UPDATE 2-Europe finalises Airbus A400M bailout deal

* Deal confirms provisional terms brokered in March

* No further financial impact for EADS, company says

* French minister intervenes to remove final snag
(Adds details)

By Tim Hepher

TOULOUSE, France, Nov 5 (BestGrowthStock) – European buyer nations
reached a final agreement on Thursday on a 3.5 billion euro
bailout to rescue the troubled Airbus A400M (EAD.PA: ) military
transporter, French Defence Minister Herve Morin said.

The agreement lifts a two-year cloud over the future of
Europe’s largest defence project and some 10,000 jobs threatened
by delays and cost overruns.

“The A400M is an emblematic programme which Europe could not
abandon,” Morin told a news conference.

“Giving it up would have meant Europe saying it wanted to be
dependent on the United States in the 21st century (in the
strategic area of military transport),” he added.

The A400M was ordered in 2003 to meet a shortfall in
military and humanitarian airlift. The European buyers include
Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey.

By reducing dependence on U.S. makers Boeing (BA.N: ) and
Lockheed Martin (LMT.N: ), the project was conceived as a pillar
of European defence ambitions.

But delays in making the West’s largest turbo-prop engines
put the A400M back four years to 2013 and sent costs soaring.

Buyers hammered out a provisional funding deal in March,
following the discovery of 7.6 billion euros in excess costs.
Taxpayers will end up bearing just under half of this.

But finalising the accord took longer than expected amid
pressure on defence budgets and a raft of disagreements over
technical aspects of the 20-billion-euro aircraft programme.

Buyers will take a total of 170 planes instead of 180
planned when the project was launched. Britain will cut its
order by three planes to 22 and Germany by seven to 53.

The deal calls for a price increase per plane of 11 million
euros for a total price hike of just under 2 billion euros. A
further 1.5 billion will come as credits against future exports.

Each buyer nation must adopt the accord, which EADS Chief
Executive Louis Gallois said he hoped would happen by end-year.

Gallois said there were no significant changes from terms
agreed in March, and the agreement would have no further
financial impact on EADS. Some government payments may, however,
arrive more slowly than initially expected, Airbus said.


Morin, whose political future is uncertain ahead of a
government reshuffle later in November, toured the aircraft
pursued by cameras before disappearing into a private meeting
area while a scheduled news conference was delayed by an hour.

The politically delicate accord nearly dissolved at the last
minute, delegates said, as new objections surfaced over support
costs and a pricing mechanism for the plane.

Delegates said Morin intervened with his mobile phone to
prevent what could be his last chance to oversee an agreement
slipping away as he took charge of the final lap of talks.

It was the second time the centrist politician has worked
his cellphone to dig the A400M out of a rut after he brokered a
deal between a roomful of ministers and Louis Gallois, at the
other end of the line, to prevent Britain walking out in 2009.

A separate financial dispute between French supplier Thales
(TCFP.PA: ) and Airbus over responsibility for carrying the risk
linked to a delayed navigation system was resolved. It was not
immediately clear how this would affect Thales’s finances.

The talks came to a head at a sensitive time as governments
slash spending on defence and other areas while bailing out the
A400M, which France and Britain say is needed in Afghanistan.

Besides Morin, who is seen as keen to keep a high profile
ahead of the reshuffle and a possible presidential run in 2012,
other ministers stayed away from the final session of talks, and
plans for a joint briefing were dropped and flags folded away.

“This aircraft remains excellent value for money compared
with the possible costs of buying off the shelf,” Morin said,
before adding for Gallois’s benefit: “Still quite expensive”.

Each aircraft will cost just under 120 million euros, which
analysts say is about mid-way between the competing Lockheed
C-130 prop plane and the Boeing C-17 jet transporter.

* Who contributes what in bailout [ID:nLDE6271UA0]

* TIMELINE-Fraught journey of A400M [ID:nLDE61O0WG]

* SPECIAL REPORT: Warbus-The incredible saga of Europe’s

(Reporting by Tim Hepher; Editing by Will Waterman)

UPDATE 2-Europe finalises Airbus A400M bailout deal