Examination of Witnesses (Questions 100
- 119)
TUESDAY 23 MAY 2000
SIR ROBERT
WALMSLEY AND
VICE-ADMIRAL
SIR JEREMY
BLACKHAM
100. Is there no alternative?
(Vice-Admiral Sir Jeremy Blackham) The only other
alternative is the Antonov which has a less satisfactory performance
than the C-17.
Chairman
101. Could you imagine the RAF, having got used
to a serious heavylift aircraft, wanting to hand them back or
the lease being discontinued?
(Vice-Admiral Sir Jeremy Blackham) To the best of
my knowledge, they are very happy with the decision to buy A400Ms.
The Chief of the Air Staff said so at the press conference when
this was announced.
102. They would, would they not? How long is
the lease for? Is it open ended?
(Sir Robert Walmsley) Seven years with two optional
extensions of one year to bring it up to either eight or nine,
should we so wish. It is principally designed against the possibility,
perish the thought, that the A400M might suffer some delays.
103. At what stage will you have to make an
irrevocable decision on proceeding with the European option? If
there are delays, how will the calculations come into play between
continuing the lease and hoping there is no prevarication in the
procurement of the A400M.
(Sir Robert Walmsley) The delays I was referring to
then were in the execution of the contracted A400M programme towards
the end. Should the Government find itself still the only country
in Europe which is committed to A400M, there will come a time
when we shall have to say this is going nowhere. We do not expect
that to be the case. I cannot tell you how enthusiastic our European
partners have been about the decisions on the missile, the decisions
on the A400M. Spontaneous clapping broke out at retirement dinners
held for DASA senior staff members. The point I am trying to get
at is that although we are the first to commit to A400M, this
has been very warmly greeted throughout Europe and I do not envisage
getting into a difficulty over the next year or so while we finalise
the contract for the A400M in respect of countries saying they
did not mean all that stuff they said and they have changed their
mind. Where I am much more sensitive in terms of risk on A400M
is making sure that we can persuade our partners to commit firmly,
as this Government has done, to a number of aircraft which in
aggregate makes the programme a viable proposition, taken of course
with the Airbus company's assessment of their likely export orders.
They are not just selling to the seven customers who work together
currently. They are hoping to make some exports. They look at
this in the round. Numbers is an issue but I am expecting that
to come out satisfactorily.
104. So in a way the C-17s are a belt and braces
exercise because if somebody pulls out, which is by no means impossible,
or the numbers reduce, I hope you would have an option to run
on the lease or even purchase the aircraft and hopefully purchase
additional aircraft. This has to be a stimulus to the Europeans
to deliver what they have been promising to deliver for some considerable
time.
(Sir Robert Walmsley) Arrangements of the type you
suggest would be extremely sensible, but I do not want in any
way to water down the commitment to making this A400M work. Of
course we will look after our own interests in the ultimate.
105. How do you make a balance between leasing
and purchasing? Over what period? If it is nine years or ten years,
would the National Audit Office then come back and say "Why
didn't you buy the bloody aircraft in the first place?" as
opposed to entering some hire purchase agreement with Boeing?
(Sir Robert Walmsley) I wish the National Audit Office
did use language like that. They are much more careful in their
questions. There is no question that if this had been a long-term
requirement, as we were hinting at a moment ago, leasing would
not have been an option. It just is not sensible to lease defence
equipment for a long-term requirement. It is extremely sensible
to lease defence equipment for a short-term requirement. Nine
years is getting quite close to the knuckle, I would think, in
terms of what we could regard as an economic proposition for leasing.
We will look very, very carefully at how we might pick up on the
point you make about safeguarding options, how we could convert
the lease to a purchase if it should come to that.
Mr Cann
106. We are certainly not going to be able to
lease Eurofighter, are we, not over a 28-year period?
(Sir Robert Walmsley) I think we can say that is an
extremely safe assumption.
Chairman
107. Did we not lease Tornado to the Italians?
(Sir Robert Walmsley) Short term, pending the arrival
of Eurofighter.
Dr Lewis
108. There will be a great deal of spontaneous
clapping in my constituency when they hear the Admiral's remarks
about the importance of sealift because we house the great military
port at Marchwood, and a splendid operation it is too. It is most
efficiently run and I must say it integrates itself marvellously
into the community and is a fine example of civil/military relations.
I was there only last week, so I declare an interest. Mike Gapes
has already covered a large part of this question but it still
bears a little more exploration in respect of the trade-off -
such as it is, and I think your suggestion is that it is not all
that much - between airlift capabilities and sealift capabilities.
Our advisers told us before you came in that there are some moves
towards developing a new generation of very fast Roll-On Roll-Off
ships. Can you tell us something about that?
(Vice-Admiral Sir Jeremy Blackham) May I say there
is a substantial trade-off between air and sealift, or there would
be if one had either very large ships or very fast ships. The
equation you have to balance is the weight of lift you want to
get and the distance over which you want to lift. I realise I
am stating the obvious. There is a very considerable trade-off
between the two. There is interest already in the United States
about fast ships and obviously I should be very interested in
that too. To the best of my knowledge, there is no immediate prospect
of bringing in ships of the sort of speeds I personally think
will be necessary; I am talking about 50 to 70 knots, the sort
of thing which would allow you to get to the Adriatic in a day
and a half. There is no immediate prospect of those sorts of ships
and propulsion systems being available, but I have my fingers
crossed.
109. Vessels of those dimensions travelling
at those speeds would certainly be a sight to see. Does the establishment
of the Defence Transport and Movements Agency with the DLO provide
any added impetus to a more holistic view of the ways in which
the MOD's lift requirements could be satisfied?
(Vice-Admiral Sir Jeremy Blackham) I am a little loath
to say too much about an organisation which belongs to the Chief
of Defence Logistics. From my own perspective, we have sea and
airlift within the same area in the capability work precisely
so that we can address the capability itself in a holistic way.
That is what we are doing.
110. Does that agency simply use those assets
which are available or does it seek to influence the balance of
the assets we have?
(Vice-Admiral Sir Jeremy Blackham) The frontline user,
what we call in our jargon the second customer, has a big influence
on what we do and is a contributor to the way in which we develop
the capability needs. Yes, they certainly have an influence.
111. Does the selection of the A400M rather
than the C-17 for the longer-term requirement place a greater
importance on having sufficient sealift to move the heavier equipment?
This is basically a summary of the line of questioning of Mr Gapes.
(Vice-Admiral Sir Jeremy Blackham) It does not place
greater importance, they are both very important. I cannot conceive
of any circumstances where we wanted to engage in a substantial
deployment where we would not require both.
Mr Cohen
112. On the purchase of the A400M, I hope in
Zen Buddhist terms it is not the sound of spontaneous one-handed
clapping. In strictly financial terms how much more is the purchase
of the A400M than an equivalent C-17?
(Sir Robert Walmsley) Individual aircraft, in round
figures, somewhere between one half and two thirds.
113. More?
(Sir Robert Walmsley) No; less than a C-17. An A400M
is cheaper than a C-17 and costs somewhere between a half and
two thirds. But, you cannot turn that number and multiply it by
25 and start thinking about what that means. It is not that simple.
There are costs like support costs, there are training costs,
there are how many spare engines we have to keep in a shed in
case one of the engines breaks, there is what we can do about
pooling our support costs with either the United States Air Force
on the one hand or with the half a dozen partner countries we
have on the other hand. I should simply say that we are very,
very careful in our assessment of bids to look at the capability
costs and not just on an initial acquisition basis but on a through-life
basis. What I can say is that it is nip and tuck between them
and I am certainly not going to compromise our ability to negotiate
a tough A400M contract by telling you how much they were in the
lead.
114. Although it would be interesting at some
point to see your comparative nip and tuck figures, if that were
possible.
(Sir Robert Walmsley) It would be interesting. It
would actually be really important at the stage we got to completing
the contract. At that stage of course we would only have completed
the contract with one company, so we would not be comparing a
hard negotiating figure with the softer figure we have in terms
of estimates.
Mr Cohen: Nevertheless, it might be useful
if we could have, perhaps in private, such a document, that we
could see how you come to your assessment between the two. Preferably
with your assumed figures.
Chairman
115. After you have finished your negotiation.
(Sir Robert Walmsley) Thank you very much; that was
what I was waiting for.
Mr Cohen
116. Perhaps you could just leave your laptop.
(Sir Robert Walmsley) I have to tell you that I do
not own one.
117. Not in there of course is the development
work and the development risk because the Minister and MOD have
made it clear that the A400M is being contracted as a complete
package with the development work subsumed within that total bill.
Are you satisfied that there will not be unexpected development
risks and development costs ensuing from that which would put
it nip and tuck, nip and tuck the wrong way.
(Sir Robert Walmsley) Unexpected development problems
will arise but we shall negotiate a fixed price contract which
means that in financial terms those fall to the Airbus military
company. What I would say is that we see several types of risk
to the A400M procurement. It is not just a question of technical
risk, although goodness me, it is developing the largest turbo-prop
engine ever put into service. The first risk is the one the Chairman
alluded to, which is whether we shall be able to persuade all
the countries to sign on the dotted line in a reasonable time.
That is an important risk, the collaborative, administrative risk.
There is a business risk in that the Airbus Military Company,
grand title, has never built a military aircraft yet. An extremely
competent company in terms of manufacturing passenger aircraft.
No question about that. A visit to the Boeing facilities in Seattle
and the Airbus facilities in Toulouse would leave you in no doubt
about which one looked closer to the twenty-first century, that
is to say it is the Airbus facilities in my view. What I can say
is that there is still a risk about dealing with governments on
a defence project. They are not used to that. They are used to
dealing with airlines on a strictly commercial basis which is
why we have tried to put our partners into a comfortable position
vis-a"-vis contracting for this in as commercial a way as
possible. There is still a risk. Three risks then: collaborative
risk, Airbus never built a military aircraft before, and of course
the not to be neglected technical points such as those on the
power plant.
118. Are you confident you can put a lot of
the costs onto the Airbus company?
(Sir Robert Walmsley) I am extremely confident of
that. There is essentially very little government furnished equipment
or information or facilities associated with this programme. That
is where you get vulnerable. It does not have to be integrated
with some complex weapons system or anything like that. A bit
of integration on communications which is not nearly so difficult.
119. I am pleased about that. Last week the
Secretary of State, and you have repeated it here today, said
that it is dependent on our European partners committing to it
and of course realistic numbers of aircraft being ordered. What
is the total number which would have to be committed to, to make
this project viable?
(Sir Robert Walmsley) If you could just imagine, if
I say a number which is needed and then we add them up and it
is one less than that, what are the Airbus company going to do
to me? They are going to come and say if I do not order another
aircraft when I have already agreed that ... I am just not going
to tell you a number like that.
| 
