Airbus secures EUR3.5bn rescue deal for military plane

European governments have agreed a deal to save Airbus's troubled A400M military transport aircraft project, but Airbus parent EADS will post an overall loss on its 2009 figures in consequence.

EADS says it has reached an agreement in principle with the seven customer nations: Germany, France, Spain, the UK, Turkey, Belgium and Luxembourg. The original contract will be amended to increase the contract price by two billion euros. The customer nations will also waive all liquidated damages related to current delays, provide an additional 1.5 billion euros in return for participation in future export sales and make pre-delivery payments earlier than previously agreed. Negotiations are still in progress on the details of the arrangements.

As a result of the agreement, EADS says it is increasing its loss provision on the project by 1.8 billion euros before tax, which will be reflected in its 2009 results, to be announced on 9 March 2010.

The A400M will fill a gap between the existing C130 tactical transporter and the much larger C17. It will be able to carry armoured fighting vehicles and large single items such as attack helicopter, and is designed to operate in difficult environments such as 'hot and high' airfields and soft or rough ground.

The programme is running two years late as a result of technical problems and because Airbus underestimated the complexity of the project. The aircraft made its maiden flight in December 2009.

EADS expressed satisfaction with the new agreement, and said it will "strive to identify opportunities to significantly reduce risks in the A400M programme and to deliver a state-of- the-art product within the new frame of the contract."

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