WASHINGTON — Airbus will meet with several NATO members on Feb. 5 in London to discuss reductions to fines imposed on the company due to delivery delays and failing to meet contract capability requirements for its A400M Atlas military transport aircraft program, Reuters reports.
If Airbus is unable to convince buyer countries to put a cap on financial penalties, the company fears the $21 billion program will be seriously at risk.
Delivering aircraft that fail to meet contracted capability requirements behind schedule have lead buyers like Germany, the program’s largest customer, to withhold full payment. Technical problems in manufacturing, specifically with cracking in the engine’s gearbox, have put the project years behind schedule. As a result, Germany’s share of costs have risen from an expected $10 billion to nearly $12 billion.
Commenting on the program’s financial issues last February, Airbus CEO Tom Enders said the company committed an “original sin” by signing a contract that was “too short on budget and timeline.” Enders said the company made another “incredible blunder” in assuming liability for the engines.
Airbus paid $2.6 billion to cover financial penalties and slow deliveries in 2016, adding to the nearly $6.2 billion the company has paid in penalties since accepting the A400M contract in 2010.
Officials from Belgium, France, Germany Luxemborg, Spain, Turkey and the United Kingdom, as well as Europe’s procurement agency OCCAR, will meet with Airbus in attempt to hash out an agreement capping financial penalties. Airbus received a $4.3 billion bailout from the seven countries in 2010.
Daniel Cebul is an editorial fellow and general assignments writer for Defense News, C4ISRNET, Fifth Domain and Federal Times.
