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Deal reached on A400M financing

| November 7, 2010 8:00 PM

PARIS (AP) - European aerospace company EADS said Friday that governments of the seven launch customers for its A400M military transporter have finalized an agreement to keep the troubled project alive.

The agreement leaves unchanged the overall economics of a deal reached in March that called for the seven customer nations - Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey - to increase the price of the contract by $2.8 billion.

The deal would also provide an additional $2 billion in exchange for a share of future export sales.

In a joint statement, EADS and its planemaking subsidiary Airbus said government payments are now more back-loaded than previously expected, but didn't provide details. Previously, EADS had indicated that the pre-delivery payments would be made between 2010 and 2014.

Britain's Defense Ministry called the agreement "a positive step forward for the A400M program." In a statement, the ministry said a draft contract amendment agreed on Friday will be subject to formal national approvals.

The project is billed as crucial to modernize Europe's air forces - but it almost fell apart over delivery delays and cost overruns.

A spokesman for Germany's Defense Ministry said that as part of the agreement, Germany will turn seven of the 60 planes that it ordered into options. It will also forego special technology that allows for low-level flights, allowing Germany to save 670 million. He did not give his name in keeping with ministry policy.

The $28 billion project is about $6 billion over budget and almost four years behind schedule.

French Defense Minister Herve Morin has called the A400M "Europe's most ambitious military program."

The A400M, a four-engine turboprop, is seen as inhabiting an important niche market between the Lockheed Martin C-130J Hercules and Boeing's C-17 Globemaster III. It is designed for combat missions in rugged areas like Afghanistan as well as humanitarian missions.

The plane had its maiden flight in December. The program was launched seven years ago with an order for 180 airplanes for a cost of $28 billion.

The program nearly collapsed over cost overruns, and a struggle between the plane's manufacturer and its military customers over technical and financial problems came to a head earlier this year, after EADS threatened to pull the plug on the project.

France's defense minister has predicted that Airbus could potentially export about 300 of its A400M military transport planes.