Military transports steal the limelight

The future of the A400M rests in German hands

The Paris Air Show is always packed with sophisticated and flashy military jets but this year's big story is a lumbering transport aircraft.

The A400M is an important project for European defence but also for European industry

Lionel Jospin
," French Prime Minister

The A400M is a key part in the development of the controversial European rapid reaction force.

France has warned that any wavering from the A400M project could endanger Europe's plans to establish a 60,000 strong rapid reaction force.

However, the fate of the Airbus A400M military transport has hung in the balance for months awaiting a decision by the German government.

EADS, the majority shareholder of Airbus, said this month that Germany was the only country which had not signed a letter of intent.

Squeeze on defence spending

The German Chancellor Gerhard Schroeder has said he hoped to sign a deal at the air show.

Gerrmany argues that a squeeze on defence spending means it cannot pay the research and development costs for the plane in advance. Paying the costs later would, however, bump up the price. EADS has offered special terms to Berlin to pay for development costs on delivery.

Recent reports suggest that Germany may be trying to reduce the number of aircraft ordered to 55 from 73, which would have cost it $8.7bn.

If Germany, the biggest customer for the plane, reduces its order too much the whole project could nose-dive.

European source

The demand for the A400M is driven by European embarassment of over-reliance on the US during the war on Yugoslavia in 1999.

The A400M is the key to the European rapid reaction force

European armies were unable to deploy their troops in the region fast enough because of their aging C-130 Hercules and C-160 Transall's transport planes. The US was too busy using their own planes to lend them out to their allies.

It was decided that if a rapid reaction force was going to be established it would need a European source for its weaponry. This provided Airbus with new impetus to develop a transport plane.

So far, the programme has been riddled with delays as some participating countries have shied away from signing the launch contract which will enable construction of the aircraft to begin.

On top of an order of 55 by Germany, France is due to take 50, Spain 27 and Britain 25. Turkey has reduced its order to 20, while Italy is taking 16, with the remainder for Belgium, Portugal and Luxembourg.