Thursday November 5, 01:55 PM
S.Africa cancels orders for military Airbus
PARIS (AFP) - Cancellation of a contract for eight Airbus (Paris: NL0000235190 - news) military transport planes by South Africa on Thursday prompted Airbus to insist that the problem-struck A400M version was set for a test flight soon.
A government spokesman said in South Africa that the government had cancelled a deal to buy eight of the aircraft, dealing a new blow to a project already beset by big cost overruns and delivery delays.
"The cost escalation would have placed an unaffordable burden on the taxpayer at a time when the national fiscus (treasury) is under pressure due to the economic downturn," government spokesman Themba Maseko said in a statement.
"Cabinet believes that the interests of the South African taxpayer will be best served by not proceeding with the contract," he added.
The contract for the A400M was agreed five years ago when the government said the cost of the planes would be about 830 million euros (1.2 billion dollars). At the time, that amounted to 6.4 billion rand.
Maseko said costs were now seen escalating to 47 billion rand (4.1 billion euros, 6.1 billion dollars).
A spokeswoman for Airbus Military said the aerospace giant was "surprised" by South Africa's decision to cancel the orders and was looking into "the potential financial impact of this announcement."
She said: "We regret this all the more since it comes at a time when the programme is making major progress towards a test flight before the end of the year."
Maseko said that South Africa would not incur any penalties because of the delays in the delivery deadlines stipulated in the contract.
An amount of 2.9 billion rand is to be refunded to South Africa, under the terms of the contract, he added.
The A400M plane has been hit by delays in building its massive turbo-prop engines, putting the 20-billion-euro (28-billion-dollar) project at risk.
It was initially scheduled to start being delivered at the end of 2009 but the programme is suffering from a delay of at least three years.
In July seven European countries threw a lifeline to the troubled project by agreeing to renegotiate their contract to buy the aircraft by year-end.
The project partners are Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey. The new four-turboprop plane is intended to replace ageing military transport planes in national air forces.
Some of the partners, most notably Britain, have mulled dropping the project, but for many European governments the political and economic necessity of a successful joint project outweighed the urgency of getting new planes.
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