UPDATE 1-Airbus says A400M contract fix would not cost more

* Airbus says not seeking cash help for A400M

(Adds union comment)

PARIS, Feb 11 (Reuters) - Contract changes sought by Airbus EAD.PA in the wake of delays to its A400M military aircraft programme would not cost European taxpayers extra money, the planemaker's deputy head was quoted on Wednesday as saying.

Chief Operating Officer Fabrice Bregier told Les Echos in an interview that contract talks between Airbus parent EADS and seven European NATO countries should be concluded this year.

“According to the current contract, EADS faces the risk of significant penalties for delays. We are not asking for these penalties to be lifted, but to be spread out over a new timetable that is both credible and binding,” Bregier said.

“If the governments accept, it won’t cost them anything, and that will reduce our risk.”

Airbus Chief Executive Tom Enders said last month the task of completing Europe’s biggest single military project within the original 20 billion euro contract was “mission impossible”.

Using a rare commercial contract for a large military deal, seven countries -- France, Britain, Germany, Spain, Turkey, Belgium and Luxembourg -- ordered 180 planes to be delivered from 2009. Malaysia and South Africa ordered another 12.

EADS has said deliveries will now not take place before late 2012 and French senators said on Tuesday the first significant wave of operational aircraft would not be delivered before 2014.

The senators said after completing a probe into the A400M that European leaders should intervene to rescue the project. Talks could happen on the sidelines of a NATO summit in April.

EADS blames delays in software delivered by a consortium of European engine manufacturers and has called for a reallocation of risks between governments, the company and its suppliers.

Industry analysts say that in practice this could mean waiving some penalties or asking engine makers to share the burden. Engine makers led by Rolls-Royce RR.L and France's Safran SAF.PA have denied responsibility for the delays.

EADS has proposed a compromise that would slow the initial phase of production to help weed out risk. A first basic model would be produced for 18 months, followed by a better-equipped model with more navigation aids but less national customisation.

EADS’s problems stem from the fact that it must deliver the planes to defence forces at a fixed price of about 110 million euros per plane while its suppliers’ liability is capped.

It has acknowledged it blundered by agreeing to sign the contract with pan-European procurement agency OCCAR but its supporters say politicians are partly to blame for overriding its choice of a Canadian engine in favour of a new European one.

At Airbus headquarters in Toulouse, unions said they supported calls by EADS to temper the financial consequences of the delays, which a French newspaper pegs at 5 billion euros.

But many blamed ongoing industrial problems inside the company following delays to the A380 civil superjumbo. The A400M contract was signed in 2003, shortly before a series of management battles erupted inside the company.

“This fiasco grew originally from a management crisis at EADS, just like the A380 whose problems have since been sorted out,” Force Ouvriere union delegate Jean-Francois Knepper said.

While Franco-German tensions fuelled the A380 crisis, the A400M has put the spotlight on the Spanish camp in EADS, which was formed from a merger of assets from those nations in 2000.

But Knepper said suppliers of engines and systems also deserved blame for the A400M delays and should share the cost.

The A400M contract is split between 10 billion euros for aircraft development and 10 billion euros for production. EADS has so far provisioned for losses of over 1.7 billion euros.

(editing by John Stonestreet)


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