Airbus has decided to redesign the C295 military transport aircraft it builds in Spain to remove German components following Germany's freeze on arms exports to Saudi Arabia, according to company sources.
Airbus Chief Executive Tom Enders said earlier this month the company could consider making products free of German parts 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, 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 Khashoggi, 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, with the total German content standing at about four per cent, 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 under way 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 per cent 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.
Airbus estimates that the export freeze on Saudi Arabia is affecting delivery of equipment and parts worth billions of euros. One French supplier, PME Nicolas Industrie, has already cut jobs as a result, according to French media.
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 as it could risk costly compensation claims.
Ms 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.