£10bn Airbus deal in jeopardy

THE fate of Europe's e17bn (£10.4bn) programme to develop and build a new military transport plane is in the balance after the German government turned Friday's Bundestag debate on the deployment of troops to Afghanistan into a vote of confidence.

Plans to sign a production contract with European planemaker Airbus Industrie on Friday have been put on hold. The meeting of British, German, French and Italian defence ministers in Bonn, where it was to have happened, was cancelled on Wednesday night.

With the Italian Cabinet expected to vote to quit the programme at a meeting today and the German government yet to approve funds for the 73 planes it wanted to order, the future of the A400M, an aircraft intended to reinforce the ability of European armies to intervene in overseas conflicts, looks ever more doubtful.

Britain's Defence Minister, Geoff Hoon, warned in June that Britain would buy American alternatives if the production contract was not signed by the year-end.

That would be very bad news for Airbus and its shareholders BAE Systems, with 20%, and Amsterdam-based Eads, with 80%. Without Britain's commitment, the programme is likely to be abandoned, or drift for years before being realised with fewer aircraft built and those at higher cost.

Airbus UK, which would design and build the wings for the plane at Filton, near Bristol, says the programme would support 900 jobs at that site, and 8,000 across British industry-Rolls-Royce, the Derby-based engine builder, has a key role in the APA consortium chosen to develop a powerplant for the plane.

Launch of the A400M, the first military plane to be built by Airbus, would also provide a welcome boost to help it weather the downturn in demand for airliners since the September attacks in the US that triggered a switch from expansion to cost-cutting.

The A400M was to pioneer a new pattern of procurement for Europe's defence industry, with eight nations combining to buy 196 planes at between e80m and e85m each from a single manufacturer contracted to deliver on time and within budget. The aircraft has been conceived to replace the ageing Lockheed C130 Hercules, the mainstay of the Continent's tactical transport aircraft.