Rescue plans for EFA could cut costs by 25%

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MALCOLM RIFKIND, the Secretary of State for Defence, will today attempt to salvage the European Fighter Aircraft (EFA) project by telling his German counterpart that the cost of the aircraft could be trimmed by up to a quarter.

In an attempt to keep Germany in the programme, Mr Rifkind will tell Volker Ruhe, the German Defence Minister, that the consortium building EFA is confident of reducing the price of each aircraft from an initial DM133m ( pounds 45.8m) estimate to less than DM100m.

The new costing will be put to Mr Ruhe when the two ministers hold talks in London today on the future of the troubled four-nation project.

Meanwhile, John Major is expected to seek assurances that Italy will stay with the project when he holds talks this morning with the new Italian Prime Minister, Giuliano Amato, before the opening of the G7 summit.

The EFA consortium, which includes British Aerospace, Daimler-Benz of Germany, Alenia of Italy and Construcciones Aeronauticas of Spain, hopes the lower price will persuade Germany to reverse its decision last week to pull out of the project on the grounds that it was too costly.

The Germans initially put the 'fly away' price of the aircraft, including spares, ground support and pilot training, at DM133m. In subsequent discussions this was reduced to DM110m. The contractors now say that the price has come down again to below DM100m.

Yesterday a source close to the project said: 'I am sure Mr Rifkind will attempt to convince Mr Ruhe that the plane can be produced more cheaply and that if Germany wants a new fighter aircraft EFA is the only solution.'

If Germany accepts the costings, however, it is likely to mean that the Luftwaffe will receive an aircraft built to different specifications. To save money, the German EFA may lack some of the mission equipment which will feature in the RAF version, such as target acquisition devices and self defence systems.

The British fly-away price is pounds 25m an aircraft, but that does not include a 10-year support package for spares. It is understood the Ministry of Defence expects the contractors to reduce the price further. An MoD spokesman said price negotiations are expected to last until next year.

Should Germany pull out of EFA completely it could deal a fatal blow to the project. The Germans would still have to shoulder their one third share of the pounds 5.8bn development costs but production costs for the three remaining partners would rise sharply.

The consortium would probably have to reduce the number of aircraft it expects to produce from 750 to perhaps 450. Britain, Italy and Spain would each take on a larger part of the workload, compensating to some extent for the fall in output.