker, which appeared caught off guard by the decision, and could hand business to US rivals eager to pounce on delays and uncertainty surrounding Europe's largest defence project.
The cancellation comes at a time when EADS is in the final stages of negotiating a rescue package for the rest of the EUR20 billion euro A400M project with a core group of European buyers, some of whom have also threatened to trim or cancel orders.
Lockheed Martin, producer of the veteran C-130 airlifter, has predicted extra sales due to A400M delays, which have mainly been blamed on engine software problems.
Launched after almost two decades of debate over European requirements in 2003, the A400M is designed to drop troops and heavy equipment in combat zones or disaster areas.
Britain, France, Germany, Belgium, Luxembourg and Turkey ordered 180 planes in Europe's largest single arms procurement deal. Export sales to South Africa and Malaysia brought the total order tally to 192 but Chile cancelled an order.
South Africa's decision does not affect the main EUR20 billion European contract which looms large over EADS finances, but the company is already relying on exports to make the plane break even after taking EUR2.3 billion in provisions.
"The termination of the contract is due to extensive cost escalation and the supplier's failure to deliver the aircraft within the stipulated time frame.
Maseko said the cost of the South African order would have been USD$5.22 billion. He said no penalty fee was expected as the contract made provision for cancellation.
Airbus plans to carry out the maiden flight of the A400M by year end, two years behind schedule.