Airbus and buyers narrow differences in A400M row

PARIS Feb 3 (Reuters) - Airbus and European buyers have narrowed differences over funding for the delayed A400M military transporter and hope for a solid breakthrough backed by France and Germany on Thursday, people close to the talks said.

The planemaker and its parent company EADS (EAD.PA) are in talks with seven NATO nations to prevent the 20 billion euro project collapsing under the weight of delays and cost overruns.

Talks between EADS and purchasing countries -- Britain, France, Germany, Spain, Belgium, Luxembourg and Turkey -- broke off last week over a 2.4 billion euro ($3.36 billion) gap in the amount of money each side is prepared to invest to keep the project afloat.

Technical talks resume in Berlin on Thursday morning and if successful could result in a decisive statement of support from French and German leaders meeting in Paris on the same day.

The fate of Europe's largest defence project is not on the agenda for a regular summit between the continental European powers but is likely to be addressed informally by President Nicolas Sarkozy and Chancellor Angela Merkel, diplomats said.

Engine problems and delays have pushed the plan to build a total of 180 troop planes 11.2 billion euros over budget.

After projected cost savings, the loss is estimated at 7.6 billion euros, of which EADS is ready to provide 3.2 billion and nations have offered two billion, leaving 2.4 billion to find.

"The differences are being narrowed consistently," a person familiar with the matter said ahead of the Thursday talks.

FINANCING

The 2.4 billion euro gap is expected to be bridged through a combination of movement from both sides in the headline figures and a package of financing for the Airbus parent company.

One stumbling block concerns a rift over clauses concerning inflation. But defence experts say this is unlikely to hold up a broad framework deal to avoid missing the opportunity for a Franco-German political push that could also be backed by Spain.

Thursday's meeting also coincides with a gathering of NATO ministers in Istanbul but plans to wrap up an accord there have for now been shelved, passing the baton to Paris and Berlin.

Germany, which has so resisted calls for a substantial boost in funds, called on Wednesday for an urgent solution.

"The government, along with everyone involved, wants to find a solution to the remaining questions as soon as possible -- a solution that is acceptable for all those involved," a German defence ministry spokesman said in Berlin. [ID:nBAT005090]

EADS is under mounting pressure to settle the row as it prepares its end-year results to be published on March 9.

It has provisioned for 2.4 billion euros of A400M losses and is expected to take a further fourth-quarter writedown once its share of the remaining 5.2 billion euro cost overrun is known.

Analysts say the market expects extra provisions of up to 3 billion euros, suggesting an underlying loss. EADS predicts 2009 operating losses before one-off items of 2 billion euros.

Fitch Ratings last week warned the outcome of the negotiations could have an impact on EADS's credit rating.