SPECIAL REPORT-The incredible saga of Europe’s A400M

* Troop plane makes public debut at Berlin show this week

* Germany made last-minute threat to kill A400M rescue deal

* Airbus chief held secret talks with Spanish king

* Britain won special treatment to keep it in the project

* Despite deal, inflation could add another 3 billion euros

By Tim Hepher and Sabine Siebold

BERLIN, June 8 (BestGrowthStock) – The first shot to be fired at
Europe’s 21st century army plane came not from the barrel of a
gun but a safety inspector’s clipboard. In 2008, weeks after the
first A400M troop transporter rolled off a gleaming new assembly
plant in Seville, a group of inspectors travelled to southern
Germany to scrutinise an important component for the plane’s
huge turbo-prop engines.

The inspectors were from the European Aviation Safety Agency
(EASA), an EU body responsible for certifying aircraft; they
wanted to conduct a routine check of plans for the engine
software. The A400M’s maiden flight was already six months
overdue, but in an industry which often measures delays in
years, that was nothing much to worry about.

Soon after arriving in Munich, though, the inspectors
discovered that MTU Aero Engines, the company behind the engine
software, was so far behind schedule that there was no point
even holding a meeting, according to people involved in the
project.

This week, after almost three decades of squabbles over what
the A400M should do, where it should be built, how much each
plane should cost, the software catastrophe and uncertainty over
10,000 jobs, the 20 billion euro ($24 billion) troop carrier
will finally woo crowds of plane-lovers during its first public
display at the Berlin Air Show.

The software and paperwork problems cost Airbus more than a
year and nearly crashed the entire project. A spokesman for MTU
says the delay was caused by a decision to go for civil
certification, which was outside MTU’s control. EASA declined
comment.

An even bigger crisis, over a huge funding shortfall, this
year forced cash-strapped European governments to back a 3.5
billion euro bailout. “We hate you, but we don’t want you dead,”
an exhausted government negotiator told Airbus officials before
a deal was finally struck in March. (Because of the sensitivity
of the matter, most people connected to the programme spoke on
condition that they not be named.)

Even as the A400M takes to the skies over Germany, officials
from the seven European nations behind the project — Belgium,
Britain, France, Germany, Luxembourg, Spain and Turkey — are
wrestling with a new problem.

Just 12 weeks after the rescue agreement, officials are
locked in another struggle over the impact of inflation clauses
on the project’s final price. One senior official says the
disputed sums could pile on another 3 billion euros. Meantime,
buyers such as Britain, Germany and Spain are contemplating
budget cuts that may yet impact orders.

At a moment when Europe should be celebrating the launch of
its biggest collaborative defence project — a plane that will
massively boost the continent’s expeditionary reach and ability
to wage war or supply aid — it’s wondering yet again if it can
even afford its new plane. “It should have been an ideal
European programme,” said Alexandra Ashbourne-Walmsley,
associate fellow of the Royal United Services Institute, a
London-based defence think tank. Instead, “it is about the
growth of Europe but also Europe’s folly.”

UP FROM THE ASHES

The only markings on the grey outer skin of the A400M in
Berlin this week will be the national flags of buyer countries
— a hint at the complicated politics and bureaucracy that have
continually flawed Europe’s efforts in defence cooperation.

Arguments over who is to blame for letting Europe’s biggest
single defence contract degenerate into such a mess that it
threatened Airbus’s future are unlikely to end with the
long-awaited first public fly-past. Much of the mismanagement
and inefficiencies are laid out in a leaked 2009 audit.

A Reuters investigation into the A400M reveals that having
meddled in designs, governments had little idea how their
down-payments of 6 billion euros were being spent until little
more than 6 months ago. Talks to rescue the project and shore up
Airbus parent EADS (EAD.PA: ) were marked by a clash of egos,
royal intervention, blackmail and, perhaps most of all, a
destructive nationalism that continues to divide Europe even
when it is meant to be united.

“We are still miles away from an efficient and effective
European defence procurement,” concedes Airbus Chief Executive
Tom Enders. “If significant issues arise, if the stakes are
high, national decision-making prevails and overrules European
bodies.”

‘WE DO CIVIL AIRCRAFT’

It wasn’t meant to be like this. The idea for a new troop
plane was born in the Cold War 1980s to meet the pressing demand
in Europe for greater mobility and lifting power. Its designers
— both political and actual — came from a generation of
leaders who deliberately tied once-rival wartime aircraft
factories into a unified peacetime industrial venture.

Designs for the plane, originally called Future Large
Aircraft, were fleshed out in the 1990s to fill a gap between
the Lockheed Martin (LMT.N: ) C-130 Hercules tactical transporter
and the Boeing (BA.N: ) C-17, a large strategic transporter jet.
Politically it marked a step away from dependence on the United
States and pushed a vision of pan-European defence, extending
important but smaller gains in fighter jets. Importantly, it
would also provide thousands of industrial jobs.

By the mid-1990s, following several false starts, the
countries backing the project called in Europe’s commercial
plane maker Airbus, made up of interests representing France,
Germany, Spain and the UK. Could Europe’s answer to Boeing build
the new troop carrier?

Airbus boss Jean Pierson took one look at the plans and
exploded. The politicians were telling him that the new plane
would deliver a great leap forward in European defence
capabilities. But Pierson saw something different: an unwelcome
new ingredient in a carefully refined industrial recipe that had
made Airbus jetliners a serious rival to Boeing. “Never! I don’t
want to hear about this plane,” Pierson told the board. “We do
civil aircraft.”

Pierson was yanked back into line by the consortium’s
shareholders and in 2003, long after he had retired to his
fishing boat, seven NATO allies placed a final order for 180
A400Ms. The planes would be built in Spain and would cost just
over 100 million euros each. France would get the first plane in
2009.

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SPECIAL REPORT-The incredible saga of Europe’s A400M