A400M Update: Airbus At The Crossroads
The Gallic vision to develop a grande European alternative to American hegemony in the defense industry has taken a severe blow to the pocket book and pride as press reports in the last two weeks disclosed that the Airbus A400M military transport will be delayed further and that deliveries won’t begin in meaningful numbers until at least 2014.
Not only that, but the transport is overweight and key flight systems are suspect. The propulsion system has major issues. The program is over budget and bleeding red ink on EADS’ ledger. Understandably the company is asking the member governments for relief and a restructuring of the program.
Where do the “Airbus governments” and the company go from here?
All images courtesy of Airbus
The German and French governments between them have 100 of these aircraft on order, or well over half the program; the UK and Spain have ordered 52. These orders comprise the core of the 190 or so orders for the aircraft.
Not surprisingly, the production is largely centered in these four nations. Like all large military programs, the major goal of this program was to maximize the return on taxpayer defense dollars by developing a world class product that could be sold throughout the world, while simultaneously stimulating the development of a technological infrastructure and jobs. On paper this aircraft certainly has promise; it fits the niche between the venerable C-130 and the larger, albeit far more capable, C-17. Further, it promised to cost a lot less than a C-17.
Recent revelations have disclosed that the costs have escalated to the point where they are no longer significantly less than the C-17. An article from Aviation Week & Space Technology has shed some light on the costs of the C-17 vis-a-vis the A400M. AW&ST disclosed that the USAF is paying about USD$200 million per copy, while the international cost is USD$220 million. The French publication, Defense-Aerospace.com, in an article discussing a report by the French Senate, noted that the cost of the A400M has risen from 110 million euros to 145 million euros…“at today’s prices”! That’s almost USD $190 million per aircraft at current exchange rates (1.3 Euro to the USD)! Note the qualifier, “at today’s prices”.
Who knows what the final cost will be when deliveries begin?
Much has been made about the engine problems, especially the FADEC, which won’t be ready until October 2009. The Europrop TP400 came about, over EADS’ objections, by the member governments’ desire for a “home grown” engine. EADS had preferred to go with the experienced turboprop manufacturer, Pratt & Whitney of Canada, but was over ruled due to political considerations. But of course. . .if you’re going to have a jobs program, why not go all the way! The TP400 engine is the largest western manufactured turboprop and despite the expertise of the individual participants, has proven to be an extremely complex and difficult undertaking. Although a prototype has flown on the wing of the test bed C-130 there are persistent reports that the engine is far from being ready for “prime time”. EADS and the engine makers are in the midst of a very public row, with each side blaming the other for the delays.
However, its not just the engine issues that are threatening this troubled program. The French Senate report also noted the following issues with the A400:
- Empty weight issues exceed specifications by 12 tonnes.
- The navigation systems are experiencing significant delays. This includes the Flight Management System, the GPS Air Data Inertial Reference System (GADIRS), the Terrain-Reference Navigation System (TRN) and the Terrain Masking Low Level Flight system (TM-LLF).
Very few aircraft will be delivered until 2014, when deliveries are expected to begin in earnest and won’t catch up until 2020! EADS has offered a compromise to speed up deliveries by offering an “interim standard”, i.e., an inferior model, which won’t be capable of all the advertised flight modes until the avionics issues have been resolved. Nothing is mentioned with respect to the weight problems and whether this “interim standard” model will have performance restrictions, or will meet the promised operating parameters.
Naturally, the customer air forces are concerned, if not out right furious. The British Defence Secretary John Hutton was quoted as saying that the RAF cannot accept a three or four year delay in the delivery of the A400. The UK is reportedly looking at the purchase of additional C-17s. The Luftwaffe aren’t happy either, given that the C-160s are aging and will need replaced soon. It is rumoured that they are looking into the C-17, although whether that’s just being floated to put pressure on EADS, or is seriously being considered is a matter for speculation. The French, while said to be looking at options, will take no course of action that will threaten the viability of the A400 program.
My aerospace colleague Howard Wheeldon makes no apologies for his forthright views and gives his own very blunt assessment.
“It is time for the UK government to end the uncertainty and pull out of the A400M,” he says unequivocally.
“All in all the A400M is turning out to be a near disaster when it comes to an example of European partnership defence procurement,” he adds.
No international defense program is immune from politics and this one is not an exception. Airbus’ CEO Thomas Enders wants to integrate the program into the company in order to take direct control over the program. Spain’s Carlos Suarez, current head of the military division, is said to be very unhappy with the suggestion. Spain, while a minor partner in EADS, still has a board seat and 5.5 percent of the shares. Further, it can make a lot of public noise, something that the French are loathe to deal with. EADS is still grappling with the insider trading investigation and would like to avoid another public scandal if possible.
The company has offered up A330s as interim lift (it worked for the A380 delays, after all), but one German military official already said they could have leased A330s already if they wanted that option. The obvious solution, to purchase a number C-17s and C-130s as an interim solution, may be politically impossible. Recall that the French Navy in years past wanted to purchase F-18s as an “interim” fix to its aging F-8 Crusaders. The French government, fearing a threat to Dassault (and the Rafale) nixed that suggestion. According to a report in Janes, the French are saying that abandoning the A400M would be “tantamount to handing US military transport manufacturers a quasi-monopoly for the next 40 years”.
That may be overstating things since there are alternatives in the international market. As for the competition, the C-17 assembly line just got a new lease on life this week as 15 more have been approved for the U.S. Air Force. Lockheed-Martin is studying a “fat” version of the C-130 and the “J” model appears to be performing well at long last.
Even Embraer is thinking of getting into the military transport market with a two engine jet military transport. Then there are the Russians and Ukrainians with the IL-76 and AN-70. Regardless of what happens to the A400M the military transport market is likely to have international competition for years to come; yet the recent delays and price increases do not auger will for more foreign sales in the near future.
EADS has publicly called for the program to be restructured. This is quite understandable since it is stuck with a money losing fixed price contract, with no prospect of turning a profit on this program in its present form. EADS has even gone so far as to publicly announce that it was considering suspending production until a settlement was worked out. Is this a hollow threat, a shake down, or a prelude to walking away?
As we saw with the U.S. Air Force tanker selection, the defense officials and the generals don’t call the shots with large defense programs. Ultimately, that call is made by the politicians. This is not surprising, and it bears repeating that every nation wants its defense expenditures to fund economic growth, infrastructure development, and jobs growth at home. These four nations have already expended a great deal of money and effort in this program and are unlikely to let it go. Look for the governments to cave into EADS’ demands and restructure the program. The UK may buy a few more C-17s and the French and Germans may opt to purchase a few C-17s under the guise of a NATO pooling effort, but the next ice age will arrive before the Airbus governments abandon this program.
And perhaps that’s the right call?
Is there a lesson here for the Obama administration? Perhaps the new U.S. Administration and Congress should take note of the infrastructure, jobs, and economic issues at stake before offering up the next tanker for the U.S. Air Force to international competition? After all, sole sourcing “works” for Europe.
Since they’ve gone down the same road with Galileo, perhaps they’re on to something?
15 comments February 17th, 2009
