Airbus set for privatisation as France abandons objection

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The French government has abandoned its objection to the transformation of the Airbus plane-making consortium into a fully fledged private company, removing the biggest obstacle to the restructuring of the $40bn (pounds 25bn) European industry.

But the significance of the breakthrough, which came after months of intense pressure from the British and German governments, was doubted yesterday by some industry analysts who predicted France would shift its objections to more detailed criticisms. French plans to force a merger by the back door of Aerospatiale, the state-owned group, with the privately owned military and civil aircraft company, Dassault, also look set to cause controversy.

Lionel Jospin, the French Prime Minister, is believed to have told Chancellor Helmut Kohl in Bonn yesterday that Paris would no longer stand in the way of the creation of a Franco-German-British-Spanish company to act as the only serious challenger to the merged Boeing and McDonnell Douglas in the large civil airliner market.

Daimler-Benz Aerospace (Dasa) and British Aerospace (BAe) have long argued that this was the best way to develop Airbus to reap the advantages of the recovery in aircraft orders. The new Socialist regime in Paris is prepared to agree, adopting a more flexible approach than its centre-right predecessor.

Dasa and BAe have urged France to inject assets into the new business, following a memorandum of understanding early this year to move towards the company structure. The present four-member consortium, including Casa of Spain and formed in 1970, operates under French law as an economic interest group and does not publish accounts or make profits as a separate entity. The restructuring of Airbus was intended as the template for a wider consolidation of Europe's military aerospace businesses.

Though France has accepted the inevitability of incorporating Airbus, the new government has not moved on its objection to the privatisation of Aerospatiale, planned by its predecessor. BAe in particular had insisted on the sell-off, arguing the new Airbus company could not operate independently unless all its shareholders were also in the private sector.

The Jospin government says that it intends, initially, to retain French state ownership of part of the new company but it would gradually reduce its involvement. Another problem concerns Dassault, which had emphatically opposed a merger with Aerospatiale unless the privatisation went ahead first.

Under the Jospin plan, the French government would transfer its 45.9 per cent stake in Dassault to Aerospatiale, in effect forcing through a merger. The French argue that a merger between the two companies would strengthen their negotiating position in future consolidation discussions.

Industry experts yesterday predicted months of further horse-trading over the size of the stakes in Airbus which each of the four partners would receive. BAe, which makes Airbus wings, has pushed for a bigger stake than its 20 per cent interest in the existing consortium, on the grounds that its businesses have much higher productivity than Aerospatiale's.