Image copyright JANEK SKARZYNSKI Image caption Poland had been testing the Caracal helicopter with a view to replacing its Soviet-era equipment

The head of Airbus has criticised Poland for cancelling a planned $3.5bn military helicopter contract.

The Polish government abandoned plans to buy 50 French-designed Caracal helicopters last week.

It spurred a diplomatic row, with French President Francois Hollande calling off a visit to Warsaw and threatening to review other defence cooperation.

Now Airbus chief executive Tom Enders has attacked the decision.

He said the company had been "misled for months" and would be seeking compensation.

The European aerospace giant won a tender to supply the Polish armed forces with helicopters in April 2015.

The two sides began to negotiate the detail of a so-called offset contract, under which Poland would buy 50 helicopters, and in return, Airbus would set up manufacturing facilities in Poland.

Soured relations

Such deals, in which a contractor provides incentives to a country buying its products, are relatively common in the aerospace and defence industries.

However, relations have soured since the election of a right-wing government under Beata Szydlo in October last year.

Last week, Poland called off talks, claiming that the proposed contract was not in the country's economic and security interests.

The reaction from France, where Airbus Helicopters has its headquarters, and where the Caracal has been designed and developed, was swift. President Hollande had been due to visit Warsaw for talks this week, but his visit has been cancelled.

Satisfactory offer

A separate visit by the French defence minister, Jean-Yves Le Drian, was also called off.

Poland blamed Airbus for the breakdown in negotiations, suggesting it failed to offer adequate incentives in exchange for the contract.

Defence minister Antoni Macierewicz told reporters at the time: "Airbus Helicopters did not make a satisfactory offer in the last phase of talks. They didn't respond to the Polish position and this is why negotiations on the contract stopped."

However, in an open letter to the Polish prime minister published on Tuesday, Airbus rejected that claim.

The company insists that its investment offer "would have generated more value in Poland than the revenues that would have been generated for Airbus Helicopters through the helicopter supply contract".

'Slammed the door'

It says it offered to build a full assembly line in the city of Lodz, mirroring the capabilities of its existing plant at Marignane, in southern France. The facility would have been 90% owned by the Polish government. There would also have been a parts factory.

Airbus believes the project would have led to the creation of 3,800 jobs.

According to Mr Enders, Airbus "wanted to invest in Poland big time", but the Polish government had "slammed the door on us".

"We have an impression that we have been misled for months by the current Polish government," he said.

"We spent a huge amount of efforts and money in recent years trusting that we were in a fair and professionally-conducted competition. We will of course seek remedies." </s> "Poland considers the negotiations regarding the offset agreement with Airbus Helicopters related to the contract for the purchase of Caracal multi-role helicopters for the Polish army as finished," the ministry said.

Poland's previous centrist government, beaten by the eurosceptic Law and Justice (PiS) party in elections last October, agreed a provisional deal with Airbus for 50 EC-725 Caracal multi-purpose helicopters.

That meant turning down offers from Sikorsky in the United States and AgustaWestland in Italy.

Earlier this year local media reported that Poland scrapped the deal, but Airbus said talks were continuing.

"For the Polish government the top priority is to ensure the security of the state and the conditions for the development of the Polish defence industry. Discrepancies in the negotiating positions of both sides make it impossible to reach a compromise, and therefore the continuation of talks is pointless," the ministry also said. ($1 = 3.8488 zlotys) (Reporting by Pawel Sobczak Writing by Agnieszka Barteczko; Editing by Ruth Pitchford) </s> Poland's Development Ministry said late on Tuesday that the negotiating position of the two sides on the purchase of 50 Caracal helicopters for 13.5 billion zlotys (3.14 billion euros) was "so different that further talks are pointless."

The collapse of talks also shelves a major offset deal agreed under the previous Polish government.

The ministry said that offers made by Airbus Helicopters had "failed to properly secure Poland's economic and security interests." Polish officials had earlier indicated that the value of the deal should match the value of the purchase.

Offset agreements - where the seller of a product or service agrees to invest in sectors or goods on the buyer's side to compensate or enhance the value of the deal - are common in the military industry.

The decision to buy the helicopters from Airbus was made by the previous government, led by the center-right, pro-European party Civic Platform, as part of plans to modernize the military over the next 10 years, spending about 35 billion euros, and was triggered by regional tensions over Russia's annexation of Crimea from Ukraine.

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The conservative Law and Justice (PiS) government had indicated it might cancel the deal after it won elections last year. Local media reported that Warsaw had actually scrapped the deal earlier this year, although Airbus said talks were continuing.

The original deal was criticized by trade unions in two Polish aviation plants linked to firms that were not chosen in the initial tender: one linked to the US producer of the Black Hawk, the other to a British-Italian consortium AgustaWestland, now called Leonardo Helicopters, which makes the AW149 helicopter.

A system by the Eurosam consortium - including MBDA France, MBDA Italy and France's Thales Group - was also in the running alongside US company Raytheon's Patriot system for the deal.

The Defense Ministry had wanted to buy eight missile batteries by 2025, with two to be delivered within three years of signing the contract. Poland had originally said it would buy 70 helicopters but reduced this to 50.

Poland's parliamentary committee of national defense in January approved a defense budget for 2016 of PLN35.9 billion (euro xxx), a rise of 9.4% over 2015, with the country increasing its annual budget by PLN2.9 billion as it commits to spending 2 percent of gross domestic product (GDP) on defense - NATO's guideline amount.

jbh/msh (AP, AFP, Reuters) </s> MOSCOW – The creation of a helicopter repair and maintenance center in Venezuela is expected to be completed this year, Igor Chechikov, deputy director of Vertolyoty Rossii (Russian Helicopters), which is part of the state-owned Rostec Corporation.

Previously the opening of the maintenance center was planned for the end of 2018. Over the past ten years, Russia has supplied more than 50 Mi model helicopters to Venezuela.

“At this time almost all the necessary equipment has already arrived in the country, the maintenance technicians are already there, the installation and calibration activities are in progress,” Chechikov said.

According to the deputy director, this is a contract in force for some years now. “Venezuela is interested in continuing the project, and we are interested in fulfilling our commitments and we are going to carry them out,” Chechikov said.

Venezuela is the largest importer of Russian armaments in Latin America. Most of the contracts had been signed and implemented before the onset of political instability in the country.

The various military contracts made with this country amounted to billions of dollars. T-72 tanks, BTR-80 armored vehicles, Pechora missile launch systems, S-300, among others were supplied.

Last Wednesday, Igor Chechikov announced the opening of a Mi-35M helicopter repair and maintenance service center in Brazil, in the city of Belo Horizonte.

Meanwhile the opening ceremony of the helicopter training center, created with the participation of Russian and Venezuelan experts, was held on Friday.

“A modern helicopter training center was built under Rosoboronexport JSC’s contract (part of Rostec State Corporation) with the Venezuelan military-owned company CAVIM,” said Russian state arms exporter’s press service, Rosoboronexport.

A team of Venezuelan experts was trained in Russia according to the rules of operation of Russian simulators (on mobile and stationary ground).

According to the statement, the capabilities of this center allow Venezuelan pilots to undergo comprehensive training in piloting the Mi-17V-5, Mi-35M and Mi-26T helicopters in close proximity to reality.

Rosoboronexport reiterated that Russia remains committed to expanding the cooperation of the defense industry with Venezuela, paying particular attention to the training of experts as well as to the timely maintenance of the equipment provided.

Russian arms deliveries “have provided Venezuela with a strong potential that guarantees the country’s security and defense capabilities,” Rosoboronexport said.
Poland's Development Ministry cancels the April 2015 tender contract for the purchase of 50 Caracal helicopters from Airbus Helicopters, worth US$ 3.5 billion.