After Airbus A400M, Europe faces dearth of big defense projects

By Tim Hepher and Brenda Goh PARIS/LONDON (Reuters) - European politicians will toast the long-awaited Airbus A400M military transport plane at a ceremony in Spain on Monday, but face warnings that Europe's largest-ever collaborative defense project may be its last for years to come. After a tortuous 30 years in development, the first of 170 troop and cargo planes ordered by seven nations grants Europe a step towards independence in military transport, a key plank of foreign intervention capability. The ceremony in Seville, where the planes are assembled, will also kickstart an A400M export campaign, a glimmer of hope to a European aircraft whose foreign sales have been dogged by costly problems with its huge turbo-prop engines and a four-year delivery delay. Still, the aircraft's manufacturer has questioned how a continent pulled apart by weak finances and policy rifts will address future conflicts like Syria, Libya or Mali - and in turn how readily nations will co-operate on large defense procurements. "I think we are further away from a common foreign and security policy than at any point in the last 20 years. I do not believe we will see a meaningful (one) in the next 20 years," Tom Enders, chief executive of Airbus parent EADS, said last week in a speech on transatlantic security. "I do not assume in my strategic planning that in the next 10 to 15 years there will be any new major European projects in our sphere of activity. I see governments are even trying to cut or reduce projects that previously been agreed," Enders said. The A400M was designed to meet a shortfall in military transport capacity among seven NATO nations: Belgium, Britain, France, Germany, Luxembourg, Spain and Turkey. But the 20 billion euro project went more than 5 billion euros over budget, forcing buyer nations to agree a 3.5 billion euro bailout in 2010, part of which is supposed to be repaid from export royalties. Many analysts say the region's financial crisis has exacerbated divisions and dampened interest in projects that have a habit of running heavily over-budget. "We will go through a phase now where there is not only little collaboration but also little investment in new products," said independent defense analyst Howard Wheeldon. A recent decision to halt production of the Boeing C-17 strategic jet-powered transporter, a rival to the A400M, breathed life into hopes for new export orders for the plane. Until now, the only export customer is Malaysia, with four planes on order. South Africa canceled an order. Airbus sees a market for several hundred aircraft. But the company has expressed concerns about plans by some of the plane's European customers to sell A400Ms they have ordered directly on to customers outside the region, frustrating Airbus hopes for producing extra planes. Germany, Spain and most probably France, analysts say, want to jump in front of Airbus and export some of their domestic allocations directly to boost budgets. That also poses technical difficulties over export royalties. According to two people familiar with the 2010 bailout plan, the first 174 planes (including Malaysia's four) are excluded from the royalty agreement. Enders told Reuters that such export plans were "understandable" in the weak fiscal climate, but added: "As an industrialist, I cannot be very happy about this approach and I have to ensure we are not leaking value". (Additional reporting by Adrian Croft in Brussels; Editing by Kenneth Maxwell)