Boost for UK as Airbus lands $4bn jet deal
Wednesday 03 September 1997
The order for a mixture of wide- and narrow-bodied Airbus aircraft, placed by the giant American leasing company ILFC, will bring in work worth hundreds of millions of pounds to British Aerospace factories and other component suppliers around the country.
However, Boeing is set to share in the bonanza with ILFC, a subsidiary of the US insurance giant American International Group, preparing to place an order for about 50 jets worth a similar amount with the US manufacturer.
BAe has a 20 per cent stake in Airbus and employs more than 10,000 people directly manufacturing wings but an estimated 50,000 UK jobs depend in total on the Airbus programme.
News of the order - the biggest Airbus has won so far this year - helped send BAe shares 50.5p higher to close at 1510.5p - the 3.5 per cent rise making them one of the best performing stocks of the day in the FTSE 100 Index.
This is the second boost for Airbus in as many weeks. Last Thursday the French socialist government dropped its objections to the transformation of the four-nation consortium into a single commercial entity, paving the way for full privatisation early in the next century.
There could be a further bonus for the British aerospace industry if Rolls-Royce succeeds in winning engine orders for the aircraft being bought by ILFC.
The Los Angeles-based company is acquiring 50 aircraft from the A320 range and 15 A330 jets, taking its total Airbus fleet to 266 and making it the consortium's biggest single customer with 11 per cent of the total order book.
The next biggest customers of Airbus are the national airlines of Germany and France, two of the other partner countries in the consortium. The fourth partner is Spain. British Airways has never ordered a single Airbus aircraft but it is one of the handful of airlines examining the proposed 600-seater Airbus super jumbo the A3XX.
Both the A320 family and the A330 are capable of being powered by Rolls Royce engines although the British company will be in competition with its larger US rivals, Pratt and Whitney and General Electric for the orders.
The ILFC deal brings the total Airbus order book to 2,392 aircraft and increases the number of jets ordered so far this year to 167. Jean Pierson, managing director of Airbus described the ILFC order as "a gratifying vote of confidence and endorsement of our overall market presence and future objectives". Around 20 per cent of the world aircraft fleet is now supplied thorugh operating leases to airlines.
Last year Airbus and its larger US rival Boeing, which has just completed the takeover of McDonnell Douglas, won 1,043 orders and 1997 looks like being another bumper year. Airbus's share of the world market is running at about 35 per cent.
It would be a stunning coup for Airbus if it could confirm an order worth up to $19bn from US Airways for up to 400 aircraft. Last November the American carrier announced plans to acquire 120 Airbus jets worth $5bn with an option to buy a further 280 worth $14bn but the orders are contingent upon it reaching a deal with its pilots union by the end of this month.
The A3XX - forecast to cost at least $8bn to develop - will only go ahead if the Airbus partners succeed in converting the business into a public company by 1999. Apart from BAe, the other industrial partners are Aerospatiale of France, Daimler Benz of Germany and Spain's Casa. BAe has indicated it is not interested in emerging with a shareholding greater than its current 20 per cent but expects in return to be compensated by the other partners for the greater value of the assets its will contribute to the new company.
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