December 13, 2016 / 4:55 PM / 2 years ago

Germany to seek penalties as Airbus A400M deliveries lag

BERLIN (Reuters) - A sixth new Airbus (AIR.PA) A400M military transporter plane is due to land in Germany on Wednesday, with another likely to follow before the year’s end, but Airbus faces penalties for the late deliveries, the German defence ministry said on Tuesday.

An Airbus A400M military transport plane is parked at the Airbus assembly plant during an event in the Andalusian capital of Seville, southern Spain, December 1, 2016. REUTERS/Marcelo del Pozo

The European multinational A400M programme is years behind schedule, with Germany’s share of the costs having risen to 9.6 billion euros ($10.2 billion) from an initial estimate of 8.1 billion euros, according to a ministry report to parliament.

Each plane is now estimated to cost 181 million euros, up from an initial 153 million, the report said.

In August the ministry asked Airbus for 12.7 million euros in damages for delays in delivering another A400M aircraft it received in July, and a ministry spokesman said it would seek damages for delays in subsequent deliveries as well.

According to the original delivery plan, Germany should have received 11 A400Ms in 2016, and should have a total of 17 planes altogether. Instead, it will have seven at year’s end.

In addition, the ministry plans to withhold an unspecified amount due in payment to Airbus given certain “shortfalls” in the radar and defensive capabilities of the first tactical A400 airlifter, a defence ministry spokesman said on Tuesday, without providing details.

Those funds would be paid to Airbus once the capabilities on the aircraft reached required levels, he said.

The first tactical aircraft, which Germany formally accepted in Seville, Spain on Monday, is due to arrive at an air base in northern Germany late on Wednesday, with a seventh A400M likely to arrive on Friday, a spokesman for the German air force said.

Airbus spokesman Kieran Daly declined to comment on any penalties or shortfalls and said the company remained in “lengthy and complex” discussions about its contracts with participating countries.

Meanwhile, experts from the German and French defence ministries are still working on plans to jointly operate a fleet of smaller Lockheed Martin Corp (LMT.N) C-130J Super Hercules transport planes, a ministry spokesman said. He gave no timetable for completion of the work.

German Defence Minister Ursula von der Leyen announced plans in October to acquire four to six C-130Js and operate them jointly with France as a complement to the expected fleet of 40 A400M aircraft.

Germany has modified its military procurement process in the wake of the A400M problems and now insists on companies assuming more responsibility for delays and technical issues.

However that approach has led to delays in two key multi-billion-dollar projects - the MKS 180 multi-role warships programme and a new missile defence system to be developed and built by Lockheed and the multinational European missiles joint venture company MBDA, owned by Airbus, Britain’s BAE Systems Plc (BAES.L) and Italy’s Leonardo Finmeccanica SpA (LDOF.MI)).

Reporting by Andrea Shalal; Editing by Greg Mahlich

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