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Hopes of BA order fade at Airbus

By Michael Harrison

HOPES are fading at Airbus that British Airways will break with tradition and award the European jet manufacturer an order worth pounds 2.4bn for up to 100 new jets.

Reports in recent weeks suggested that Airbus was ahead of its US rival Boeing in the race for the prestige deal. But sources in the European consortium, in which British Aerospace has a 20 per cent stake, believe this was merely a ruse to get Boeing to return with a more aggressive tender. Indeed, as recently as last month there were suggestions that Airbus executives were angry at being given "the runaround" by BA.

The choice is between the Airbus A320 family and Boeing's New Generation 737 series, launched at the beginning of last year. BA plans to use the new jets to operate regional services from the UK to short-haul and medium- haul European destinations. The order is due to be placed in early April.

BA has never ordered Airbus aircraft before - something which has led it to being christened Boeing Airways at the Toulouse headquarters of the European consortium.

Although senior BA sources maintained last week that Boeing and Airbus had an equal chance of winning the order, Airbus believes that the US manufacturer will pull out all the stops to clinch the deal.

"It is more important for Boeing to keep BA as a customer than for Airbus to win its first order," one observer said. Boeing has ramped up production rates of the new 737 at its Seattle factories after incurring more than $1bn (pounds 614m) of charges and will be anxious to secure BA's order. Airbus is also considering raising production rates again from 236 this year to 300 in 1999. That would take output of the A320 family to 17-18 a month.

As part of its attempt to secure the order, Boeing has been conducting a lobbying campaign highlighting the UK jobs it provides and the number of suppliers that work on the 737 programme. It says that if selected, it will create work for 25 UK suppliers including BAe, British Aerospace, GEC-Marconi and Smiths Industries. According to Boeing executives, more than 30 major components, ranging from the rudder and dorsal fin to electronic instrumentation, are manufactured in the UK.

Observers also believe Boeing will be keen not to lose such a prestige customer as BA if it decides to press ahead with the development of a super-jumbo. Boeing shelved plans to build a stretched version of its 747 jumbo jet last year, claiming the market was too small. The announcement took observers by surprise and, for the time being at least, left Airbus as the only jet manufacturer preparing to launch a super-jumbo.

Airbus, which has been working with 20 airlines including BA on the development of its 650-seater A3XX, intends to finalise the design later this year and start signing up customers in 1999. This may oblige Boeing to spell out its plans. BA is one of the most enthusiastic backers of the concept but Boeing puts demand at only 470 whereas Airbus estimates it at 1,360.