BERLIN (Reuters) - Airbus, frustrated by a German freeze on arms exports to Saudi Arabia, has decided to redesign the C295 military transport aircraft it builds in Spain to remove its German content, company sources told Reuters.
Airbus Chief Executive Tom Enders said earlier this month the company could consider making German free products because of Germany's "moral superelevation" on arms exports, which was frustrating Britain, France and Spain.
German curbs on arms exports to non-EU or NATO countries have long been a thorn in bilateral co-operation because of the historical objections of the Social Democrats (SPD), junior partners in Chancellor Angela Merkel's ruling coalition.
But in October, Germany decided unilaterally to reject future arms exports licences to Saudi Arabia over the killing of journalist Jamal Kashoggi, and to freeze deliveries of already approved equipment. Existing deals allow Berlin to stop exports of arms that include German parts.
"We are now designing (the German content) out of the plane," said one source familiar with the plans. Navigational lamps used for landing the planes are built in Germany, and the German content on the aircraft is about four percent, the source said.
Airbus has received 208 orders for the military transport from 28 countries, with 166 aircraft in operation worldwide.
A second company source said a review was underway to see if German-sourced parts could be replaced on other Airbus aircraft that have smaller amounts of German content. No further details were immediately available.
But this source said it would be difficult, if not impossible, to redesign the Eurofighter Typhoon, a multinational programme that has about a third German content.
Britain's BAE Systems, which generates 14 percent of its annual sales from selling Typhoons and other arms to Saudi Arabia, last week warned Germany's freeze on arms exports to Saudi Arabia could hit its financial results.
The German move has delayed British government efforts to finalise a 10 billion pound deal to sell Saudi Arabia 48 new Typhoons.
Germany's SPD said this week it wanted to extend the freeze on arms exports to Saudi Arabia beyond the current March 9 deadline, despite pressure by Britain and France not to do so and risk costly compensation claims.
Merkel last week declined to say whether the freeze would be extended, but senior conservative lawmakers say they see no immediate progress on loosening the embargo.
(Reporting by Andreas Rinke and Andrea Shalal; Writing by Andrea Shalal. Editing by Jane Merriman)