Taiwan deal may save BAe's regional arm

HOPES ARE rising that British Aerospace may yet clinch a deal with Taiwan to save its troubled regional aircraft business and the 12,000 jobs that depend on it.

Denny Ko, president of the Taiwan Aerospace Corporation, said yesterday that he hoped to conclude talks with BAe this week, allowing an announcement to be made in a few days.

The Taiwanese are considering joining BAe in a pounds 200m programme to develop a new regional aircraft. BAe has said that it will not build another aircraft without partners, putting the future of the division at risk.

Dr Ko's comments, in an interview with Flight International, are the strongest indication yet that the two sides are close to a deal to rescue the division. Dr Ko visited the Farnborough Air Show earlier this week and is holding the talks in London.

BAe has been negotiating with the Taiwanese for months and is expected to make a formal announcement on the fate of the division when it reports its half-yearly results later this month.

Some industry sources remain sceptical that it will pull off a deal with Taiwan. The Taiwanese had planned to take a 40 per cent stake in the American aircraft manufacturer, McDonnell Douglas, but are now on the verge of pulling out, jeopardising McDonnell's plans to develop a new long-range jet, the MD-12.

BAe employs 12,000 in regional aircraft production at Hatfield in Hertfordshire, Woodford and Chadderton, Greater Manchester, and Prestwick in Ayrshire, manufacturing the BAe 146 'whispering' jet, Advanced Turbo Prop and the Jetstream range. Analysts believe that closing the business could cost BAe up to pounds 750m in provisions against redundancies and restructuring costs.

News of the talks with the Taiwanese came as Airbus, the four-nation aircraft manufacturer in which BAe has a 20 per cent stake, announced a pounds 300m order from the Philippines for its long-range A340-200 jet. Philippine Airlines has ordered six A340s, with options on a further four, making it the first Asia-Pacific carrier to operate the aircraft.

Airbus suffered a blow, however, when the US carrier Northwest Airlines confirmed it had delayed delivery of an order for 16 Airbus A330s from 1994 to 1996.

The US engine manufacturer Textron Lycoming signed a deal with the Russian aircraft company Yakolev Design Bureau to re-engine a range of regional jets. Textron will replace the three AN-25 engines powering the YAK-40 aircraft with two Lycoming LF500 engines - the same engines used on the BAe 146.