Poland likely to scrap $3 billion Airbus helicopter deal: report

A flight test engineer holds an Airbus Group flag after the first flight of the Airbus A320neo (New Engine Option) in Colomiers near Toulouse, southwestern France, September 25, 2014. REUTERS/Regis Duvignau

WARSAW (Reuters) - Poland's $3 billion (2 billion pounds) army helicopter deal with Airbus AIR.PA is "very likely" to be canceled, the deputy defense minister said on Tuesday, signaling one of Warsaw's key military programs, speeded up in response to the Ukraine crisis, may face delays.

Poland's previous centrist government, beaten by the Eurosceptic Law and Justice (PiS) party in a parliamentary election in October, agreed a provisional deal with Airbus for 50 EC-725 Caracal multi-purpose helicopters, turning down offers from Sikorsky LMT.N and AgustaWestland SIFI.MI.

The contract, negotiated by the economy ministry, has yet to be signed and PiS has repeatedly said it would rather see the deal awarded to a producer manufacturing locally. Both Sikorsky and AgustaWestland have facilities in Poland.

“I can’t say that the final assessment of the (industrial) offset negotiations will be negative, but considering how big the differences are, it is very likely that an agreement will not be reached,” Bartosz Kownacki told the Rzeczpospolita daily.

“We are not allergic to the French, but to not utilizing the capacity of the Polish (defense) industry,” Kownacki said. “We’d have to get really as much as possible from the French side to make this contract profitable for us,” he said.

Poland may be better off scrapping the deal and paying a potential fine, which may reach hundreds of millions of zlotys, than accepting the losses the contract would impose on the Polish defense industry, Kownacki was quoted as saying.

The negotiations are supposed to conclude by Feb. 10, the daily said.

“Talks on industrial compensation are under way. Let’s wait until they are concluded,” a spokesman for Airbus Helicopters said.

Reporting by Wiktor Szary; Additional reporting by Cyril Altmeyer; Editing by Mark Potter