Pic: A400M MSN 001 poweringup all four engines for the first time last week. First flight is now anticipated before Christmas

European defence conglomerate EADS may cancel industrial contracts in South Africa tied to the Airbus Military A400M Loadmaster strategic transport project after the country pulled an order for eight of the aircraft French newspaper La Tribune reported this morning.

The paper did not say where it obtained the information.

US news service Bloomberg reports the contracts are valued at about 400 million euros (R4.4 billion) through partnership agreements with South African state-owned defence contractor Denel Saab Aerostructures (DSA) and private aviation concern Aerosud.

 The La Tribune added relations between EADS and South Africa were strained as a result of the cancellation that came at a key time in the programme as the prototype was being readied for an imminent first flight.

The paper added "the letter of cancellation of the contract ... greatly surprised the European group."

Noteworthy was that the paper put the worth of the SA order at 1.5 billion euro (R16,8 billion), up from the 837 million euro (R9.6 billion) *1 deal signed in 2005 that 100% EADS-subsidiary Airbus Military has said was the only price on the table.

Now-suspended Armsor CEO Sipho Thomo had put the price at R47 billion, while defence minister Lindiwe Sisulu put it at R30 billion at a press conference to announce the cancellation and a Cabinet spokesman had it at R40 billion.

Sisulu, DSA and Aerosud has previously said they did not expect fall-out from the cancellation.

The minister's spokesman Ndivhuwo Mabaya this morning said the La Tribune report appeared speculative. "May?" he said of the operative verb. "It is difficult to comment on speculation," he said.

"The impact of the ... cancellation will have little impact in the immediate future on DSA as the aircraft is still in development phase.," DSA CE Lana Kinley told defenceWeb earlier this month.

She has previously told defenceWeb DSA expected revenue of R13 billion from its A400M activities over the next 15 years.

" ...the status quo prevails and I ... have no further comments (on) this issue," she said this morning.

Aerosud MD Paul Potgieter said such a reaction from Airbus would be understandable, and that there is a risk to SA industry is very real, but the Aerosud position is that one must under the present very fluid circumstances take care not to react to rumours "our position continues to be that it is premature to comment. I personally see a long process ahead of us all."

Potgieter's company's workshare is estimated at R1.5 billion.

Defence analyst Helmoed-Romer Heitman said he still doubted that EADS or Airbus Military would pull any work from Aerosud, "which is a long-standing supplier to Airbus "

He said they would not want to spoil a perfectly good relationship, and it would make no sense at all to do so.

"I also doubt that EADS/Airbus Military would pull the design work from DSA at this point in the project. That would only serve to incur further delay, cost and risk, which would make no sense in a project that is already over-budget and over-schedule.

Heitman said, however, he would not be surprised if they declined to place further planned A400M work (or even other work, if any) with Denel or pulled the bulk of the A400M manufacturing work, redistributing it among the other project partner nations.

"Here it is important to remember that there is not a similar relationship to that with Aerosud; that Denel is a government entity (Saab only has 20%) and it is the government that pulled out of its half of the overall deal; and that some of the work packages allocated to South Africa were actually taken away from other development partners at the time. Those partners will want that work back."

With acknowledgements to Leon Engelbrecht and defenceWeb.