THE outlook for British Aerospace's civil aircraft business, which
includes the Jetstream assembly line at Prestwick, has brightened with
the formal signing of the group's deal with Taiwan for the joint
production of its regional jet aircraft.
The Taiwanese are to buy a half-share in this business for #120m plus
a further #16m when the first aircraft rolls off the Taiwanese
production line next year.
The deal, first mooted last September, is a major plank in the
reorganisation of BAe's lossmaking civil aircraft side. It will enable
the group to release part of the #750m of provisions made to fund the
possible closure of the regional jet business which will help the
financial position of the whole civil division.
The restructuring has already led to heavy job losses, particularly at
the group's traditional base at Hatfield. But the remaining workforce
will be more secure after the Taiwan deal.
Prestwick gained 500 jobs as a result of the shake-up as production of
the ATP twin-turboprop airliner was transferred there. The factory
already makes the Jetstream 31 and the new 41, the first of which has
just entered service with Loganair. It also makes parts for the regional
jet.
If the Taiwanese had not come in BAe would have been forced to close
down the production line of the 146 and its new derivative the Regional
Jetliner (RJ). This would have put 4000 BAe jobs plus several thousands
more at sub-contractors at risk and would have been very costly because
the bulk of the 200 146s sold were leased by BAe to airlines. Their
second-hand value would have plunged had production ceased and
provisions against this loss of value would have had to be made.
BAe has spent #150m in developing the RJ, which looks externally like
the four-jet 146 but has a new flight deck and interior design and
improved engines giving better economy and lower maintenance costs.
Having four engines gives it more flexibility and is advantageous in
getting in and out of small airports but it goes against the trend and
BAe has guaranteed that its operating costs will be no more than an
equivalent two-jet aircraft.
There are 33 RJs on order with the first due for delivery in April and
the Taiwan connection will greatly improve its sales prospects in the
Pacific Rim which has the fastest-growing air traffic in the world.
Taiwan is very keen to become a significant force in civil aviation but
there are doubts in aviation circles about how BAe will get on with the
new Taiwan Aerospace Corporation.
The new joint-venture company, Avro International Aerospace, revives
the Avro name, one of the most famous in aviation history because of the
Avro Lancaster and Vulcan bombers, and a BAe spokesman said that the
Taiwanese were particularly pleased to be associated with such an
illustrious name.
BAe shares have rallied strongly since the dark days of last
September, when the group revealed losses of #140m, as the market has
become more confident that chairman John Cahill would succeed in pulling
the business round. They gained 9p to 194p yesterday.
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