BAe likely to cut Airbus stake if restructuring goes ahead

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The Independent Online
British Aerospace is likely to reduce its stake in Airbus Industrie if it wins its battle to turn the plane-building consortium into a separately incorporated group instead of a partnership.

Pressure to reform the structure of Airbus is mounting, following threats last week from the German government to withhold subsidies for the development of the partnership's next aircraft unless it begins a reorganisation.

Under the present arrangements, work is shared by members of Airbus according to their participation.This has been criticised by the UK and Germany as inefficient. France, the third member of the partnership - through the Aerospatiale group - is resisting change.

Britain and Germany want Airbus turned into a conventional company with managerial freedom to make decisions about cost cuts without referring back to the partners at every move.

British Aerospace sources dismissed press speculation that it would be seeking an increase in its present 20 per cent stake if Airbus is restructured.

The main reason is that new shareholders may need to be invited to join Airbus if it is incorporated and a reduction in the stakes of the existing partners - BAe has 20 per cent - would be necessary to accommodate this.

The pressure for restructuring goes hand in hand with Airbus's plans to build a new super-jumbo, the 550-seater A3XX, costing pounds 5bn. The existing partners will be unable to raise the capital, the reason they are talking of bringing further partners into the consortium.

The likeliest candidates are organisations from Asia and the Pacific Rim, where growth of airline orders is expected to be strongest over the next 20 years. Companies from Taiwan, South Korea and China are thought to be the most likely to join.

Boeing's authoritative annual survey of the airline market earlier this month estimated that airlines will spend $1,100bn buying about 16,000 aircraft over the next 20 years. The bulk of the demand will come from Asia-Pacific.

If Airbus becomes a separately incorporated company it will have more freedom to buy components from the most economic sources.

However, the underlying problem stalling a restructuring is that Aerospatiale, the state-owned French member of the grouping, is the least efficient and would lose most heavily from a move away from worksharing.