View from City Road: BAe produces spark of revival

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THE SIGNS of relief yesterday on the face of John Cahill, chairman of British Aerospace, were palpable. At last BAe had managed to do something it had been promising and the City's reaction had been positive.

The sale of a 50 per cent stake in BAe's loss-making regional jet business to the Taiwan Aerospace Corporation is, however, but one step in the company's rehabilitation. As Mr Cahill himself might concede, BAe has a lot further to travel before it can justify its billing as one of the recovery stocks of 1993.

The pounds 135m raised from the regional jet sale, together with the clout that TAC can wield in the fast-growing Pacific Rim aerospace market, will be welcome to BAe. In this case a problem shared is probably a problem more than halved.

But other difficulties wait to be overcome. Unless BAe can find partners for the remainder of its civil aircraft business, Airbus excluded, it may yet have to make further provisions on top of the pounds 1bn announced last September.

There is also the small matter of the second phase of the Al Yamamah arms-for-oil deal with the Saudis which, renewed Gulf worries notwithstanding, shows few signs of being any nearer to fruition.

Closer to home, the cut-price European Fighter Aircraft has still to be signed up, while the property and car markets are a long way from demonstrating that a sustained recovery has arrived.

The 10p rise in BAe's share price to 194p yesterday was probably a vote of confidence in the group's management as much as anything. But it will take a sustained flow of good news to demonstrate that BAe is back on track.