Airbus loses £3 billion contract with South Africa

South Africa has cancelled a £3 billion contract for eight military aircraft with Airbus, citing escalating costs and delivery delays.

The deal for the A400M planes was signed in 2005, when the proposed cost of the planes was significantly less.

The planes were originally due to cost £500 million – a cost which has spiralled to £3.7 billion.

The final assembly line is at the Spanish manufacturing facility of EADS, but the overall design and management of the wings is the responsibility of the Filton Airbus plant, where about 900 workers are involved in the project.

The wings' composite material is made at Filton, where the fuel system was also designed and integrated into the wings.

A further 100 workers at Rolls-Royce in Patchway make the engines.

A South African government spokesman said the cost was now too great given its more limited resources during the downturn.

The A400M has suffered technical problems and been delayed. It was due to fly for the first time in March.

South African government spokesman Themba Maseko said: "The cost escalation would have placed an unaffordable burden on the taxpayer at a time when the national (finances) are under pressure due to the economic downturn."

He said the planes would now cost 47 billion rand (£3.7 billion), compared with 6.4 billion rand when they were ordered.

Airbus said it was "surprised" by the decision.

"We regret this all the more since it comes at a time when the programme is making major progress towards a test flight before the end of the year," it said.

The A400M had a boost this summer, when seven European countries pledged to continue supporting the troubled plane. Ministers from Belgium, France, Germany, Luxembourg, Spain, Turkey and the UK hope to agree a contract for the plane by the end of the year.

The project was launched in 2003 as a replacement for the main Nato military transport aircraft, the US-built Lockheed Martin Hercules. Airbus UK has invested more than £200 million over five years in the wing project, which employs 900 workers at Filton.