Airbus chief backs new mid-range jet

Gallois warns of 'painful' job cuts. UK unions concerned over Broughton and Bristol sites

The new head of Airbus warned yesterday that "painful" job cuts would be needed if the turnaround plan for the ailing European aircraft manufacturer is to succeed.

But Louis Gallois, who took over as chief executive on Monday, also had better news for the Airbus workforce by pledging to proceed with the new A350 mid-sized jet, even though the development costs of the aircraft have doubled to $10bn (£5.4bn).

Reports in France claim 10,000 employees could be cut from the 55,000-strong Airbus workforce, although a spokeswoman said such estimates were "premature".

Speaking yesterday on Europe 1 radio in Paris, M. Gallois said: "It will be painful, yes, because there will be job cuts. We have to ask questions about the sites, the assembly lines, in order to rationalise it. We cannot live with two sites that each share all the assembly lines."

His predecessor, Christian Streiff, who resigned on Monday after less than 100 days in the job, had outlined plans to cut overheads by 30 per cent and improve productivity by 20 per cent, but declined to say how many jobs and plants were at risk.

M. Gallois, who is co-chief executive of Airbus's parent company EADS, had more comforting news on product development, despite the huge challenge posed by cost overruns on the A380 super-jumbo and the profit squeeze caused by the weak dollar.

Commenting on the proposed A350 XWB, Airbus's answer to the new 787 Dreamliner from Boeing, he said: "I believe that Airbus has to be present across the whole market and the A350 is in the middle of the market." He added that the sector of the market occupied by the new 250-375 seat A350 represented 40 per cent of all sales.

M. Gallois's comments contrast with those last week of his fellow EADS co-chief executive Tom Enders, who said: "We will discuss intensively in the next weeks whether we have the financial and engineering resources to actually take on this programme."

Airbus and EADS have been laid low by disastrous production delays on the A380 super-jumbo which have left the aircraft two years behind schedule, knocking €4.8bn (£3.2bn) from profits between now and 2010. The board of Virgin Atlantic, which is buying six A380s, meets tomorrow to decide whether to stick with the order or cancel some deliveries.

M. Gallois, who oversaw the turnaround of the French rail company SNCF, identified the weak dollar as the biggest handicap to the recovery of Airbus. The company manufactures in euros but sells in dollars. The US currency has fallen 40 per cent since the A380 was launched.

M. Streiff had set out plans for €5bn of cumulative cost savings by 2010 and annual cost savings from then onwards of €2bn a year. However, in an interview published yesterday in the French daily Le Figaro, he complained that he had not been allowed "the necessary operational powers" to do the job properly and faced resistance from "certain shareholders" about the proposed cuts at Airbus.

DaimlerChrysler, the German automotive group, owns 22.5 per cent, the French government owns 15 per cent and Lagardère, the French media group, 7.5 per cent.

Although the bulk of the job losses are expected to take place in Germany and France, UK unions expressed concern about the impact of the rationalisation plan on Airbus factories at Broughton, north Wales and Filton near Bristol which employ 13,000 making the wings for the planes.

A scheduled meeting with company executives to discuss the implications of the A380 delays has been postponed.