BAe near to pounds 160m Airbus aid

The Government is close to agreeing a pounds 200m launch aid package for British Aerospace and Rolls-Royce for a new long-range Airbus aircraft.

The four-nation Airbus Industrie consortium, in which BAe has a 20 per cent stake, is expected to announce the industrial launch the A340-500/600 series at the Dubai airshow in a week's time.

This indicates that government launch aid for the Airbus partners in virtually in place.

BAe is seeking about pounds 160m in launch aid towards the pounds 500m cost of developing a new wing for the stretched A340 while Rolls has applied for aid to develop a smaller version of its Trent engine to power the jet.

Development costs of the A340-500/600 programme are expected to reach pounds 2bn in total. The trigger for Airbus deciding to go ahead with the industrial launch of the programme was a $1.5bn order for 12 A340-500s announced yesterday by the Taiwanese carrier Eva Air. This takes launch orders for the new jet to 27, enough to justify proceeding. A further five orders are said to be in the pipeline.

This will be the first launch aid that Britain has given to Airbus since 1988 when the Government contributed pounds 400m towards the development of the original A330-A340 family. In the next five years launch aid repayments are expected to total pounds 500m.

The Airbus programme supports about 15,000 direct jobs in Britain and a further 25,000 indirectly, which is the main justification for the taxpayers support it has enjoyed over the years.

The other Airbus partners are Aerospatiale of France and Daimler Benz of Germany, each with 37.9 per cent, and Casa of Spain with 4.2 per cent.

The agreement to support the new stretched A340 may prove an important litmus test of how the four partner governments will react to launch aid requests for the development of the much more ambitious super-jumbo, the 600-plus seat A3XX.