United States: SA scraps deal for Airbus military aircraft.

Byline: kusumv03

The government has withdrawn from its contract with Airbus to buy eight strategic airlift military aircraft, and hopes that the R2,9bn already spent on the acquisition of the planes can be recovered, as Airbus missed critical production deadlines.

The price tag for the aircraft had ballooned from the original R17bn to a staggering R47bn, it was revealed last month.

Airbus Military said yesterday it was surprised by the announcement. Industry experts said SA not getting the Airbus meant it would not have replacement aircraft for its ageing fleet of C130s, likely to be decommissioned from 2016.

Although SA could now look at buying newer models of the C130 aircraft, experts warned the market was constrained with demand exceeding supply .

The first of the Airbus A400M aircraft were to have been delivered next year, but the project is about four years behind schedule and a first flight, scheduled for January last year , has still to take place. The parallel contract between Airbus and Denel Saab Aerostructures for the supply of parts of the aircraft will remain intact unless it is cancelled by Airbus.

Chief government spokesman Themba Maseko said at a post-cabinet briefing yesterday that after intense discussions by the ministries of defence and military veterans, finance, trade and industry, science and technology and public enterprises it was decided to terminate the contract due to extensive cost escalation and the supplier s failure to deliver the aircraft within the stipulated time frames. The cost escalation would have placed an unaffordable burden on the taxpayer at a time when the national fiscus is under pressure due to the economic downturn; R2,9bn will be refunded to National Treasury as per the contract provisions.

Cabinet believes that the interests of the South African taxpayer will be best served by not proceeding with the contract, Maseko said.

Defence Minister Lindiwe Sisulu , briefing the defence committee, said that the main contract provided that if there was a delay of 14 months in meeting critical milestones then the contract could be unilaterally terminated.

Sisulu told the committee that a strategic airlift capacity remained a priority for the air force, indicating that aircraft would be bought at some stage in the future. The decision was welcomed by the Democratic Alliance, the Freedom Front Plus, the Inkatha Freedom Party and the Independent Democrats.

In response to a question from DA MP David Maynier, Sisulu said it was not clear whether SA could impose penalties on Airbus, but stressed that the contract did provide that the R2,9bn already paid could be recovered, and anything more than that would be a bonus .

Defence analyst Helmoed Romer- Heitman said: The decision to cancel the A400M acquisition essentially leaves SA without any credible airlift capacity, and therefore also without any credible capability to respond quickly to a crisis.

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