Airbus Group NV (AIR) Faces Pressure from German Government to Cut Military Jets Cost

The deal between Airbus Group NV (EPA:AIR) and German government is likely to witness some more theatricals as the German government is seeking price cuts for Airbus’s A400M military airlifters. German Defense Ministry has demanded longer cancellation period for the same and the A400M are likely to be delivered later than the expected timeline.

Bild am Sonntag highlighted some specific parts of a letter written by the Defense Ministry to the Finance Ministry and the court of auditors under which, the Defense Ministry was pressurizing Airbus Group NV (EPA:AIR) for disclosing its “further planning and connected project risks.”

Bild am Sonntag further mentioned that the Berlin government maintained pressure for “price reductions for lower performance as well as continued rights to terminate the contracts.” In addition to price reduction demands, Berlin government would inspect every single A400M in terms of its equipment before purchasing it.

Airbus Group NV (EPA:AIR) is likely to deliver a single A400M to the German ministry in November without having all the military capabilities as per the demand. The delivered planes are likely to be costlier and less equipped as compared to the initial deal.

Earlier, Airbus Group NV (EPA:AIR) condemned the Berlin government over its defense export regulations. The CEO of Airbus, Fabrice Bregier, said that the restrictive defense export regulations are likely to affect partnerships from other manufacturers in future defense projects. He added, “While there are lofty speeches being made that talk about more cooperation and consolidation in European defense, the axe is being swung at decades of Franco-German cooperation.”

This is not the first time that defense manufacturers have complained against the German government. Earlier, the German government interfered with a contract for MBDA under which the company was to deliver Milan ER anti-tank missiles to a Gulf State.

This article has been written by Prakash Pandey.

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