Subsidy row endangers jumbo plans: A US-EC dispute over government money for aircraft manufacture dogs joint study by Airbus and Boeing

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The Independent Online
A FRESH trade dispute over commercial aircraft subsidies between Europe and the United States is threatening to scupper plans for the joint development of a 600-800 seat successor to the jumbo jet.

The four partners in Airbus Industrie, the European aircraft consortium, and Boeing of the US yesterday agreed that the airline market would bear only one new super jumbo with a payload half that again of the existing 747.

However, joint studies between them on the development of such an aircraft for entry into service early next century, which began last January, have been dogged by renewed recriminations over direct and indirect government subsidies being paid on opposite sides of the Atlantic.

Speaking on the opening day of the Paris Air Show, Jean Pierson, managing director of Airbus, accused the US of reneging on an agreement signed last July to limit aircraft subsidies.

He alleged that the US administration had breached the clause limiting indirect subsidies to 3 per cent of the total turnover of its aerospace industry and rejected counter demands emerging from the Clinton administration that direct launch aid be cut from 33 to 20 per cent of development costs of new aircraft.

The Airbus partners - British Aerospace, Aerospatiale of France, Deutsche Aerospace and Casa of Spain - and Boeing said yesterday that the market for the next generation of Very Large Commercial Transport was likely to be between 400 and 500 aircraft.

The jet, likely to cost at least dollars 12bn ( pounds 8bn) to develop and sell at more than dollars 200m, would weigh up to 570 tonnes and have a wing span of up to 300 feet. With a range of 7,000 nautical miles it could carry up to 1,100 people in a single class. Jurgen Thomas of Deutsche Aerospace, European director of the joint study with Boeing, said that on the basis of 500 aircraft the project was viable but only on an international basis. 'This project is just too big a risk for one manufacturer,' he added.

However, a senior executive of Airbus, which is studying plans for an all-European 500-plus seater jumbo, questioned whether the two sides could agree to collaborate. 'How can Boeing and the Clinton administration be so rabid about subsidies on the one hand and yet be so friendly with the Airbus partners on the other? It is an interesting question and one that our partners will have to resolve.'

The super jumbo project faces other hurdles - one of the difficulties presently being examined is how an aircraft with capacity for more than 1,000 passengers could be safely evacuated in an emergency and how easily it could be accommodated at airports.

Should a joint project go ahead it would almost certainly need to be vetted by anti-trust authorities in the US and Europe. Then there is the sheer cost. John Cahill, chairman of BAe, said yesterday that the project was so enormous that Airbus and Boeing might have to invite Japan and Russia to take part as well.

British Aerospace's corporate jet division, sold last month to Raytheon of the US for pounds 250m, won a dollars 250m order from Executive Jet Aviation of Columbus, Ohio, for up to 20 of its latest BAe 1000 business jets. BAe also announced a controversial pounds 500m order for 24 Hawk trainer aircraft from the Indonesian air force.

(Photograph omitted)

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