A400M Contract To Be Restructured

by: Matthew Potter
July 27, 2009

Category: Business Line, Companies, Contract Additions, Countries, development program, EADS, England, Events, logistics, Military Aviation, production program, Restructuring | RSS 2.0

The A400M transport program is the premier new aerospace defense effort in Europe. Seven separate countries had teamed together to develop and buy the aircraft from EADS. The program has had major delays due to engine and software issues and the customers have been delaying action for most of this year. Under the original contract EADS would have had to pay back money due to schedule targets not being met. This deadline has been pushed back until 30 July.

Now the customers have announced that a new contract will be negotiated by December of this year. Under the current schedule the first flight of the aircraft should occur by the end of the year with production deliveries in 2012. Britain had been pushing back on the contract due to their budget problems and the need for support for operations in Afghanistan.

The new contract is not technically a done deal as there could still be issues with some of the countries involved. The terms are obviously not clear now but will clearly revolve around the schedule and payments. EADS will probably see some relief from the schedule penalties. Military development programs are not new to such schedule issues and often if the program is important enough these kind of concessions will be made by the customers. The program is looking at a minimum three year delay and this will be reflected in the new contract.

The big thing this decision does delay further the penalty deadline that EADS has been facing all year and has made it hesitant to use their cash reserves for any other action.

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