EC Approves State Aid for X4, AW169

 - April 2, 2012, 2:10 AM
Italy is providing a subsidized loan for AgustaWestland’s AW169.

The European Commission (EC) has allowed France and Italy to grant aid for the development of two medium twins in the 10,000-pound class–the Eurocopter X4 and the AgustaWestland AW169, respectively.

Eurocopter will receive €143 million ($186 million) as a repayable advance to fund research (14.5 percent) and development (85.5 percent). The advances will be repaid in full when “a pre-defined sales target” is reached. Each additional delivery beyond this target will trigger the payment of a royalty fee to the French state.

Eurocopter CEO Lutz Bertling had previously said that France’s total aid for the X4 will amount to €250 million ($325 million). This will be shared among Eurocopter and partners Daher, Thales, Turbomeca and Sagem. Bertling also said he expects the X4 to generate about 1,000 sales over the life of the program.

The X4 will compete with the AW169 and the S-76D (scheduled to enter service this year). In addition the Turbomeca-powered Kamov Ka-62, if it is actually developed, might become a low-cost alternative. Eurocopter plans to deliveries of an initial version of the X4 to begin in 2016 or 2017, followed by a second, more advanced version in 2020.

In Italy, AgustaWestland will benefit from a €272 million ($354 million) zero-interest subsidized loan, spread over 19 years, to fund research (40 percent) and development (60 percent). The zero interest equates to €94 million ($122 million) of aid, the EC has calculated.

In approving the loan to AgustaWestland, the EC took into account that the AW169 program will provide work in Campania, Lazio and Apulia, regions suffering from “development deficits in relation to the EU average,” and will “make a positive contribution” to their technological development.

The EC decided that these measures are compatible with its rules on state aid, particularly since the planned public funding is “justified, proportionate and without risk for competition.” The two helicopters “will bring significant progress in terms of [safety] and reduced environmental impact; they will also help increase European know-how in leading-edge technologies,” said Joaquín Almunia, EC v-p in charge of competition policy.

In both cases, the EC estimated that the scale of the projects is such that “the investments and associated risks” exceed the funding capacities of the undertakings. It pointed out that commercial investment markets are wary of financing risky projects that will provide a return on investment only in the long term. “The French and Italian aid therefore makes up for a genuine market failure,” the EC said. The aid is “proportionate [and] limited to the amounts strictly necessary to conduct the R&D projects.”

Despite expressing doubts about the commercial market’s appetite for investing in such projects, the EC says its aid is unlikely to limit other competitors’ willingness to invest. The sector is characterized by “significant scope for technological innovation and high growth prospects,” the EC notes, adding that its aid is therefore “unlikely to distort competition.”