The A400M: The Cost of Reinventing the Wheel

The A400M, the troubled European joint effort to meet demand for heavy strategic airlift capacity, has officially gotten a six-month reprieve. The A400M has been plagued by technological setbacks, production delays and cost overruns. At this point, the contractor, EADS/Airbus, is officially in default of its contract, meaning the partner countries could, if they wished, back out of the program, with at least some of the €6 billion already allocated reimbursed. Over the weekend, defense ministers from the seven countries agreed to maintain a “moratorium” on pursuing any contractual penalties against EADS.

Jean-Dominique Merchet compares the eventual cost of the A400Ms when eventually delivered (€140 million per plane, not before 2015) with the cost of buying U.S.-made C130Js (€50 million per plane). For France’s order of 50 units, it comes out to a savings of €4.5 billion — €7 billion as opposed to €2.5 billion. In other words, roughly the cost of, say, an aircraft carrier, give or take a billion. (The two planes’ capacities are not the same, but even complemented with U.S.-made C17s, the savings is enormous.)

The question, obviously, is why continue to feed this albatross? Merchet points out that many European countries already buy American, including France (14 C130Hs in the 1990s). The idea, too, that the only thing standing in the way of a globally deployed EU defense force is the lack of a strategic airlift fleet — whether built in Europe or the U.S. — is farfetched.

The answer, obviously, is political. The A400M, for various reasons, is too big to fail. It is the flagship program of the EU’s halting efforts to create a joint defense market. It is also a next-generation design in terms of the engine (part of the reason for the delays), which would mean market share and prestige. And there is the significant element of developing and maintaining production capacity independent of what is perceived as U.S. hegemony in defense manufacturing. That’s important if the EU is ever to have a more autnomous voice in global defense issues.

In other words, the startup costs for the partner nations are paying for more than just airplanes. And even if subsequent third-party orders would not reduce those initial costs for the partner governments, the benefits of a healthy European defense industry would add a subsidy function to those costs.

Merchet has pointed out elsewhere that the biggest failure of efforts to construct an EU defense industry is that the economies of scale that it makes possible have so far not resulted in savings. The A400M is a prime example. But the partner countries have essentially taken the political decision to reinvent the wheel. And it seems like that decision has gone beyond the point of no return.