Airbus gets go-ahead for $13bn launch of A350 jet

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The Independent Online

Airbus, the European aircraft manufacturer, got the go-ahead last night from its parent company EADS for the €10bn ($13bn) launch of a new mid-range airliner to challenge Boeing.

The approval for the A350XWB came after the core shareholders in EADS - the French government, DaimlerChrysler and the French media group Lagardère - settled their differences over the funding of the aircraft.

EADS is understood to have agreed to provide €6bn of the development costs from its own resources, with the remaining €4bn coming from finance backed by the four partner governments in Britain, France, Germany and Spain.

Louis Gallois, the chief executive of Airbus and also co-chief executive of EADS, emerging smiling from a board meeting in Amsterdam after agreement had finally been reached.

The green light for the plane could mean the British Government being asked to provide funding of more than £500m for the A350, a 250-375 seater jet designed to compete with Boeing's new 787 Dreamliner.

Britain makes the wings for Airbus aircraft at sites in Broughton, north Wales, and Filton, near Bristol, employing 13,000.

It is not clear precisely how the government funding would be provided as the US and Europe are currently locked in a dispute before the World Trade Organisation over state support for large civil aircraft programmes. One option would be for EADS to issue some form of hybrid bonds which were guaranteed by the four governments, rather than receiving straight refundable launch aid as it has on previous programmes.

Airbus sources said that the government-backed funding would not be needed until much later in the development programme, by which time the rules governing subsidies should be sorted out.

The A350 is not due to enter service until 2013 - some five years later than the 787.

Orders for the aircraft so far stand at 182, compared with 403 for its Boeing rival.

Airbus had little option but to proceed with the A350 because of the huge share of the market this type of plane will take in future. Airbus's latest global market forecast, released last week, puts the market for the A350 at between 3,750 and 5,300 over the next 20 years. The plane will cost $185m at list prices.

Details of the A350 programme may not be announced until next week, after Airbus has held meetings with its works councils. This is because an Airbus restructuring plan currently being worked on by the company calls for thousands of job losses and possible site closures in order to save €5bn between now and 2010 and €2bn a year after that.

The drastic restructuring at Airbus follows production problems on the A380 superjumbo, which is two years late and will cost EADS €4.8bn in lost profits.

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