At least 180 A400Ms must be sold for the program to be financially feasible, according to its project leader.

Huge stakes
These are critical times for the A400M program, which represents more than just a major new source of revenue for Europe’s aerospace industry. At stake is the future of a common European defense/aerospace equipment acquisition policy. In addition, the program is a test of European nations’ commitment to catching up with U.S. military capability in tactical and strategic airlift. And there may be other implications as well.

“The A400M is of great importance for the modernization of the European forces, for the development of a joint European defense and security policy, and for the European industry,” said European Aeronautic Defense and Space (EADS) joint CEOs Philippe Camus and Rainer Hertrich in January. “The A400M also has a direct positive impact on the development of the European industry and its global competitive position.”

Moreover, “By some accounts, the A400M’s death could permanently hobble Franco-German defense relations, putting a question mark to whether EADS really is the final stage of Europe’s industrial restructuring,” said Richard Aboulafia of Teal Group, U.S. aerospace market analysts, in January.

“This long-lived…project has assumed a political importance that transcends its military necessity. The surreal contract signed in December meant nothing, but German Chancellor Schroeder committed to a full buy of 73….And unless it strengthens its strategic lift capability, Continental Europe will need to rethink its ambitions to be a strong military power,” Abou-lafia continued.

A400M project leader Airbus Military (AMC) calculates the program will be economically feasible if at least 180 aircraft are sold. Germany’s decision not to commit to its original order for 73 planes puts the whole program on hold; with a German commitment of just 40 aircraft, the total order book for the A400M stands at just 163, 17 short of economic viability. The production deal would be worth up to $15.6 billion for a full quota of 196 aircraft—with Germany originally ordering 73 of the planes, France 50, Spain 27, the U.K. 25, Turkey 10, Belgium seven, Portugal three, and Luxembourg one.

	If the A400M program fails, European nations may consider C-17s (top) and C-130Js for their airlift requirements.

Vision and vulnerabilities
The A400M program was originally seen as a blueprint for a new type of common European approach to military equipment procurement. In December 2001, defense ministers from eight European countries witnessed the signing of a contract between AMC and the European Defense Purchasing Agency/Organisme Conjointe de Cooperation en Matiere d’Armament (OCCAR), acting on behalf of the governments, for the production of the A400M. OCCAR is seen as a prototype for a common European armaments procurement agency and was set up by France, Germany, Italy, and the U.K. in an effort to harmonize defense procurement strategies.

“A400M is one of the first common procurement projects with a highly political and economic impact on increased European integration,” according to EADS CEOs Camus and Hertrich.

The first flight of the aircraft is scheduled for 2006, and the first delivery, to France, in 2008. Production is planned to run over 12 years, with the last delivery going to Belgium in 2020. The final assembly line of the A400M will be located in Seville, Spain.

But over its extended gestation period, the program has proved vulnerable to the winds of economic and political change that have swept the continent. The program traces its origins to 1991, with the establishment in Rome of the European Future Large Aircraft Group. In 1995 the program was transferred to AMC, which would manage the work-share allocations. During the late 1990s, the project was weakened by a German government’s flirtation with Russia and Ukraine over the possibility of using the Antonov An-70 as an alternative to the A400M.

In 1998 the U.K. launched a competition for a Future Transport Aircraft based on the European Staff Requirement (ESR), which had also received the endorsement of six other European NATO allies. The A400M has been specifically designed to meet the ESR. With a maximum payload of 37 tonnes and a cargo box volume of 356 m3, the plane can carry substantially more than the C-130, the aircraft it is designed to replace.

But the collapse of the project would raise serious doubts over the European Union’s commitment to establishing an effective European Rapid Reaction Force and improving its military capabilities. In Helsinki the European Council set a goal for EU member states to be able, by 2003, to deploy collectively up to 60,000 troops within 60 days and keep that number in theater for at least a year. The summit laid down 144 capabilities required for such an operation, but conceded that Europe still depends on the U.S. to supply 55 of them. A major boost to the continent’s airlift capabilities has always been seen as a priority.

Burden-sharing for greater security
According to NATO Secretary General Lord Robertson, speaking in January, “We are also redoubling our efforts to complete the modernization of European and Canadian forces. They must be able to take on a greater share of the burden of maintaining our common security—including dealing quickly with terrorism and weapons of mass destruction….For all the political energy expended in NATO and in the EU, the truth is that Europe remains militarily undersized….And hardly any European country can deploy usable and effective forces in significant numbers outside their borders, and sustain them for months or even years as we all need to do today.

“For all Europe’s rhetoric, and an annual investment of over $140 billion by NATO’s European members, we still need U.S. help to move, command, and provision a major operation. American critics of Europe’s military incapability are right,” said Robertson. “So, if we are to ensure that the United States moves neither towards unilateralism nor isolationism, all European countries must show a new willingness to develop effective crisis management capabilities.”

The A400M’s importance to the European aerospace industry is more difficult to gauge. Both EADS and BAE Systems have reported surprisingly good figures for 2001: EADS increased revenues by 27% to $26.79 billion, exceeding its 20% target. Its Military Transport Aircraft Div. is currently a relatively modest subsidiary, recording revenues of just $0.43 billion in 2001, mainly through the sale of C-295s. But when, and if, the $15.66-billion A400M program is given the go-ahead, “the Military Transport Aircraft Div. will have the second-largest order book of any division within EADS,” according to the company. In February BAE Systems announced a profit before interest of $1.8 billion—an increase of 32.6% over 2000—and an order book of $62.66 billion, up 6.8% from last year.

According to BAE Systems officials, the A400M would generate over 8,000 jobs in the U.K. alone, as well as providing the funds for a major new advanced wing manufacturing center at the company’s Bristol site.

But for many in Europe’s aerospace and defense industries, the importance of the German decision on whether or not to go ahead with the A400M carries with it the EU’s commitment to playing a far more substantial role in world affairs than it currently does. If the project fails, Lockheed Martin and Boeing will be some of the first beneficiaries as European nations are forced to consider C-130Js and C-17s for their next-generation airlift requirements. In the longer term, the damage to Europe’s political and industrial organizations could be more serious still.