Deal nears to save European military plane

Airbus parent EADS looks close to clinching a long-awaited deal with European governments to rescue the A400M military transporter plane, boosting its shares and easing fears over 10,000 jobs.

As France and Germany piled pressure on the aerospace group to accept a package of international support to prevent a cost crisis overheating, EADS confirmed that a letter from the A400M's seven customer nations represented "an important step towards convergence," but insisted that it was too early to draw financial conclusions.

Airbus chief executive Tom Enders warned in January that losses on the programme were threatening the future of the company, and called on European governments to come up with a support package or see the project shut down.

Technical problems, delays and rampant overspending have pushed Europe's ambitions to develop a home-grown transporter for strategic missions more than 5 billion euros into the red.

Countries that ordered the troop plane - Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey - have offered 3.5 billion euros in mixed forms of funding support, which is 900 million euros less than EADS had been asking for.

An EADS spokesman said the offer was still being studied. The company had received a letter summarising the status of the negotiations and proposing changes to the original contract, but was seeking clarification on several items, and some points had been left open for later discussion.

Germany said it expected a swift answer on the offer and that all sides were making efforts to resolve disagreements.

France said there would be no more money on the table after the new offer, which would leave EADS with A400M losses of 1.7 billion euros on top of 2.4 billion it has already written off.

Although EADS still faces a hefty loss on the deal, shares in the world's second-largest aerospace group rose up to 6.4 percent as concerns faded that it would have to bear the entire 5.2 billion euro loss or walk away at even greater cost.

The A400M heavy airlifter is designed to fill a gap between the veteran Lockheed Martin C-130 Hercules and the larger jet-powered C-17 from Boeing, but has been plagued by problems in developing its powerful turbo-prop engines.

Despite making its maiden test flight last December, the aircraft will not be ready for military or humanitarian missions before late 2013, four years later than scheduled.

Buyers ordered 180 planes for almost 20 billion euros in 2003, but the cost of building them is set to top 30 billion.

Failure to finalise a deal could hit 10,000 production jobs.

EADS meanwhile faces pressure not just from government buyers but also from its own auditors, who are seen as increasingly reluctant to let EADS defer potentially hefty charges beyond its fourth-quarter 2009 results due on March 9.

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