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A400M Cost and Schedule

After its budget began to balloon - currently to over 20 billion euros ($23 billion), it soon became clear that the project would be unable to break even without sales to countries outside NATO. The only trouble: The constant delays meant that many potential customers, such as South Africa, began looking elsewhere for alternatives - or even suing Airbus for compensation.

The program was launched in the spring of 2003 on the basis of 180 aircraft for seven European NATO nations, with first deliveries in 2009. Delivery of the first series aircraft were initially planned for the year 2005.

The acquisition price is only a portion of the total costs of owning and operating an aircraft. The Life Cycle Costs (LCC) are also affected by downstream operating costs such as fuel and maintenance. These will vary for each type of aircraft owing to many factors such as types of engine, aircraft size, and technology employed. A fair comparison can be obtained by calculating the LCC corresponding to the aircraft fleet required to perfom a typical mission.

A fleet of 50 A400M airlifters represents a US$ 4bn acquisition cost and a US$ 10bn 30-year life cycle cost. When compared to a corresponding fleet of competing aircraft required to perform identical missions, the A400M will have the lowest 30-year life cycle cost.

Airbus stated as of 2003 that the A400M unit cost was around $80 million, but the national budget numbers at that time indicated that the unit costs was more likely to be $120 million-$130 million. The considerably less capable C-130J, a competing plane, sells for $67 million, which excludes the development cost reflected in A400M pricing. While the A400M program was officially valued at $17.5 billion, the actual costs were more likely to exceed $22 billion. By 2009 the program was about 5 billion euros ($7.4 billion) over budget and four years behind schedule.

On 17 October 2007 EADS informed its A400M customers, including OCCAR, of its revised estimate for the first aircraft deliveries schedule. This will affect A400M deliveries to both European and other customer nations. A400M deliveries were now expected to start six months later than initially planned with a risk of a further slippage of up to a half year.

The first A400M was in production in the new final assembly line in Seville, Spain and was due to make its first flight in summer 2008. Sections of subsequent aircraft, which will join the flight test aircraft fleet, were also in production.

In July 2008 France and the United Kingdom stated that they were committed to finding a positive outcome for the renegotiation of the A400M program. The principle behind this renegotiation is that the company bear the consequences of the program delays and contribute to compensating for the resulting capability deficit. The two governments were open, on the basis of these principles, to amendments allowing the pursuit of the program under reasonable conditions. In late July 2009 defense ministers from the seven European nations that launched the troubled A400M military transport plane agreed to renegotiate the contract for the delayed project.

In January 2009 Airbus Military suggested resuming series production only once adequate maturity was reached, based on flight test results. With this proposed new approach, the first delivery of the A400M would then occur around three years after first flight. Airbus Military and EADS will only be able to reliably determine all financial implications once a committed industrial plan, including the availability of systems, is fully stabilized and once OCCAR's position on the proposal is known. This proposed new approach would not compromise the ultimate qualities and the exceptional characteristics of the airplane, with the most advanced logistic and tactical capabilities.

As of June 2009 Germany anticipated the first delivery of A400M military transport aircraft in 2014. Airbus Military remains on track to deliver the first production example of its A400M Atlas transport to the French air force during the second quarter of 2013, according to a financial update released by parent company EADS on 07 November 2012. A further three A400Ms would be delivered during 2013, comprising a further two examples for France and the first Atlas for the Turkish air force. The company planned to deliver 10 aircraft, including first deliveries to the UK and Germany in 2014.

The A400M finally had its maiden flight in 2009, but the first aircraft was only delivered to France's air force in August 2013. The Germans did not get their first aircraft until a year later.

By 2009 the program was about 5 billion euros ($7.4 billion) over budget and four years behind schedule. Airbus stated as of 2003 that the A400M unit cost was around $80 million, but the national budget numbers at that time indicated that the unit costs is more likely to be $120 million-$130 million. The aircraft had been due to enter service with air forces in 2009, but this has now been put back to 2013.

In a package presented by seven European countries to Airbus parent company EADS, Germany said in February 2010 it could offer $1.64 billion in cash and loan guarantees to help cover cost overruns for the A400M military transport plane. Germany had ordered the most planes of the seven countries, and in total, the country was expected to pay about $7 billion in additional costs.

On 05 March 2010, Customer Nations and EADS came to a principle agreement regarding the A400M military transport aircraft with the intention to amend the original contract accordingly in the coming weeks. In this principle agreement, the Customer Nations agree to increase the price of the contract by 2 billion; waive all liquidated damages related to current delays; provide an additional amount of 1.5 billion in exchange for a participation in future export sales (Export Levy Facilities); and accelerate pre-delivery payments in the period of 2010 to 2014, a new schedule of which will be finalised in the amended contract.

In 2014, the A400M became one of several overspending defense projects (including the Eurofighter and the Tiger helicopter) to be assessed by the international consultancy KPMG at the behest of the German government. It concluded that one major problem was that Germany's military procurement authority, the BAAINBw, was severely understaffed. Not only that, KPMG also noticed that the delays to projects created waves of inefficiency that rippled throughout the military. As the weekly "Die Zeit" pointed out in 2015, if the air force only has three A400Ms, it made no sense to train pilots to fly them, but when the planes are finally rolled out, the air force will suddenly lack trained pilots.

In December 2015, Germany's Defense Ministry secured the promise of a compensation payment from Airbus because of the delays. But members of the parliament's defense committee criticized the figure - 13 million euros - as too low, on the grounds that the costs to the German taxpayer would be "several times higher," as Rainer Arnold, defense policy spokesman for the Social Democrats, put it.

Despite nominal plans to complete construction of the new planes in 2016, Germany's Defense Ministry admitted in April 2016 that it did not know whether Airbus would actually be able deliver new planes in 2016. Tobias Lindner, the defense spokesman for the Greens, described hopes that the new plane could be finished this year as "extremely unrealistic," because the new engine problems would cause more delays.

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Page last modified: 07-03-2018 18:39:09 ZULU