JOHANNESBURG (Reuters) - South Africa is still negotiating to buy eight Airbus A400M military transport planes despite delays and a cost increase that have raised doubts over the purchase, defence officials said on Tuesday.

South Africa was the first country to order the aircraft in 2004 and a decision to walk away would damage the credibility of Airbus as a military supplier at a time some European buyers have threatened to trim or cancel orders.

The A400M is Europe's largest military project, designed to give capacity to fly troops and equipment to combat zones or deliver aid. The plane has been dogged by technical delays and financial losses. It is now due to fly by the end of the year, four years late.

Last week South Africa's procurement agency Armscor told parliament the cost of its order had jumped to 47 billion rand from 6.4 billion rand, or 837 million euros at the time and the order might be cancelled.

South Africa's annual defence budget is around 32 billion rand and Airbus has said the 47 billion rand figure was exaggerated. Armscor gave no further details on the increased costs and was not available for comment on Tuesday.

Department of Defence spokesman Ndivhuwo Mabaya said talks with Airbus were continuing on buying the planes, which South Africa plans to use for peacekeeping on the continent.

"There are a number of issues such as the issue of price and the deadline," Mabaya said.

Airbus' South African spokesman Linden Birns, said there was no indication from the government that the contract would be cancelled. He also disputed the Armscor figure.

"The 47 billion rand number... is a widely exaggerated figure, if that is the figure that is ascribed to the purchase price of the aircraft," he said.

Birns said Airbus was in talks with the government on the price, given the delays, and was negotiating a revised production and delivery schedule. He said Airbus was about three years behind the original schedule for delivery by 2010.

So far 2.9 billion rand has been paid towards the deal and a further 1.1 billion rand payment was to be made by December.

South Africa's main opposition party, the Democratic Alliance, has called for a parliamentary investigation into the deal, which took place under former President Thabo Mbeki, who was forced from office last year.

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