EADS denies troop carrier project faces 5b-euro hit

Paris: EADS on Tuesday denied a report that its Airbus unit's troubled A400M programme faced a 5 billion euro ($6.5 billion, Dh23.5 billion) cost overrun but could not say how much the cost would be or when it would make its maiden flight.

Development of the heavy troop and equipment transporter has been delayed by a split with suppliers over engine problems. Airbus parent EADS recently pushed back the first delivery by at least three years to 2012 at the earliest. Daily Le Figaro said that delays in the 20 billion euro programme could cost Airbus five billion euros, citing people "with very good knowledge" of the situation.

The Toulouse-based aircraft maker was planning a test flight for the A400M in 2010, the newspaper said, citing a note Airbus Military had sent to European arms-buying organisation OCCAR.

Airbus Chief Executive Tom Enders said earlier this month that the plane would fly in the second half of 2009.

"EADS denies the cost overrun of five billion euros because it is still in negotiations with clients and other companies on the schedule and penalties," an EADS spokeswoman said. EADS shares were down 3.4 per cent at 13.89 euros at 1037 GMT.

Le Figaro also cited the note as saying that full-scale production would not start before 2014, with the test flight planned for the start of 2010, a first delivery scheduled at the end of 2010 and a second delivery guaranteed by the end of 2013.

The report came ahead of a French Senate report on the delays in delivering on Europe's largest single military procurement contract.

EADS and suppliers have blamed each other for delays to the plane, powered by the West's largest turbo-prop engines, built by a team led by Roll-Royce and France's Safran.

Although many military programmes encounter delays, the A400M contract leaves EADS heavily exposed as it was drawn up on commercial lines with a fixed price and rigid penalties.

EADS has begun talks with seven European Nato governments to review the penalties in return for firm pledges on deliveries.

It has already taken charges of 1.7 billion euros and analysts say it faces a potential deficit of billions more - echoing problems caused by delays to the A380.