Launch aid for Airbus depends on conversion

THE FOUR PARTNERS in Airbus Industries were warned yesterday that government launch aid proposed for the 555-seater Super-Jumbo, the A3XX, depends on the consortium successfully converting to a Single Corporate Entity (SCE).

The warning followed a meeting of ministers from the four Airbus countries - Britain, Germany, France and Spain - at the Paris air show. After the meeting, John Battle, the UK's aerospace minister, said that in appraising any requests for financial support, progress towards the goal of becoming a SCE would be a "vital factor".

He added: "We really would urge the partners to shift the barriers out of the way to bring together the SCE because it is vital to the whole project."

The latest Airbus estimates put the cost of developing the A3XX at $11bn. British Aerospace, the UK partner in the consortium, is expected to submit an application for up to pounds 450m in repayable launch aid.

BAE and the other airbus partners - Aerospatiale, Daimler Chrysler Aerospace and Casa of Spain - hope to give the go ahead to the A3XX at the turn of the year and bring it into service in 2005. But the prospects for successfully launching the programme have been undermined by the stalled negotiations on forming an SCE. The partners are yet to exchange dossiers on the valuation of their Airbus assets and many observers are sceptical that an SCE will be in place before the end of next year.

There are also doubts about the size of the market for such an aircraft. Yesterday Airbus raised its forecast for demands of A3XX to 1,500 aircraft over the next 20 years. But its archrival Boeing, which has stopped work on its own Super Jumbo project, puts the market at 360 planes.

The A3XX would be a double-decker aircraft with a 555 to 656 seating capacity and a range of 7,650 to 8,750 miles. Airbus is also planning a freighter version.

For the project to be viable, Airbus says the A3XX will have to be 10 per cent more cost effective than existing Jumbo jets and achieve a 20 per cent return. Airbus will try to raise up to 40 per cent of the development costs from new partners in the US, Japan and elsewhere.

A dozen airlines including British Airways have been advising Airbus on the new aircraft's design. Despite BA's decision to reduce its fleet of Jumbos and bring more smaller aircraft into the fleet, Airbus insists it is a supporter of the A3XX.

Outlook, page 19