Airbus A350 Wing Will Stay in Britain, EADS Chief Gallois Says

June 14 (Bloomberg) — Airbus SAS will use British workers and technology to build the wing on its A350 plane even if the U.K. doesn’t contribute to development costs, the chief of the planemaker’s parent company said.

“The work share is already decided,” European Aeronautic, Defence & Space Co. Chief Executive Officer Louis Gallois said in an interview in Paris yesterday. “We’re not going to change that. We’re in the process of starting to build the plane.”

The A350, which will challenge Boeing Co.’s 787 and 777 models, will cost about 12 billion euros ($16.8 billion) to develop. EADS is seeking loans from the governments of France, Germany, the U.K. and Spain, where Airbus has its principal factories. Britain is considering whether to contribute its share, a person familiar with the discussions said June 7.

“Given the importance of launch aid to this plane, the big risk is that failure to agree on funding results in a delay,” Richard Aboulafia, an analyst with Fairfax, Virginia-based Teal Group, said in an interview. “If Airbus is in the position of needing an aid package the next time it launches a plane, the U.K. runs the risk of losing work share.”

EADS, based in Paris and Munich, is wants 3.6 billion euros in state loans for the A350, which is scheduled to enter service in 2013, two people familiar with the plan have said.

Government ministers from the four countries are scheduled to meet tomorrow at the Paris Air Show to discuss the loans. Past state lending has been given in proportion to the work share that Toulouse, France-based Airbus gave to employees based in the each country.

Trade Dispute

In February 2007, Germany said it would review its orders for military goods from EADS should significant parts of Airbus’s production be moved from Germany to France. That dispute was settled, although the issue underlines governments’ wish to develop and keep technologies within their industries.

Any loan commitments from European states may re-ignite a trade dispute between the European Union and the U.S. over subsidies for planemakers. The two governments filed dueling complaints with the World Trade Organization in 2004 about aid to aerospace companies. A ruling is expected in the coming year.

At a press briefing in Paris yesterday, Gallois declined to say whether EADS will limit its request for loans for the A350 to 30 percent of development costs.

All Airbus planes developed after 1992 won about 30 percent of funding in government loans as part of a 1992 agreement between the U.S. and Europe. The U.S. pulled out in 2004.

Boeing and the U.S. government contend that Airbus is getting unfairly subsidized when it accepts state lending. They argue that the loans are not at commercial rates.

‘Not Guilty’

The European Union’s filing with the WTO in March 2007 argues that Boeing benefits from research work reimbursed by NASA and the Department of Defense at no cost for technologies used in the 250-seat 787 Dreamliner.

“We’re not ashamed to have received loans,” Gallois said at a briefing yesterday, before the start of the air show tomorrow. “When you see the level of subsidies our colleagues at Boeing are receiving and reimbursement loans in Japan through their suppliers, we don’t feel guilty and we don’t plead guilty.”

from: bloomberg.com