Paris Air Show

Airbus will defy U.S. block on A350 funds Headline here Head

 - December 13, 2006, 8:38 AM

Airbus will launch the A350 airliner in September regardless of whether the transatlantic trade dispute over airliner subsidies has been settled by then. Airbus chief executive and EADS co-CEO Noël Forgeard yesterday admitted that the company did indeed delay the launch of the A350 to allow the subsidy negotiations between the European Union and the U.S. to advance further. He told a press conference here the new launch target of September is in fact tied to the October 5 expiration of the 1992 EU-U.S. bilateral agreement on subsidies for the aerospace industry.  

“We could have launched now,” Forgeard told a packed auditorium. “We want to give the maximum possible time for a negotiated solution…since the 1992 agreement finishes on October 5, we have decided to confirm the launch in September.” Even if the sides do not reach common ground by then, Airbus will launch the A350 at that time, he added, signaling that Europe is ready to defy the Bush administration. The program may be backed by repayable loans from the governments of Airbus partner nations, although Forgeard had declared on Monday that the company has enough cash to launch the program without the the government loans.

Forgeard bluntly criticized Boeing for what he considers a disingenuous attempt to characterize government support to Airbus as something less legitimate than subsidies granted to Boeing by U.S. government entities and Japan.

“The competition has done an excellent job in public relations,” said Forgeard. “It’s a joke.”

Airbus has recently leveled more pointed criticism not only about Boeing’s U.S. tax breaks and NASA funding, but by what Airbus calculates as $1.5 billion in government aid to the 787’s Japanese suppliers. The stronger stance has raised suspicion that Airbus has begun to swallow sour grapes over its failure to break into the Japanese market in any meaningful way.

“We would like to increase our share in Japan but [the prospects] don’t look very promising,” admitted Airbus COO and executive vice president of programs Gustav Humbert. No one on the panel, which also included Airbus commercial vice president John Leahy, would admit to any connection between Airbus’ recent focus on Japanese subsidies and its lack of business in the country, however.

“Our stance against Japan has nothing to do with the fact that their carriers do not have open competition,” added Humbert.

Forgeard also fielded questions about EADS’s search for his replacement at Airbus, and most notably about his ability to fully attend to his responsibilities at Airbus and EADS while holding leadership posts at both.  “Not being an unreasonable person, I never had a desire to consolidate the leadership of Airbus and EADS,” he said. “Until further notice I am in charge [of Airbus] and will devote all my time to Airbus.”

Turning to less politically charged matters, Humbert briefly alluded to some of the reasons for the delay of the A380, including a requirement from customers for “a major weight reduction.” He also said customer demand for a more complex specification than originally anticipated delayed systems integration. “All this will be under control in the next two or three months,” said Humbert.

The snags have forced Airbus to delay deliveries to some of its customers, including Dubai’s Emirates Airlines, whose chairman, HH Sheikh Ahmed bin Saeed Al Maktoum, made the trip to Paris to talk over the issue with Forgeard.

“We had most of our customers in Paris to inform them of delays from two to six months,” said Forgeard. Originally expecting first delivery in March, launch customer Singapore Airlines now won’t take its first airplane until late next year. 

Forgeard said the delay would not significantly effect the company’s 2006 operating results, although Emirates has said it will seek compensation in some form. He also issued production rate estimates of “at least” 360 airplanes this year and more than 400 next year. Last year it delivered 320.