Germany floats plan to buy new Lockheed transport planes

October 5, 2016 10:14 AM EDT

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By Sabine Siebold and Andrea Shalal

BERLIN (Reuters) - Germany is looking at buying 4-6 new Lockheed Martin (NYSE: LMT) C-130J military troop transport planes and operating them jointly with France, placing a further dent in plans for a fully European airlift capability following the delayed A400M.

German Defence Minister Ursula von der Leyen and her French counterpart, Jean-Yves Le Drian, signed an agreement in Paris late on Tuesday to study a joint tactical airlift pool of C-130J aircraft, the German defence ministry said.

The latest initiative in Franco-German defence co-operation comes against the backdrop of tough negotiations with Airbus Military (NYSE: AIR) over delays to the A400M, as well as growing European concerns over a possible shift in UK defence priorities away from its continental partners following the Brexit vote.

France is already in the process of buying four C-130J aircraft from Lockheed partly to allow refuelling of helicopters used by its special forces, a feature originally meant to be supplied by the A400M but abandoned for technical reasons.

"We expect considerable synergies from such a move," Markus Grubel, parliamentary state secretary in the German defence ministry, told key lawmakers in a letter about the C-130J purchase.

There has been speculation that Germany could buy used C-130J aircraft from Britain to help meet near-term needs.

But a German defence ministry source said Berlin would buy up to six new aircraft directly from the United States.

Such a deal could be worth close to half a billion euros, based on the 330 million euros ($370 million) budgeted by France for its earlier purchase of four C-130Js.

"Current plans call for the procurement of new aircraft. There are no specific timelines for that purchase," a defence ministry source said.

The German-French agreement foresees the new joint tactical airlift capability being in operation by 2021, but it is not certain Germany will have all its C-130Js by then.

Von der Leyen told Reuters last week that Germany would make a decision soon on acquiring C-130s to cover what Berlin views as a gap in capabilities once the elderly Transall leaves service in 2021.

Germany is part of a European group of seven European NATO nations that funded the 20-billion-euro development by Airbus (NYSE: AIR) of the A400M.

Lockheed was originally a partner at an early stage of the A400M project, which was eventually billed as a European alternative to the smaller C-130 and the larger Boeing C-17.

Airbus declined to comment on Germany's C-130 proposals.

(Additional reporting by Tim Hepher; Editing by Elaine Hardcastle)

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