Airbus faces battle on two fronts over call for A400M aid

Mon Feb 27, 2017 11:36am EST
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By Tim Hepher

PARIS (Reuters) - Airbus (AIR.PA: Quote) faces tough negotiations on two fronts as it seeks new relief from European governments and engine makers for losses on its troubled A400M military transporter plane.

The planemaker called last week for new talks with European governments to ease "heavy penalties" for delays to the troop and armored vehicle carrier, after taking a fresh 1.2 billion euro ($1.3 billion) charge for Europe's largest defense project.

It has also appointed a new program manager for the A400M as part of a broader reshuffle and is set to beef up the management of its military aircraft business with a new deputy, industry sources said. Airbus declined to comment.

The 20-billion-euro project has been beset by political wrangling since its inception more than a decade ago. By citing a new 'crisis' and calling for ministerial talks, Airbus seems to be repeating tactics that led to a previous 3.5 billion euro bailout in 2010.

This time, analysts and people familiar with the project say it will be harder for Chief Executive Tom Enders to get a deal to refloat the project, whose customers include Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey.

"I can see why Tom Enders is doing this, because they need to stop the hemorrhage," said a person involved in past negotiations.

"However, it is going to be difficult. Governments aren't awash with cash and can't even fund what they have got."

The dispute underscores problems in putting defense projects on a commercial footing, and Airbus's difficulty in moving on from an abandoned strategy of growth in defense.   Continued...

FILE PHOTO:  An Airbus A400M military aircraft participates in a flying display during the 51st Paris Air Show at Le Bourget airport near Paris, France, June 16, 2015.  REUTERS/Pascal Rossignol/File Photo