EADS, the European defence group, has suffered a blow in its effort to recoup up to €1.4bn ($2bn) in extra costs for developing the Airbus A400M after a rebuff from government ministers.
Franz Josef Jung, German defence minister, turned down a written request from Louis Gallois, EADS chief executive, for discussions about reducing the penalties that the company has to pay a seven-nation consortium for delayed delivery of the military transport aircraft.
Government and EADS officials said Mr Jung rejected the initiative, which did not propose any sums, by noting that the parent of commercial aircraft maker Airbus was doing well - it made €441m net profit in the first half of 2008.
The reply from Berlin, which officials said was made after consulting with partner governments including France and the UK, is bad news for Mr Gallois, who has said the A400 will never make a profit under the seven-year-old contract.
EADS's troubles started late last year, when it said delivery of the first aircraft - to France - would be delayed by 12 months into 2010.
This triggered penalty payments to governments that forced EADS to write down €1.4bn, becoming the second significant development project to cause EADS and Airbus headaches.
Its commercial superjumbo, the A380, was delayed several times in past years, also precipitating large writedowns.
Fears about delays to the A400M project have contributed to problems selling the turbo prop-driven aircraft to countries beyond the project's founders. They have 180 units on order, while only two other countries have signed up for a further dozen.
Germany is the project's biggest buyer with 60 aircraft on order - and is one of the nations most exposed to possible knock-on effects from delays. Berlin is relying on delivery from early 2011 to replace a fleet of battered transporters.
As a result, German officials said, their top priority was to ensure EADS could fulfil its new delivery schedule. Should it fail, Berlin could be forced to lease C-17s from Airbus rival Boeing.
Wary that this alternative could trigger a backlash in the German parliament, Berlin does not exclude sitting down with EADS to talk about the A400M contract at some point.
Berlin also does not exclude the possibility that the A400M could eventually come to be linked with negotiations over the Eurofighter Typhoon, the European fighter jet programme, as the UK wants to pay less through scaling down its order of 232 of the EADS-made jets by more than a third.
