Airbus says board OK'd a $2.9 billion investment Firm plans to build 2 new aircraft models to compete with Boeing


December 09, 1997|By BLOOMBERG NEWS

TOULOUSE, France -- Airbus Industrie said yesterday that its board gave the go-ahead to a $2.9 billion investment in building two new aircraft models intended to challenge Boeing Co.'s dominance of the market for large, long-range jetliners.

The European plane maker has been selling the new models since June, when it unveiled them at an air show in Paris. So far, it's won public commitments for orders and options of 100 of the planes from five airlines including Lufthansa AG, Virgin Atlantic, Air Canada, Taiwan's Eva Airways and EgyptAir.

Airbus said in a statement that two more airlines, which haven't yet disclosed their plans, will order the new models of its four-engine A340 wide body jetliner. It said it has orders and options worth $13 billion for the new planes.

Rolls-Royce PLC, the primary engine supplier for the new models, estimated the orders are worth $4 billion to it. Shares in the U.K. jet engine maker rose 3 pence to 246 pence in London trading yesterday.

The four-nation group's clearance for the project came even though British Aerospace PLC, one of its members, still hasn't lined up support from the U.K. government for a 120 million-pound ($200 million) loan to support its share of production costs.

Airbus spokesman David Velupillai said the board's approval means that all of the partners had agreed to pay their share of the production costs, indicating that BAe expects to find alternative funding if U.K. support doesn't come.

British Aerospace wouldn't comment in depth.

"We are awaiting a decision from the government," said Mike Peters, a company spokesman. "There is nothing new in that situation." U.K. press reports have said the company is threatening to move jobs out of the country if the U.K. doesn't agree to the loan.

A spokesman for the U.K.'s Department of Trade and Industry, which is weighing British Aerospace's aid request, said the formal launch of the Airbus models won't affect its decision. "We're still considering it carefully," he said.

Airbus and Boeing are allowed to finance as much as one-third of the development costs for new aircraft through government loans under a 1992 treaty between the United States and the European Union.

U.K. press reports have said the British government, which has already awarded a 200 million-pound ($333 million) loan to Rolls-Royce for the engine production, is reluctant to give similar aid to BAe because the company is showing relatively strong profits.

Pub Date: 12/09/97

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