The UK Government's decision to give British Aerospace £123 million ($200 million) launch aid for development work on the wing of the Airbus A340 500/600 airliner may give a much-needed morale boost to the UK aerospace industry, but it may also do little to bolster (and may even harm) the prospects for a strong European aerospace industry.
Apart from safeguarding up to 2,000 jobs and signalling to aerospace business leaders that the Government is prepared to do more than just pay lip service to the industry, the cash advance also sends a message to political leaders in continental Europe that the UK aims to retain a strong role and leadership in any future European aerospace industry structure.
That message began to filter through in 1997 with the £200 million ($333 million) pledged to Rolls-Royce to help develop the engines for the new A340s, meaning that both BAe and Rolls-Royce would be responsible for at least 50% of the development work.
While the £300 million plus in launch aid is a drop in the ocean compared with the returns from the investment expected from the potential £13 billion in airline commitments to the A340-500/600, the UK Government does appear to be moving the goalposts back to the line drawn by its European counterparts.
Rather than continuing to press for a level playing field in Europe on which market forces would determine business winners and losers, the UK has apparently decided that "-if you can't beat them, join them". Giving highly profitable BAe a cash injection may demonstrate that the UK is not prepared to let its national companies be disadvantaged vis-a-vis their counterparts in continental Europe which are unprofitable and inefficient and regularly receive boosters just to keep them afloat - but just what sort of message is the UK Government sending in doing this?
Is it that, as long as national champions exist, the UK will fight tooth and nail to keep its flag flying through subsidy until Europe's politicians finally agree to end their encouragement of overcapacity, inefficiency and duplication across Europe's aerospace manufacturing sector? That is what others seem to be signalling: only last week, Dr Norbert Lammert, Germany's parliamentary state secretary and federal government co-ordinator for the aerospace industry, said: "There is no other brand of industry in this economy that enjoys such political support-and we've not an inkling of bad conscience about it because we are convinced that this is a strategic industry for our economy".
If keeping a level playing field for now is a question of preserving the status quo, where does that leave current consideration of the structural integration and consolidation of the European aerospace industry? Where does it leave Europe's aerospace groups in deciding how to merge their companies to produce world-competitive European champions?
State aid is an accepted factor on the aerospace scene, for good or for ill: the European Commission and the USA even agreed a couple of years back on a formula (although perhaps not an enforceable one) for regulating this necessary evil. Within Europe, however, there seems to be no agreement or co-ordination to ensure that state aid is being deployed towards the improvement of the industry and towards sensible long-term goals. If repayable launch aid is a means to helping a pan-European airliner manufacturer find its feet, why cannot the interested governments contribute to a pool of aid which could be distributed in the best interests of that manufacturer, rather than each pursuing its own local interest?
French, German and UK leaders recently made joint declarations about the need for a European aerospace super company to match the strength of the likes of Lockheed Martin and Boeing, but their individual actions since then seem to indicate that none of them believes in the concept of playing on the same team if that means accepting local job losses.
Just how long can Europe's Governments - including that of the UK - continue to sustain the fragmentation of the aerospace industry instead of fostering the growth of an efficient, competitive, technologically sound and profitable, European giant ?
Source: Flight International
