'Euro-Boeing' plan for Airbus

Europe's leading aerospace companies are considering proposals to extend Airbus's remit from Europe's commercial aircraft maker to a pan-European combined civil and military aerospace company able to compete with a merged Boeing-Mc-Donnell Douglas, writes Richard Halstead.

The plan, thought to have originated with British Aerospace, would be for it and Airbus partners Aerospatiale of France, Dasa of Germany and Casa of Spain to put their military aerospace businesses - including factories - into a centrally controlled entity with independent management.

The proposal comes as the partners in Airbus attempt to maintain the progress of the four-nation consortium towards conversion into a conventional limited company in 1999, in the face of opposition from Aerospatiale chairman Yves Michot.

The existing plan for Airbus calls for a restructuring that would give it independent finance raising and R&D capabilities. BAe and Dasa are pressing for a more comprehensive restructuring, which would also hand control of the partners' manufacturing facilities to Airbus.

Ten days ago, Mr Michot said that the transfer of assets proposal had been dropped and that the partners had agreed to restructure Airbus as a pure R&D concern, with contracts going to partners' factories. BAe and Dasa contested this, saying nothing had been decided yet.

Ironically, the idea of a broader deal incorporating both civil and military aerospace assets under the Airbus umbrella is considered more acceptable, if inevitable, by European aerospace executives, including Mr Michot, who has been campaigning to have the Airbus restruct- uring considered as part of a larger rationalisation of Europe's aerospace industry.

John Weston, managing director of BAe's defence arm, said: "There is now a broad commonality of view that there is a need to create one major consolidated company ... [but] little clarity as to the form such a company might take."

Senior aerospace executives, in Paris this weekend for the Paris Air Show, added that the biggest hurdle facing such an arrangement was not the businesses themselves but the continued presence of government in the defence industry. This was seen as a thinly veiled attack on the new Socialist French government, which has indicated its reluctance to allow "strategic" industries to be fully privatised.

"Governments have to see the fundamental necessity of privatisation, and be willing to forforgo their influence," said Wolfgang Piller, a board member of Dasa. "Public and private shareholders are committed to different aims. And so there are bound to be conflicts."

While there seems to be broad agreement in principle on amalgamating Europe's defence and civil aerospace interests, most of the details remain to be resolved, particularly on the civil side. Disagreements continue between the Airbus partners on three crucial issues: whether the factories that make the parts for the airliners come under Airbus's control; the transfer value of such assets; and who will form the company's management.

If these issues are not resolved, executives warn that the restructuring plans will be delayed, or possibly collapse, hurting Europe's aerospace industry at a time when US aerospace businesses will be gaining in strength and market share.