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>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>
• Spanish Air Force takes delivery of its first H215
• The aircraft will be the first H215 in service in Spain
• It will be based on Gran Canaria to perform Search and Rescue missions
• The first H 215 “made in Romania” helicopter is to be produced in 2018 at Airbus Helicopter’s €52M investment in Ghimbav, Brasov

In a ceremony held at the Airbus Helicopters plant in Albacete, the Spanish Air Force yesterday took receipt of its first H215, a robust, cost-effective latest-generation helicopter with an extensive mission capability. The purchase was negotiated in July by the Spanish Ministry of Defence, through the NATO Support and Procurement Agency (NSPA).

A member of the tried-and-tested Super Puma family, the H215 is a twin-engine, heavy rotorcraft equipped with state-of-the-art technologies, which complies with the most stringent safety standards. Its onboard equipment includes multi-function digital screens and an advanced 4-axis autopilot which provides flight envelope protection, unrivalled precision, and stability in even the harshest operating conditions.

The aircraft carried out final test flights at the Albacete plant on 22 September, where it was painted and fitted with specific mission systems enhancing its Search and Rescue (SAR) and Personnel Recovery/CSAR missions. The Air Force’s H215 boasts additional fuel tanks that extend its range up to 560 Km, an emergency buoyancy system, a high-frequency radio, a hoist, and a cockpit compatible with night vision goggles, among other equipment.

“H215 is the perfect acquisition for any modern air force. Spain’s decision to buy the helicopter which we will be soon producing in Romania confirms the European value of H215 helicopter and paves the way for other air forces to upgrade their capabilities. We are looking forward to starting H215 production in Ghimbav and we hope that Romania will be acquiring the first helicopter produced by Romanians”, said Serge Durand, General Director Airbus Helicopters Industries who is leading the operations in Romania.

The Spanish Air Force operates several helicopters belonging to the Super Puma family, in both civil and military versions. The aircraft operate in 3 SAR Squadrons as well as in the 402 Air Force Squadron, which is responsible for the transport of senior government officials. The new H215 will be assigned to the Air Force’s 802 Squadron/RCC Canarias and will arrive at its base in Gando (Gran Canaria) before the end of the year.

The new helicopter will enter into service straightaway, following a short training program for crews, who already have extensive experience of flying other versions of the Super Puma.

“We are very grateful to the Air Force for its renewed confidence, and I am proud to be here today to deliver a helicopter that is not only powerful, rapid and reliable, but also cost-effective, offering a highly optimized operating costs,” said Francisco Vergé, General Manager of Airbus Helicopters in Spain. “I wish you many flight hours, all with our first-rate support, which we are committed to providing you with.”

On September 13th 2016 Airbus Helicopter inaugurated Airbus Helicopters Industries new production site in Brasov, in the presence of French President Francois Hollande and the Romanian Prime Minister Dacian Ciolos . The first H215 100% made in Romania could come out of the Final Assembly Line in Brasov in 2018.The plant in Ghimbav will employ 350 people when it reaches full production capacity.
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.