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10 months ago
Airbus lifts lid on helicopter talks after Poland scraps deal
October 11, 2016 / 9:09 AM / 10 months ago

Airbus lifts lid on helicopter talks after Poland scraps deal

A multi-role military helicopter EC 725 by Airbus Helicopters is pictured at an international military fair in Kielce, southern Poland September 2, 2014.Kacper Pempel/File Photo

PARIS (Reuters) - Airbus Helicopters hit back on Tuesday at Poland's decision to cancel a multi-billion-dollar military helicopter deal, deepening a defence procurement row that has soured relations between France and its eastern European NATO ally.

In an open letter to the country's prime minister, Europe's largest aerospace group accused the Warsaw government of shifting the goalposts as Airbus competed with U.S. and Italian rivals and attempting to contravene European Union regulations.

Airbus Helicopters Chief Executive Guillaume Faury said the deal would have led to the creation of 3,800 local jobs and generated more value for Poland than for Airbus itself.

Poland's previous centrist government, which was beaten by the Law and Justice (PiS) party in elections last October, had provisionally agreed with Airbus to buy 50 of its Caracal multi-role helicopters in April 2015 as part of efforts to modernize its military at a time of tensions with Russia. But on Oct. 4 the new administration said it was scrapping the contract.

France reacted angrily, saying Paris would review defence cooperation with Poland and cancelling a presidential visit to Warsaw.

Lifting the lid on the typical secrecy surrounding defence contracts and the economic trade-offs or "offsets" that typically go with them, Faury said the decision to cancel the deal came a day after Airbus had offered new concessions.

He said Airbus Helicopters had offered offsets worth more than the net value of the helicopters, or 10.8 billion zlotys (2.25 billion pounds).

He also said the ministry of development had slapped an additional 23 percent in value-added tax (VAT) on the deal, bringing the overall value to 13.4 billion zlotys.

"Although compensation of a value-added tax through offset is not standard practice, Airbus Helicopters agreed to compensate this gross value," the letter said.

He said the ministry had also introduced other new requirements in August, some of which Airbus had been unable to meet because they contravened European Union regulations, but did not give any details.

Polish officials were not immediately available to comment.

Airbus said the deal would have led to the transfer of 45 items of security-sensitive technology and provided 30 years of work for state-owned companies, modernising an industry depending on servicing "old-generation Russian helicopters".

Faury claimed Airbus had gone further than its rivals, Lockheed Martin's Sikorsky and Italy's Leonardo in offering a state-owned assembly plant.

"Airbus Helicopters offered a full H225M Caracal assembly line mirroring the capabilities of the existing French facility," he said, adding it had also promised a parts production plant worth 370 million zlotys.

Parent Airbus Group says it employs 900 people in Poland and spends 204 million euros annually there.

A French source said last week the French government, which holds 11 percent in Airbus Group, would advise it to review its strategy in Poland, including investments already made. Airbus declined comment.

Editing by Greg Mahlich

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