Airbus CEO Says Turkish Delay in Taking A400M Threatens Ramp-Up

Airbus Group NV (AIR) Chief Executive Officer Tom Enders said he’s frustrated by Turkey’s failure to accept delivery of the third production A400M airlifter, even though two planes are flying successfully with French forces.

 

Enders said today that his company is “still bargaining” over the delivery process with Turkey, which has 10 A400Ms on order and is one of seven so-called core customers that signed up for the military transport plane almost 11 years ago.

 

“The aircraft is ready to go,” the CEO said at a press conference. “It’s the same aircraft that we delivered to the French Air Force that has been instantly operational and fit for flight. I find the situation increasingly unacceptable.”

 

Airbus is ramping up A400M production following years of delays and cost increases that mean the program won’t make a profit unless additional orders are won beyond the 174 already secured. The company’s travails with the model underscore shortcomings in military activities that last month prompted it to adopt the name of its jetliner unit and drop the European Aeronautic, Defence & Space Co. identity after 13 1/2 years.

 

Airbus should deliver 10 or 11 A400Ms this year while working on upgrading the turboprop to its full capabilities, according to Enders, who said the first planes have performed well in ferrying French troops to Mali to combat insurgents.

 

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Enders declined to go into detail about the spat with Turkey, saying: “I constrain myself to one word. Bargaining.”

 

He added: “In a multinational program that’s really a problem. How can you efficiently ramp up production if you have no certainty that your customers are taking those aircraft?”

 

Airbus will seek “support from other nations very soon” in pressing its case, Enders said. The other core buyers for the A400M, which fits between Boeing Co.’s C-17 and Lockheed Martin Corp.’s C130J, are Germany, France, Spain, the U.K., Belgium and Luxembourg, with Malaysia as the only export client.

 

Turkey is a 5.5 percent shareholder in the A400M program, with Turkish Aerospace Industries supplying fuselage and wing parts for the plane to Bremen in Germany and Filton, England, for integration before final assembly in Seville, Spain.

 

Murad Bayar, head of Turkey’s Defense Industry Undersecretariat in Ankara, wasn’t available when calls were placed to his office.

 

Eurofighter Concern

 

Enders said he’s also “not very optimistic” about securing further deals for the Eurofighter combat jet needed to sustain production once outstanding orders have been fulfilled.

 

“We do hope we can still score one or two other successes in exports,” he said. “But we also have to prepare for a scenario -- due to lack of export orders plus cancellations from others -- that we’ll have to ramp down production of this otherwise very impressive aircraft sooner rather than later.”

 

The Eurofighter, a venture between Airbus, BAE Systems Plc (BA/) and Finmeccanica SpA (FNC), suffered a blow last week when Germany indicated it would halt deliveries at 143. The country has canceled the last tranche of 37 planes, Social Democrat defense spokesman Rainer Arnold said, citing the Defense Ministry.

 

Airbus’s defense-side woes contrast with its success in building a bulging airliner orderbook which helped boost earnings before interest, tax and one-times items 21 percent last year and should result in further gains in 2014, according to an earnings statement today. The Toulouse, France-based company will accelerate production of A320 narrow-bodies to 46 a month in 2016 to meet demand, four more than current output.

A400M and C295W to be pitched to New Zealand

The eventual retirement of the RNZAF’s C-130Hs will see Airbus Military pitch the A400M and newly-launched C295W to the New Zealand government.

Announced at its annual briefing to trade media, Airbus Military said while it views New Zealand as a longer-term proposition, it is confident the two aircraft could fill the gap to be left by the ultimate retirement of the RNZAF’s five C-130Hs and indeed enhance the nation’s airlift capabilities.

Airbus Military was upbeat about the potential its new products could offer, and will embark on initial discussions within an undisclosed period, believed to be in the nearer-term to seed the products as potential candidates.

One observer at the briefing noted the C295 could also provide a pragmatic solution to New Zealand’s future maritime patrol needs when the Orions fall due for replacement. Airbus Military is offering the C295W as both a tactical airlifter and maritime patrol aircraft.

The last of the RNZAF C-130Hs to undergo a 15-year life-extension was re-delivered only in February this year, five years later than expected, under a program that was originally approved in 2003.

Airbus Military’s advance campaigning comes as it readies to launch the A400M into service in the coming weeks. The manufacturer’s head of programs, Rafael Tentor, who was A400M project head, said it had been “a long and winding road” to get to this point of delivery, but the A400M was “now the right aircraft at the right time”.

French army expects first A400M airlifter by July 14

The French army hopes to receive its first Airbus A400M military transport aircraft in time for the country's annual Bastille Day celebrations on July 14, a Defence Ministry spokesman said on Thursday.

The aircraft, which is about five years behind the original schedule, is also expected to win certification for military use in time for the biennial Paris Air Show starting on June 17, Pierre Bayle said.

The head of EADS unit Airbus Military, Domingo Urena-Raso, confirmed that this timetable was "absolutely reasonable," adding that he expected a total of four deliveries this year, 10 next year and 21 the following year.

France will be the first of the seven nations behind the 20 billion euro ($25.7 billion) project to take delivery of the European military transport and heavy cargo plane. Germany is due to receive its first A400M at the end of 2014.

France has ordered 50 of the planes, and Germany 53. The other countries involved are Belgium, Luxembourg, Spain, Turkey and Britain.

"Delivery before July 14 would enable a French crew to pilot the French plane above the parade," Bayle said, referring to the traditional Bastille Day military procession.

Airbus Military had said earlier this year it expected to deliver the first of the airlifters to France in the second quarter.

The four turboprop-engine A400M can carry a helicopter, two armoured vehicles or 116 paratroopers. It can land on short, gravel airstrips, making it suitable for transporting troops and equipment to theatres such as Mali or Afghanistan.

The plane has been hit by delays and billions of euros of cost overruns that led to a multinational bailout.

"The A400M got off to a bit of a bumpy start, to say the least, but it's making good progress," Urena-Raso said, adding that there were "no signs" that any of the nations planned to reduce their orders.

He said he hoped the aircraft would fly at the Paris Air Show, adding it had been performing very well in test flights.