Friday, January 22, 2010

"Super Size Me!" Brings Sticker Shock at Airbus

We've commented about the future prospects of the A400M-you know, the Euro airlifter that is four years behind schedule and $7 or 8 billion over budget....but it seems as if matters may well be coming to a head. Airbus, it seems, is requesting that the contracting parties who ordered the airlifter ante up an extra 25 per cent to help subscribe the increased cost of the project.

The contracting parties are not happy, particularly the Germans who have the biggest dog in this fight.

Airbus agreed to and sold the project on a fixed price contract basis back when the project was put together-which in retrospect was the very apotheosis of a "bad idea", because the one constant in aircraft projects is that they always go over budget and over weight, particularly when there's both a new airframe and an unproven powerplant in the mix.

Always. It has never been known to fail. Ever.

Going over budget is the polestar of every aircraft project-that, and figuring out how to get the customer to eat the difference, which usually consists of getting the customer in deep enough that they feel they can't back out.

I did work on part (a very small part to be sure) of the Canadair Challenger project-which was both a new airframe and a new engine (the 'born under a bad sign' ALF-502), and it was only the availability of the General Electric CF34 that saved the Challenger from the rubbish tip when the ALF502 turned out to be one of the greatest airborne turds of all time. So I know whereof I speak.

So how anyone could have thought that this project was going to be any different is, well, mildly stunning.

At the present time, there are about 190 or so aircraft on order, and the projected price of the contract amounts to $28 billion give or take, which comes out to about $150 million each, assuming that costs do not escalate further. An additional 25 per cent would put the price per unit closer to $190 million per unit. The project is also four years behind schedule and the first flight was recently accomplished.

So what are the people who ordered it going to get for their money, if ever?
A super sized C130 with a C-17 price tag attached is what they're getting. Looking at it another way, it's like getting a quart and a half of milk but paying for a gallon. Hardly anyone likes that kind of math, even if it is a 'buy fresh, buy local" Europork project.

It must hurt, knowing that you are tied to this project when any number of C17s can be had for about the same price, out the door, drive them away.

It's the very definition of throwing good money after bad, which seems to be popular among government types these days. The notion of getting what you want, on time and on budget never seems to have occurred to the players.

I suspect that if one of the major players bails (i.e., the Germans) then the project will be ready to stick a fork in.

Come to think of it, Alex Pajic could probably make a pile by selling his domain and website to Airbus-truth in advertising and all that.

Image courtesy of Alex Pajic-best damn barbecue chef ever.


One of my correspondents suggests that the over-budget cost of the A400M is on the order of $15 billion USD that Airbus may be asking the contracting governments to eat, and mentions that at $280 million each that money could buy them 4o or more brand new shiny C17s.

Just a thought.......


Post a Comment

<< Home