Airbus: A400M, Future funding

With tanker news dominating this week, there are a few Airbus items that haven’t received much attention: the A400M, future airplane program funding and the A350.

(Updated September 26.)

A400M

This disastrous program appears heading for some resolution. Aviation Week has this report. It looks like Airbus is headed toward a new agreement with the A400M customers (most of which are Airbus member-states) that will restructure the contract, terms and conditions in a program which has already cost Airbus billions of dollars in cost overruns. The program costs the company $100m a month, and it–along with the A380–has been a huge financial drag.

UBS estimated that the restructured contract could add 5bn Euros to the charges Airbus has already taken. We spoke with Airbus CEO Tom Enders earlier this month and he said the estimate is “completely unreasonable.” While he would not offer a “reasonable” number, published reports suggest a 3.5bn Euro figure.

The program has been a perfect example of political interference, notably on the engine selection at the start, which speaks more than ever why Airbus and EADS should divorce from ownership by the French and German governments.

The ever-candid Enders said the A400M should have stuck with the proposed Pratt & Whitney turbo prop rather than having a new design forged in Europe forced upon the airplane. “The choice was made under political pressure,” he said.

The operational specifications for the airplane are challenging but if ever achieved will indeed be a remarkable airplane. Positioned between the venerable Lockheed C-130 and the Boeing C-17, the design takes into account the changing dimensions of equipment procured and which have outgrown the C-130 since it was originally designed way back in the early 1950s.

Enders hopes for first flight by year end or in early 1Q2010.

A350

From September 17, Bloomberg has this report that Airbus projects 1,500 deliveries for its A350 in support of the “reimbursable launch investments” (aka “launch aid”) pledged by the UK, Germany, France and Spain, the Airbus-member states.

The article provides some detail about how the loan would be structured, and it is this sort of transaction that drives Boeing crazy. If Airbus doesn’t reach 1,500 sales, the loan is guaranteed by the state bank, KfW. (If sales exceed 1,500, Airbus continues to pay a “success fee,” another masterpiece in marketing mislabeling for its implications of success or failure of the program. This should be called a royalty, like it is on the A320.)

Boeing doesn’t have any guarantees if it fails to reach a sales target. This is one of the things at the crux of the WTO complaint.

Airbus says A350 launch aid will conform to WTO rules.

We’ve not been in the Boeing camp with respect to the legal attack on Airbus launch aid, but as readers know we don’t like government subsidies of any kind. Which brings us to….

800m-1bn Euros needed

This is the one that really caught our eye: Reuters has this report saying Airbus needs another 800m to 1bn Euros to finance future airplanes, with a plea to France to kick in for aerospace research. Our immediate reaction: Go to the G-D stock and debt markets!

This falls into the ‘Holy crap’ category, is there no end to turning to the governments?

The problem is that this practice is proliferating rather than getting reduced. Bombardier is relying on 33% Canadian and UK government support to launch its CSeries. Embraer is bent out of shape about this, and the US previously said it will ask WTO to look at this, too.

The Chinese and Russian governments are funding airplane programs in these countries that will complete with Airbus and Boeing. Japan is also developing civil airliners, and while as far as we know the government isn’t funding these efforts, the government did pour at least $1.2bn into the Japanese partners of the Boeing 787 program–and these partners now developing indigenous airliners said they are benefiting from 787 technology, so it’s an indirect subsidy of these new airliners.

One Comment on “Airbus: A400M, Future funding

  1. Let’s hope the A400M will become the success Airbus and the contracting governments. It is a technological achievement for sure… but will it find export customers?

    On the other hand Airbus was said to be loosing against the B787. Now it seems it may very well become the winner of the race.

    Anyway, both the B787 (if it succeeds) and the A350 XWB will be the most ecofriendly aircraft in their category.

    Daniel Stanislaus Martel
    http://aeroskies.wordpress.com

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