Tuesday, February 09, 2010

A400M GretaGarboLiner Contract Remix

For this occasion I have chosen to include this image because the photoshopper who produced it died from an overdose of Propofol and is slated to be interred alongside the late, unlamented Michael Jackson, a/k/a the King of Pop. The only place you will see this flying is in some rilly good hallucinations.

Well nevermind. And I promise I'll shut up about this when some sort of decision's made.

As we've been pointing out, the A400M program has had some problems that have caused long delays and numerous efforts to remix the fixed price contract that everyone agreed to when the project launched. That agreement now seems to have been hopelessly optimistic, and Airbus is losing its shirt on the project, which is overdue and over budget in a significant way.

My own suspicion is that Team Airbus didn't appreciate the problems inherent in launching a new airframe and a new engine-particularly when that new engine was not a derivation of anything now in existence.

There's much finger pointing over who was responsible for the engine choice, now that it's turned out to be a turkey of epic proportions. And thereby hangs a tale, if you're a Canadian, a believer in conspiracy theories, and you don't like being played for a sucker.

The fellows at Bloomberg tell us that the buyers may offer 2 billion euros toward the cost overruns and another 1.5 billion in loans, but whether that is enough to make the deal is something we'll have to wait to see. It's far short of what Airbus is asking for, and there's very little chance that the A400M will ever make a dime for Airbus.

The original project cost was pegged at 20 billion euros in 2003, and the cost overruns are admittedly somewhat west of that figure. The pundits over at Reuters opine that the project is 11 bn euros over budget and deliveries cannot be expected until 2013.

I'm all about public works and good paying jobs, good liberal democrat that I am, but I would have a hard time selling this to the taxpayers-which was what happened with the cancellation of South Africa's order in 2009. I think that the south Africans got out while the getting was good.

Either way, the next month or so ought to be interesting-if one of the major buyers (Germany, France, Britain, Spain) bolts, the program will likely collapse. In view of the financial issues rocking the PIGS countries in the euro zone, pouring more cash down this dry hole may prove to be a very difficult sell.

That's particularly difficult because the A400M, if it ever gets delivered, will not end European mission dependence on the American fleet of C-17s and dodgy Il-76 operators from the old Combloc.


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