Armscor admits maintenance blooper helped to blow up Airbus costs
Date: 16 October 2009
Julius Baumann
ARMSCOR yesterday admitted that the parastatal's failure to provide for maintenance costs had added to the R30bn extra SA has to pay for the eight A400M military transport aircraft on order from Airbus.
On Wednesday, Armscor CEO Sipho Thomo told stunned members of Parliament's defence committee that cost overruns had pushed up the price of the eight aircraft from R17bn to about R47bn, without giving reasons for the sharp rise.
Yesterday, Airbus responded angrily to Thomo's statement, saying the price tag was "wildly exaggerated". "Airbus Military categorically denies the A400M price increase stated in South African news reports this morning. Airbus is committed to keeping the programme within a realistic and affordable budget, with minimum additional impact on its customers," said Linden Birns, spokesman for Airbus in SA.
Thomo admitted that adding in the maintenance costs over the life of the aircraft to the overall price tag had pushed SA's cost increase up 600%, from R17bn in 2005 to R47bn now, exceeding the cost escalation directly related to the development cost of the A400M. "It was never put in the original contract," he said.
Meanwhile, Airbus has requested clarity from the Department of Defence on Thomo's remarks.
An Airbus delegation was in SA last week to discuss the progress of the project and the likely cost effect and possible price adjustments.
Thomo said it was now up to the government whether it wanted to proceed with the order. He said SA had already made R2,9bn in pre- delivery payments to Airbus, with a further R1,1bn payment expected to be made next month.
Democratic Alliance MP David Maynier has called on the government to scrap the order, but this may hurt South African aerospace groups Aerosud and Denel Saab Aerostructures, which are to manufacture key components for the new aircraft.
Lana Kinley, CEO of Denel Saab Aerostructures, said it had already spent about R500m to prepare for production . Aerosud MD Paul Potgieter said it too had made a significant investment at its Pretoria plant, without disclosing figures.
Both groups have incurred huge costs due to the delays in the A400M and have scrambled to find additional orders for their order books.
Source: Business Day
