Change Or Scrap Superjumbo, Airbus Told

The British partner in Europe's Airbus Industrie warned on Saturday that if the four-nation consortium failed to resolve differences and transform itself into a limited company in the next 18 months it would scrap plans to build the worlds first superjumbo jet.

The head of British Aerospace (BAe), Airbus subsidiary told Reuters at the week-long Paris airshow which opened yesterday that the A3XX project would not be viable without the efficiencies that a company restructuring would bring.

Airbus has already said it wants to overtake arch-rival Boeing Co as producer of the world's largest airliner with an all-new double-decker aircraft seating over 500 passengers, compared to the 400-seat Boeing 747 jumbo. The A3XX would enter service by the year 2003. But development costs are estimated at at least $8.0 billion.

 

"BAe's priority is that it cannot envisage that investment being made without a fundamental change being made along the lines of the single corporate entity," said BAe Airbus managing director Chris Geogheghan. The consortium partners are struggling to agree how to turn Airbus from a work-sharing cooperative into a single company.

BAe and German partner Daimler-Benz unit Daimler Aerospace (Dasa) say the new Airbus single corporate entity (SCE) should take over their civil aircraft facilities in return for taking a share in the new Airbus. But Yves Michot, chairman of French partner Aerospatiale, made it clear last week that he has refused to inject Aerospatiale assets into the new company, saying Aerospatiales Airbus facilities should remain under the ownership of partner companies. Aerospatiale is still state-owned. Plans to privatise and restructure the French aerospace and defence industry have been held up by this month's election of the new Socialist government under Prime Minister Lionel Jospin.

In addition, industry sources say Airbus minority partner Construcciones Aeronauticas SA (Casa) of Spain is also reluctant to lose its corporate identity in a new supranational body.

But BAe and Dasa have been adamant that injection of assets is the only way to giving Airbus the control it needs to cut costs and streamline

management.

The Airbus partners signed in January a MoU which envisaged injection of

partners' assets into the new company, a plan which Michot has now

questioned, raising the prospect of a rift with his partners.

"We remain totally committed to the objectives of the MoU we signed earlier this year," Geogheghan said. The partners were due to have further meetings at the airshow. BAe has called for further consolidation of the European defence and aerospace industry to combat the powerful new combines formed from the rapid consolidation in the United States, namely Lockheed Martin, Raytheon and the proposed merger between Boeing and McDonnell Douglas.

(Reuter)

BAe said at a press briefing on Saturday that it was in favour of all of

Europes leading companies eventually coming together to form a similar

monolithic company, but emphasised that the resturucturing of Airbus came

first.

"We do recognise the need for a total coming together but the first step is Airbus," BAe joint managing director Mike Turner said.

He said he was still hopeful the differences with Aerospatiale could be

resolved.

"Were negotiating," he later told Reuters. "Some unfortunate things get said because this is a high profile business but we have got to make it happen," he said. "The good news is that we all recognise that in view of the US competition we have got to make this happen...It's the first significant step in creating a pan-European aerospace and defence industry."