Kevin O'Toole/LONDON
Consolidation of the European aerospace industry will not go ahead without a clear solution to the issue of French state ownership, warns British Aerospace chief executive Dick Evans.
Speaking as BAe unveiled a strong set of annual results, Evans cautioned that there is still a gulf between the positions of France and the privately owned UK and German industries, as the three nations look for a way to create a single European aerospace business to compete against US giants.
A report on restructuring is due to be presented by the end of March under the "trilateral accord" signed by the three European governments late last year, but Evans plays down expectations that it will form a firm blueprint for restructuring. "We shouldn't have any illusions that there are some major barriers which we have to overcome," he says, admitting that there are areas of "fundamental disagreement". The main stumbling block is ownership, with BAe adamant that it cannot cede control of major parts of its business to a new European organisation if France continues to hold privileged voting rights.
Although state ownership is "not a complete block", Evans believes that the three governments need to spell out exactly what levels of control they are prepared to accept, so that industry can work on creating an appropriate structure.
"The message seems to be that the trilateral accord is going to produce as many questions as answers, particularly on the ownership issue, "says Chris Avery, aerospace analyst with Banque Paribas in London. "It looks as though the rush towards a centralised European solution is running out of steam," he adds, pointing out that the major UK companies still have options open for links across the Atlantic.
Evans also stresses that the negotiations towards restructuring Airbus Industrie into a standalone company, cannot be made conditional on any wider consolidation involving defence platforms and systems. "There is no conditionality between the two, in fact quite the opposite," he says. The partners have now "-broadly agreed" the division of assets within Airbus and are preparing to thrash out valuations, he says, but they are still on course for the 1999 target date for an agreement.
Meanwhile, BAe's financial performance continues to improve as the group resolves the heavy losses from the regional aircraft business, which have dogged the results over the past six years.
The group ended 1997 with pre-tax profits up by 31%,at £596 million ($993 million), before a £250 million write off to cover the closure of the Jetstream 41 turboprop line.
The improvement came as losses fell to £20 million in the commercial aircraft business. Although the profits are not split out, estimates based on cashflow figures show that the Avro regional jet operation was at breakeven, while turboprops lost more than £44 million. BAe Airbus operating profits were at more than £100 million after launch aid repayments of £66 million on the A320.
Further details have emerged of Aerospatiale's re-organisation plans ahead of attempts to restructure the European aerospace industry. The company's activities are being organised in two sectors, Aircraft and Space & Defence.
The new organisation, which comes into effect in the second half of the year, will see an Aircraft sector comprising subsidiary operations covering Aerospatiale Airbus, Aerospatiale ATR, Sogerma, Socata and the Eurocopter Group. The Space & Defence sector will include Aerospatiale Ballistics and Space Transport, Aerospatiale Missiles, Aerospatiale ISTI ( covering systems engineering and information technology operations) and Aerospatiale Satellites, which will become part of a joint venture with Alcatel and Thomson.
Source: Flight International
