Airbus to take pounds 400m charge for `black hole'
Wednesday 17 March 1999
The disclosure came as it emerged that the four Airbus partners, including British Aerospace, have formally applied to their governments for up to pounds 2bn in launch aid for the proposed 600-seat super jumbo, the A3XX.
BAe, which has a 20 per cent share of Airbus, is thought to have applied for around pounds 410m in repayable launch funding. The other partners are Aerospatiale of France, Daimler-Benz Aerospace of Germany and Casa of Spain.
Noel Forgeard, chief executive of Airbus, said he was confident the A3XX programme could be launched by mid-2000. However, he indicated that the transformation of Airbus into a single corporate entity was now unlikely to be completed before autumn next year, 18 months behind schedule.
The pounds 400m provision is to cover losses on orders booked in the three years from 1995 to 1997 when Airbus and Boeing of the US fought a savage price war.
Previously Airbus has supported aircraft sales with a package of support measures including guarantees, spares and pilot training, but has not taken them as an upfront cost. From now on it will shoulder a much bigger share of these costs, and financing charges, at the time a sale is made.
Mr Forgeard refused to disclose figures. But it is thought the partners have agreed to take pounds 200m of the provision in the 1998 accounts, leaving the consortium nursing a loss of pounds 120m.
It has also taken has a pounds 30m to pounds 40m provision against a cancelled order from the Philippines. This means that, leaving aside provisions, Airbus as a consortium made a profit of about pounds 40m last year. However, industry estimates of the underlying profitability of Airbus, stripping out exceptional charges and exchange-rate losses, range from pounds 400m to pounds 450m.
The tightening of Airbus's accounting is in readiness for its change into a conventional public company, with shareholders and a proper balance sheet. However, progress on this and the exchange of valuations of partners' Airbus assets will not occur until Aerospatiale is privatised this summer. It will then take a further year to complete the change.
The A3XX, a double-decker aircraft capable seating 550 to 680 passengers, will cost $10bn to develop and will sell for between $213m and $246m, Mr Forgeard said. Spending on the programme by the partners increases by 50 per cent this year, with 1,000 staff now working on development in Britain, France, Germany and Spain.
The aim is to start marketing the A3XX to airlines at the end of this year, launch the programme in mid-2000 and bring it into service in 2005. Airbus believes there is demand for up to 1,400 such aircraft over the next 20 years.
Despite reports to the contrary, it is understood that British Airways remains a strong supporter of the A3XX and does not want to see any slippage in the timetable.
About one-third of the programme will be with risk and revenue-sharing partners outside the Airbus consortium. One-third would come from the partners and the final third from government launch aid.
Risk-sharing partners Airbus is talking to include Fokker, Saab, Finmeccanica, Mitsubishi of Japan and Aerostructures Corporation of the US.
Mr Forgeard said he did not expect Boeing to launch a rival jet in advance of Airbus.
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