Airline industry woes could damage Airbus

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Increasing problems in the airline market could have a serious effect on Airbus Industrie, the aircraft consortium that includes British Aerospace, according to European aerospace ministers meeting at the Farnborough Air Show.

The ministers, chaired by Michael Heseltine, President of the Board of Trade, declined to comment on the measures, including job cuts, that Airbus might take.

Earlier in the week Jean Pierson, chairman of Airbus, said that the company would review its production plans later this year.

But Mr Pierson told the ministers that, although the aerospace market is continuing to struggle, the company would maintain its position as a leading supplier of civil aircraft.

Airbus also told ministers of proposals to change its organisational and industrial structure to make the company more efficient. The Airbus partners previously have considered turning the consortium into a public limited company to streamline its accounting and decision-making procedures.

However, Mr Heseltine said there were no current plans to publish Airbus accounts.

British Aerospace's Airbus partners are Daimler-Benz of Germany, Casa of Spain and Aerospatiale of France. They were praised yesterday by the ministers for plans to launch the A319 regional aircraft, raising funds on the open market rather than asking for government cash.

Mr Heseltine said that the meeting had not arrived at any decision concerning the US Foreign Sales Corporation system, which Airbus claimed earlier this week gives its US rivals unfair tax breaks. But he welcomed the agreement signed by the US and the European Community earlier this year that limits government support of aircraft development to between 30 and 35 per cent of overall costs.

BMW Rolls-Royce has won a dollars 500m ( pounds 255.8m) launch order for its BR700 engine from Gulfstream of the US. The order is for 200 engines to power twin-engined regional jets. It marks the first fruits of the development programme set up by the Anglo- German joint venture formed two years ago.

The BR700 series has been developed for regional and large business aircraft with between 60 and 140 seats. A spokesman for BMW Rolls-Royce said that the company is also speaking to Canadair, Fokker and Boeing.