* Spain says surprised by Airbus call for A400M support
* Airbus says European warplane in new financial difficulty
* Airbus CEO invited to brief buyers in Spain on March 30
* Analysts say odds are against quick agreement
By Tim Hepher
PARIS, Feb 27 Airbus faces tough
negotiations on two fronts as it seeks new relief from European
governments and engine makers for losses on its troubled A400M
military transporter plane.
The planemaker called last week for new talks with European
governments to ease "heavy penalties" for delays to the troop
and armoured vehicle carrier, after taking a fresh 1.2 billion
euro ($1.3 billion) charge for Europe's largest defence project.
It has also appointed a new programme manager for the A400M
as part of a broader reshuffle and is set to beef up the
management of its military aircraft business with a new deputy,
industry sources said. Airbus declined to comment.
The 20-billion-euro project has been beset by political
wrangling since its inception more than a decade ago. By citing
a new 'crisis' and calling for ministerial talks, Airbus seems
to be repeating tactics that led to a previous 3.5 billion euro
bailout in 2010.
This time, analysts and people familiar with the project say
it will be harder for Chief Executive Tom Enders to get a deal
to refloat the project, whose customers include Belgium,
Britain, France, Germany, Luxembourg, Spain and Turkey.
"I can see why Tom Enders is doing this, because they need
to stop the haemorrhage," said a person involved in past
"However, it is going to be difficult. Governments aren't
awash with cash and can't even fund what they have got."
The dispute underscores problems in putting defence projects
on a commercial footing, and Airbus's difficulty in moving on
from an abandoned strategy of growth in defence.
Launched in 2003, the A400M was designed to extend Europe's
reach in military operations but is up to four years late and
already 50 percent overbudget.
Despite Airbus's call for more support, the initial response
from governments and engine makers has been cool.
Germany, the largest buyer, said last week it was up to
Airbus to solve the problems.
Spain expressed "surprise" at Enders' statements and invited
him to attend scheduled junior ministerial talks on March 30.
Engine makers have also joined the fray, refusing to help
Airbus pay existing penalties or to absorb its liabilities.
"It's no. I'm very firm on that," Safran Chief Executive
Philippe Petitcolin said, though he did not rule out new
incentives for maintaining future deliveries.
Airbus blames engine makers and political meddling for the
programme's chronic problems, but has also struggled to fill
gaps in parachuting or refuelling capacity as well as the
defensive systems needed to take the combat aircraft to war.
It had originally picked specialists Pratt & Whitney Canada
to build the West's biggest turboprops, but buyer
nations wanted a European consortium including Safran,
Rolls-Royce, MTU Aero Engines and Rolls unit
After fresh problems with a gearbox supplied by Italy's
Avio, Airbus says the A400M project is off course again.
Analysts say odds are against any quick new funding deal,
leaving Airbus to burn more cash on the A440M in 2017-18.
"Airbus wants to put everything on the table and increase
pressure for a deal, but the nations are aware of that," said a
person involved in the negotiations.
Airbus's overall position has improved since its last such
appeal in 2009, while governments continue to face budget
problems. Back then, its shares were recovering from record lows
around 10 euros; last week they touched a peak near 70 euros.
Some say the main target of Airbus's campaign is the engine
consortium, hoping to win political support for more
Its decision to go public came after private talks with
engine firms broke down last summer. Engine executives say the
consortium, not Airbus, paid for the fitting of new gearboxes
and question how far the engines caused any new losses.
Relations between Airbus and those suppliers have long been
testy. Tensions soared after four crew were killed in an A400M
test flight in 2015, focusing attention on the absence of alarms
when engine data was accidentally wiped.(reut.rs/2mCcX2D)
($1 = 0.9432 euros)
(Additional reporting by Julien Toyer; Editing by Susan Fenton)