SEVILLE, Spain — Airbus’ hulking new military transport plane has proved it can fly, but the question, now, is can Europe afford it?
Even as Airbus today finally succeeded in putting its immense, 127 ton A400M airflifter in the air for its maiden flight, the plane program has yet to solve the thornier issue of who pays for the delays and budget overspending.
Abandoning the project would cost EADS $8.4 billion in advance payments it would have to return to governments — and would dent its credibility. It has already put aside euro2.4 billion in provisions against losses related to the plane.
Airbus CEO Tom Enders declined to talk about the A400M’s funding gap, saying “There are ongoing negotiations. I hope we can conclude them in the weeks ahead.”
German Chancellor Angela Merkel said the flight was “good news … we have waited a very long time for this.”
But Merkel said she cannot anticipate the outcome of the talks.
“That we need a transport plane is clear … but, of course, we cannot wait indefinitely because at some point a product is needed,” she said in Brussels, where she was attending a European Union summit.
Defense officials met on the sidelines of an event to mark the maiden flight of the A400M in the Spanish city of Seville to decide how to continue with project.
The A400M program was launched six years ago with an order for 180 planes from seven governments — Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey. The project is running at least three years late.
The original price was $29.5 billion, but a preliminary report by auditors PricewaterhouseCoopers said EADS might need an extra euro5 billion — inflating the final bill by 25 percent, a person familiar with the talks said.
Today’s flight tested basic functions such as the landing gear and the flaps. It marks the beginning of a three-year flight test program.
The plane took off 15 minutes late after a few glitches with the flight instruments, said Fernando Alonso, head of Flight Operations at Airbus.
The crew, dressed in orange jump suits, were equipped with parachutes and helmets just in case. They nicknamed the plane “Grizzly,” and they also brought along a mascot: a rubber chicken named Rocky.
EADS has asked governments to renegotiate the initial contract, which was agreed along the lines of Airbus’ standard fixed price commercial contracts, rather than a risk-sharing military deal.
Germany has held a tough line in negotiations, but EADS hopes governments will either pay more for the planes or reduce the number of planes on order. Other options on the table include reducing the specifications, or spreading increased payments out over time.
Enders has slammed the contract agreed by his predecessor, which saddles the European planemaker with most of the costs of delays.
But asking governments to pay more has become difficult at a time when countries’ budgets have ballooned as they fight off the worst of the economic crisis.
Enders said EADS can’t bear the burden of the extra payments alone but he promised that “even with a revised price this aircraft will be a very good value for the taxpayer.”
The ongoing talks seek to overcome a deadlock between countries such as France and Britain, whose militaries need the aircraft urgently, and other countries, such as Germany, that have budget concerns.
Ministers hope to agree in principle to continue with the project before the end of the year, according to the person familiar with the talks. But the tricky details probably won’t be pinned down until the contract signing in late March or early April, the person said.
As well as price, governments need to decide on technical specifications and delivery schedule.
The A400M is designed to replace Lockheed Martin Corp.’s aging C-130 Hercules cargo aircraft used by the U.S. Air Force as well as the retired C-160 Transall transport aircraft developed by a French and German consortium.
It should almost double its predecessors’ cargo capacity and have a range of up to 4,000 miles.
South Africa recently pulled out of an order for eight A400Ms, leaving Malaysia as the only export customer.
The flying truck, designed for combat missions in rugged areas like Afghanistan as well as humanitarian missions, took off on today with nine flags on its side — the seven nations, Malaysia as well as South Africa.
“Maybe the South Africans will be so impressed by the flight today they … will come back’,” Enders said hopefully.
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