Feb. 26 (Bloomberg) -- Britain’s defense ministry should consider canceling its order for 25 A400M military transport aircraft because manufacturer Airbus SAS can’t rule out further delays in delivery, a panel of lawmakers said in a report.

“It is extremely serious that the A400M transport aircraft program is now running two years late and further delays cannot be ruled out,” said James Arbuthnot, a lawmaker from the Conservative opposition who leads the Defense Committee including lawmakers from Britain’s three main political parties.

The government should say “whether it considers that there is a real risk that the entire A400M project might be so delayed that abandonment would be preferable,” he said.

Glitches with engine-control software have put the A400M at least four years behind schedule, prompting Airbus parent European Aeronautic, Defence & Space Co. to take a 1.7 billion- euro ($2.2 billion) charge. The plane, meant to compete with Lockheed Martin Corp.’s C130J Hercules and Boeing Co.’s C-17 Globemaster, is the main project of EADS’s Spanish business.

Initially, the contract signed in 2003 was worth 18 billion euros and included orders from six European governments and Turkey to supply 192 transport planes. The risk for developing and producing the A400M fell to EADS and wasn’t shared by the governments involved.

Refits Required

For Britain, the delay requires the military to refit its aging fleet of Hercules C-130 transports, which ferry troops and equipment to and around both Iraq and Afghanistan.

The Defense Committee is concerned that the U.K. lacks sufficient air transport capability to keep its forces adequately supplied and said the situation is “worsening.”

The panel’s advice isn’t binding on the government. The Ministry of Defence said that it had taken note of the recommendations and will respond to them in the coming weeks.

The panel also criticized Prime Minister Gordon Brown for delaying setting the second phase of the “Defense Industrial Strategy” by more than a year. Brown’s failure to outline an equipment spending plans is undermining the nation’s ability to supply its armed forces, they said.

“We condemn the failure to publish an updated version of the Defense Industrial Strategy and consider that its continuing absence increases the risk that the U.K. defense industrial base will not be able to meet the future requirements of our armed forces,” Arbuthnot said.

To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net

Last Updated: February 25, 2009 19:01 EST