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.