MADRID/PARIS, March 13 (Reuters) – Doubts are growing over the future of Madrid’s remaining orders for the Airbus (AIR.PA) A400M airlifter, European defence sources said on Monday, raising the stakes of talks over the planemaker’s future investment in one of its founder nations.

The A400M is one of Europe’s core defence projects and a focal point for aerospace investment in Spain, which has ordered 27 of the troop planes and is responsible for final assembly.

But after several months of uncertainty, European defence sources said Madrid was leaning towards cancelling the remaining 13 or so aircraft in Spain’s quota that have not been delivered, after its air force indicated it did not need the extra planes.

The Spanish government and Airbus declined comment.

Designed to boost the strategic autonomy of seven European NATO nations that previously relied on U.S. airlift, the A400M project has been hit by a series of cost overruns and delays.

Fresh doubts over what was once Europe’s largest defence project emerged as Airbus (AIR.PA) Chief Executive Guillaume Faury attended centenary celebrations of Construcciones Aeronauticas (CASA), one of the European companies that gave birth to Airbus more than 50 years ago.

Prime Minister Pedro Sanchez, Defence Minister Margarita Robles and King Felipe also attended Monday’s event in Getafe, outside Madrid, which included the opening of a space facility.

Any decision over the future of the A400M is expected to trigger intense negotiations over alternative defence orders and Airbus’s ongoing investment in Spain, the sources said.

JOBS AND RESEARCH

Spain and Airbus are already in discussions over how to soften any impact from a partial A400M order cancellation, they said, while Sanchez’s office issued a detailed breakdown of the benefits that Spain had provided Airbus.

In a statement following a meeting between Sanchez and Faury on Monday, the prime minister’s office made no mention of the A400M but urged Airbus to increase its footprint in Spain – one of its core nations alongside France, Germany and Britain.

The two sides “addressed the need for the company to increase the industrial workload in Spain” as well as boost research spending and space activities, the statement said, adding that Madrid had supported Airbus during the pandemic.

There was no immediate comment on the meeting from Airbus.

Defence publication Janes reported last year that Airbus was waiting for Madrid to back the SIRTAP tactical drone project, co-developed by Airbus Spain and Colombia.

Spain also last year ordered an extra 20 Eurofighter combat jets, a four-nation fighter programme for which Airbus is the industrial partner in Spain and Germany.

Spain’s unemployment rate rose to 12.87% in the fourth quarter of 2022 from 12.67% three months earlier, pushing the number of unemployed people above the 3 million threshold.

In the southern Spanish region of Andalusia, where Airbus assembles the A400M, the rate was however higher at 19%.

Reporting by Belen Carreno, Tim Hepher, Inti Landauro, Jesus Aguado; Editing by John Stonestreet, Alison Williams and Lisa Shumaker

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