Chris Jasper/LONDON
Airbus Industrie has made provisions for losses totalling £400 million ($650 million) as a result of the mid-90s price war with Boeing over shorthaul airliner sales, the European manufacturer has revealed.
Around £200 million of the charge was absorbed last year, resulting in a loss to the consortium's central administration of £125 million (Flight International 3-9 March). A further £200 million charge - relating to price cutting in 1995-97 - will be spread over the next few years, and will lead Airbus to register another loss this year.
Most of the overall £400 million provision relates to price cuts in the years after the launch of Boeing's Next Generation 737 in 1993, with Airbus chief executive Noel Forgeard claiming the US giant initiated a price war against the A320 family. "They said: 'Let's kill Airbus'. They dumped prices," he says, adding that his predecessor Jean Pierson was forced to react.
Part of the exceptional charge stems from more recent problems encountered by Airbus - including the Asian economic crisis, which led to Philippines Airlines cancelling an A320 order.
Forgeard stresses that if its partners' profits from Airbus work are taken into account, the consortium returned a profit of around £450 million last year, while the GIE would itself have made a profit of £30-40 million had it not been for the charge.
Airbus also revealed that its partner companies have approached their governments for refundable investment in the A3XX programme. Such investment is allowed up to one-third of the project's $10 billion launch costs.
Airbus' difficulties are mirrored at Boeing, says aerospace analyst Paul Nisbet of JSA Research, who has put a figure of $590 million on Boeing's losses due to commercial aircraft discounting last year.
Nisbet says Boeing 747s sold for an average of $129 million (27% down on list price); 777s for $114 million (17% down); 767s for $67 million (25% down); 757s for $49 million (25% down) and 737s for $31 million (14% down).
Nisbet was able to calculate the figures because of Boeing's new accounting procedure, which discloses charges for aircraft modifications and parts, revealing the prices of aircraft built by the original equipment manufacturer.
Source: Flight International
