Europe to build military aircraft

December 17, 2001 Posted: 1446 GMT

LONDON (CNN) -- Eight European nations are set to sign a deal to build a European military transport aircraft, a spokesman for Airbus has told Reuters.

Airbus Military spokesman Alistair Reynolds said the deal, worth a total of some 16 billion ($14.5 billion) for 196 planes, would be signed in Brussels on Tuesday at the end of the NATO defence ministers conference.

The A400M plane, seen as key to equipping Europe's planned rapid reaction force, will be built by Airbus Military, with each plane costing some 80 million.

Noel Forgeard, chief executive of Airbus SAS, which owns Airbus Military, said the signing is contingent on German parliamentary approval next year.

He also said he hoped the German parliament would vote next month to back the project, which is seen as essential if Europe is to deliver on promises to create a rapid reaction force.

The announcement comes just after Forgeard said on Monday Airbus SAS plans to cut roughly 500 jobs in Britain to counter the slowing demand from airlines. He said no job cuts were planned in continental Europe.

Airbus Military is majority owned by European Aeronautic Defence & Space Co (EADS). British defence contractor BAE Systems owns 20 percent.

Forgeard said the work would be shared among Britain, Spain, Germany and France. Italy has been critical of the project and is not likely to sign the deal, he added.

Defence analysts have expressed doubts over how meaningful a signing ceremony would be given Germany's demand for a clause in the deal that would say its purchase of 73 aircraft was contingent on future approval by parliament.

A German defence ministry spokesman said earlier he hoped the deal could be signed on Tuesday, but added negotiations were still under way between the signatories.

Germany only has parliamentary approval for 10 billion marks ($4.6 billion) for the project, enough for about 40 planes, which Airbus said would not be enough for the deal to fly.

The ruling Social Democrats and Greens agreed last week to double

that ceiling, but parliament's budget committee has yet to reach

a formal agreement to that effect.

Turkey, Belgium, Portugal and Luxembourg are committed customers.