Commentary by Celestine Bohlen
Airbus Needs U.S. Help to Dispose of Elephant: Celestine Bohlen - Bloomberg.com
July 7 (Bloomberg) -- Can elephants fly?
That’s one way of looking at the Airbus A400M military- transport plane, which a group of mostly European nations has been trying to get off the ground since 2003.
It’s time to get real. Time and money are running out, and the four-engine turboprop plane designed to ferry troops and equipment still hasn’t even had a test flight.
After a delay of almost four years, and cost overruns that are digging into profits, the European Aeronautic, Defence & Space Co. should pull the plug on this 20 billion-euro ($28 billion) project, and let its customers buy American.
With 6,000 jobs at stake, this would cause economic pain and howls of political protests. European pride would be wounded, and the reputation of the region’s defense industry would be badly damaged.
There may be a solution: If the Europeans swallow their pride, and buy American military-transport planes, then maybe the U.S. Air Force could stifle its own protectionist urges and award a much-disputed $40 billion contract for aerial-refueling tankers to EADS and its U.S. partner, Northrop Grumman Corp.
The Europeans have a refueling tanker -- the A330-200 -- which is already up and flying. The Americans have well-tested military-transport planes. Why reinvent the wheel when there is one already on the shelf?
Surely, burden sharing is what the trans-Atlantic alliance is all about. Why should the U.S. and Europe be duking it out for orders when in another 20 years, they will both be desperate to save their defense industries from being cannibalized by China and India?
Camel-Like
The point isn’t to chip away at one aerospace industry at the expense of the other, but rather to save them both. Letting politics dictate business decisions -- or tying down political projects with commercial contracts -- isn’t the way to go. The A400M is one example.
Politics have plagued the project from the start. Early on, EADS was forced to pick a group of European companies, including Rolls-Royce Group Plc to make the plane’s engine, instead of Pratt & Whitney, whose price was better.
The project has become a kind of Christmas tree, with the different governments trying to add on special features, such as low-flying or all-weather capability. The result is a product that looks more like a camel than a racehorse, according to Bernard Jenkin, a Conservative member of the U.K. Parliament who sits on the House of Commons defense committee.
“We should dump it,” he said. “It was always a political airplane.”
Capability Gap
EADS has already had to book 2.3 billion euros in charges for the A400M, denting its profits. Its customers -- France, Germany, the U.K., Luxembourg, Spain, Belgium and Turkey -- have twice pushed back a deadline for contract renegotiations, with the latest set for this month.
As they wait for the plane, now due in 2013, France and Germany, with contracts for 50 and 60 planes respectively, have had to check out alternatives to fill their capability gap. These include Boeing Co.’s C-17, the Lockheed Martin C-130J or even the Antonov 124, built in Ukraine.
Meanwhile, the U.K., which seems to be trying to wriggle out of its order for 25 planes, is leasing six C-17s for the Royal Air Force. All three countries badly need military- transport planes for their operations in Afghanistan.
No wonder people talk about the A400M as a nightmare.
Looming Catastrophe
Nick Witney, a former director of the European Defense Agency, calls it a disaster. “If it doesn’t proceed to producing an aircraft, it will be a catastrophe,” he said. “The stakes are huge.”
From its inception, the A400M -- which began life as the Future Large Aircraft -- has been plagued by bad decisions, hubris and the problems that come from design-by-committee, particularly when the committee is made up of Air Force generals, each with their own demands.
For EADS and its Airbus unit, the main concern is the original 2003 contract, which it is now trying to renegotiate so that the customers shoulder some of the burden of the cost overruns. Naturally, no government wants to be presented with that kind of bill -- especially for a plane that has yet to fly -- in the middle of a recession.
‘Plane That Works’
With hindsight, everybody agrees the project’s original timeframe was unrealistic. As a report issued this spring by a French Senate Committee concluded, EADS “underestimated the size of the challenge,” which itself is an understatement.
Europe and the U.S. have a healthy competition going between Airbus and Boeing. That has spurred both airline companies to keep costs down and improve their products.
But in the military sphere, this competition is getting in the way of delivery. If Europe is to have a credible defense capability, it needs to be able to move its troops, tanks and equipment around.
Before they start throwing more good money after bad, the governments involved should think about their priorities. As a top adviser to French President Nicolas Sarkozy said this week: “All we want is a plane that works.”
(Celestine Bohlen is a Bloomberg News columnist. The opinions expressed are her own.)