Airbus on Thin Air
By Thomas Withington for ISN
The aircraft, which made its maiden flight in Seville, Spain on 11 December, was conceived as a state-of-the-art airlifter that would fly troops and military equipment into war zones and humanitarian disaster areas around the world.
Work began on the project in 1982 under the Future International Military Airlifter (FIMA) initiative - involving companies from France, the UK, Germany, and at the time, the US - to develop a successor aircraft to the venerable Lockheed Martin C-130 Hercules military airlifter design which had been in production at that time since the mid-1950s.
Lockheed quit the program in 1989 to develop the updated C-130J Hercules aircraft. However, the FIMA program survived and was re-branded as the Future Large Aircraft (FLA) initiative after Italy, Turkey, Belgium and Luxembourg also joined, with the agreement to buy 212 Airbus A400M freighters, which would fulfill the FLA requirement signed in 2003 (although this was revised downward to 180 aircraft after Italy later elected to buy the C-130J instead). The intention of the FLA program was to develop an aircraft that would offer more capacity and range than the C-130 Hercules.
However, the Airbus A400M, despite its impressive levels of technical sophistication, has been dogged by serious problems. Currently, Airbus' parent company EADS and the governments of the A400M partner countries are external pagetrying to find a way to move the project forward and for the aircraft to enter production.
This follows the warning of EADS Chief Executive Officer Louis Gallois, who told reporters in Seville on 12 January that “[EADS and Airbus] cannot continue beyond the end of January without knowing where we are going financially.”
Expensive realism
Since the program began, the aircraft's development costs have increased by around €11 billion ($15 billion), over the circa €20 billion original estimate.
Meanwhile, initial deliveries, which will be made to the Armée de l'Air (French Air Force) have been delayed by four years and are now due to begin in 2013.
Developing a military aircraft is never cheap and the technological complexities of such aircraft often outstrip those of civilian airliners. However, Airbus was contracted to develop the A400M using a so-called fixed-price contract that did not take into account the inevitable cost increases encountered as advanced technologies, such as powerful new engines and sophisticated new engine control systems, were developed.
Gallois concedes that EADS made a “mistake in accepting a fixed-price contract on a program with huge technical challenges and an unrealistic schedule.”
The result of these costs is that EADS has reportedly already sunk €2.4 billion of its own cash into the program and says that it cannot afford to pour in any more.
At the same time, EADS has said that it requires more cash, in excess of €4 billion to complete the aircraft's development and place it into production.
Amid governmental belt tightening across the Airbus partner nations as their economies begin a much hoped for, but modest recovery, EADS’ request could not have occurred at a worse time.
Professor Keith Hayward, head of research at the Royal Aeronautical Society in the UK, told ISN Security Watch that “the cost of bailing out the program is now four or five billion euros. That's a big chunk of money, even divided by the partners at a time of considerable retrenchment.”
How will EADS and the partner governments proceed? So far, no definite decision on moving forward seems to have been reached. Reports circulated in the defense press last week that €1.5 billion of loans could be made available from the French and Spanish governments to the company to this end.
French Defense Minister Hervé Morin told reporters during a NATO defense ministers' meeting in Istanbul last week that "We decided on a system of reimbursable advances between €1 billion to €1.5 billion which the [A400M partner governments] would put on the table," although any deal and the value of these reimbursement advances has not been announced.
However, the external pageUK is reportedly refusing to provide more money for the program, and instead is looking to scale its order back to 20, as opposed to 25 aircraft, to ensure that the cost for its tranche of A400Ms does not exceed the €3 billion it has already budgeted.
Moreover, penalties for late aircraft deliveries, which the company could incur because of delays, could also be waved.
Even if this proposed loan package is eventually agreed to, it could still leave EADS with a sizeable bill, perhaps around €900 million, which it would need to find to ensure the future of the A400M. At present, there is no indication of where this money will come from.
Treading air
There are several reasons why, despite the cost and delays, EADS and the partner nations are striving to see the A400M project through to production.
Firstly, thousands of jobs across Europe depend on the A400M, and to cancel the program risks making these workers redundant at a time when unemployment figures across Europe refuse to fall.
In addition, the military airlift fleets of the UK, France, Germany, Spain, Turkey and Belgium are simply not getting any younger. Large numbers of the C-130 and C-160 Transall aircraft used by these countries are showing their age, and at the same time, are heavily tasked to fly supplies to and from Europe to Afghanistan and other military deployments further afield. Put simply, these aircraft will not fly forever.
Furthermore, Jean-Pierre Maulny, deputy director of the Paris-based Insitut de Relations Internationales, told ISN Security Watch that the future of large-scale, trans-European defense programs would be left hanging in the balance if the A400M initiative were to be cancelled.
“If there is a cancellation for the A400M program, it will be a huge problem for the European Union because the risk is that no one will want to continue cooperation programs in the future,” Maulny said.
Individual members of the EU can no longer afford to develop complex military aircraft and weapons systems alone and the only way that these countries can design military equipment tailored to their individual needs is to collaborate, rather than having to buy almost exclusively from the US, which is ostensibly designing military equipment tailored to its own forces - forces that are much larger and generally better financed than those of the EU.
Even the US is now finding that exclusively developing military aircraft is extremely costly and has enlisted the help of eight partner nations to develop the next-generation Lockheed Martin F-35 Lightning II Joint Strike Fighter, which will equip the US Air Force, Navy and Marine Corps.
The monopoly gamble
To walk away from the A400M at this stage would hand Lockheed Martin a virtual monopoly on the sale of military cargo aircraft via its C-130 Hercules family, particularly as Boeing is expected to cease production of its C-17 Globemaster-III airlifter this year.
With C-17 production complete, the A400M would at least offer military customers the option of buying a larger airlifter with a longer range, compared to the C-130, should this be required.
As far as airlift is concerned, range and payload equals life. The recent earthquake in Haiti has once again demonstrated the vital role that large military aircraft such as the C-17, an unsung hero of the relief effort, have to offer. Military freighter aircraft are not just expected to support war fighting missions, they are being increasingly called upon to support humanitarian assistance, and quite simply the A400M can carry more and carry it further than its closest rival the C-130, despite Lockheed Martin's design also being a hugely capable aircraft.
While Ukraine does offer massive freighter aircraft via its Antonov AN-124 series, production of these planes is sporadic and they are technologically a generation behind the A400M.
Though the A400M is arguably an example of the methodology not to use when pursuing a major defense program at the European level, particularly in terms of the fixed-price contract, the continent does have some success stories to look toward, which provide instructive examples for when European defense policymakers turn their thoughts to the continents’ next big collaborative programs.
Maulny notes that the Meteor air-to-air missile program has run comparatively smoothly and is now in service. Likewise, Hayward agrees that “the best collaborative [European] ventures have come out of the missile sector because this collaboration has largely hinged on the needs and requirements of a couple of states.”
EADS and the partner nations certainly have a lot of work to do, and money to spend, in getting the A400M into service. However, the risks of failure both in terms of having a robust fleet of modern cargo aircraft that can move materiel, troops and life-saving supplies to the four corners of the world, and in terms of moving ahead on future European collaborative ventures, may be just too great to ignore.