Saudis' $6bn boost for US air industry

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The Independent Online
Saudi Arabia is to buy 61 civil aircraft from two US manufacturers in a $6bn (pounds 3.8bn) deal that the White House said yesterday would create thousands of jobs in the ailing aerospace industry.

Spin-off work worth about pounds 90m will go to UK aero-engine maker Rolls- Royce. Other contractors, including Smiths Industries, will also benefit.

Meanwhile, concern continued in the US over last week's breakdown of talks with the UK to liberalise air services. A US official warned that the Bermuda II agreement governing services may be ripped up.

The huge Saudi deal was signed on Wednesday night by President Clinton and a member of the Saudi royal family. Saudia, the state airline, has ordered 23 of Boeing's 777-200 twin jets and five 747-400 jumbo jets. An order for 29 MD-90s and four MD-11s has been placed with McDonnell Douglas. The first planes will be delivered to the airline in 1997.

The aircraft market is in deep recession, with the trough not expected to be reached until 1996, so the order was welcomed by the industry.

The problems were underlined yesterday when France's Aerospatiale announced 4,000 jobs cuts. And Boeing, the world's biggest aircraft manufacturer, faces protracted industrial action because of cutbacks. The company, which yesterday reported a 22 per cent jump in third-quarter profits, said the machinists' strike would hit this quarter's figures.

Yesterday, American transport officials said they were examining "all of our options" in the light of the collapse of US/UK air talks, including scrapping the Bermuda II accord signed in 1977. Patrick Murphy, Assistant Secretary of Transportation, said support for ending the agreement has been growingamong members of Congress and US airlines.

Each party would have to give one year's notice before ending the agreement. One airline executive said he thought Mr Murphy was just sabre-rattling.

No further face-to-face talks are planned between US and UK aviation officials, though Mr Murphy said the two sides would continue talks on the telephone. But he said the matter was likely to be held up until agreement of the possible sale of USAir, 25-per cent owned by British Airways, to American Airlines or its rival, United.