Expansionary Institute

Airbus to launch A3XX giant aircraft seating 555 passengers,

Airbus to launch A3XX giant aircraft seating 555 passengers

By Bradley Perrett, European aerospace & defence

correspondent

LONDON, Dec 19 (Reuters) - The European Union rejected U.S. accusations of aerospace subsidies on Tuesday as planemaker Airbus Industrie prepared to launch full-scale development of its A3XX giant aircraft.

President Bill Clinton warned the European Union late on Monday of a trade fight over the project's government funding, expected to be a third of the $10.7 billion development cost estimated by Airbus.

As Airbus planned a news conference to make a "major announcement" at 1330 GMT, sources confirmed that the firm, now armed with orders for 50 A3XXs, was finally ready to commit itself to building the 555-seater.

Airbus, a partnership of European Aeronautic Defence & Space Co NV (EADS) and Britain's BAE Systems Plc, has proposed a plane like the A3XX since the early 1990s as a larger successor to the successful U.S. Boeing 747.

At 1200 GMT, EADS shares were trading 3.8 percent higher in Paris at 22.00 euros.

"The form of support will be repayable loans," Gunnar Wiegand, spokesman for EU External Affairs Commissioner Chris Patten, said in response to Clinton's warning.

"These are not subsidies."

Earlier, Deputy U.S. Trade Representative Susan Esserman said: "Given the size and financial strength of its corporate parents, (Airbus) should not be receiving additional subsidies of any kind.

"We believe it is critical to get this issue resolved if we are to head off a potential conflict on this matter."

According to some estimates, A3XX development will cost $12 billion or more.

COST EFFICIENCY

Airbus touts the A3XX as a spacious cruise ship of the sky, but most airline executives have been highly sceptical of proposals to fit the plane with facilities such as gyms and cabins at the cost of revenue-earning seats and freight.

To them, the alluring bottom line is Airbus's promise that the A3XX will move each passenger 15 percent more cheaply than can the 747-400, currently the industry's cost champion.

Such performance would be a great threat to Seattle-based Boeing, which has long complained that Airbus receives debt forgiveness and below-market interest rates on government loans, violating a 1992 U.S.-European Union treaty and a 1994 World Trade Organisation agreement.

The project has been deferred several times, and Airbus did not even begin soliciting launch orders until June.

But since signing up Singapore Airlines affiliate Virgin Atlantic last week, Airbus has had orders for 50 A3XXs, the number it had targeted to justify a launch.

A last-minute order from another launch customer is still possible, since Airbus said last week that it would not turn airlines away simply because it had reached its launch target.

Moreover, attractive launch-customer prices were still available, the firm's chief salesman, John Leahy, said then.

BOEING ALTERNATIVE

Boeing is offering longer-range and bigger variants of its 747 to rival the A3XX -- the 430-seat 747X and the 520-seat 747X Stretch -- but has booked no orders.

Apart from Virgin, Airbus's customers include Australia's Qantas Airways Ltd, Air France, Emirates of Dubai, American International Group leasing unit ILFC, and Singapore Airlines.

Since Airbus had not committed itself to building the four-engine plane, the contracts with those companies were only preliminary. But with Tuesday's launch they will become firm orders, with Airbus contractually obliged to deliver the aircraft as scheduled and with the advertised performance.

That performance includes greater range than the current 747-400 and about 35 percent more passengers. The aircraft will permit Qantas, for example, to fly from Los Angeles to Melbourne with a full load of passengers and freight -- something it cannot do with its 747-400s.

Airbus calculates that the A3XX will have 50 percent more floor area than the 747-400, implying more space per passenger even if airlines refuse to sacrifice freight space in the belly for cabins or recreational facilities.

Better fuel efficiency is promised from two new engines from Rolls-Royce Plc and a joint venture of General Electric Co and United Technologies unit Pratt & Whitney.

(Additional reporting by David Evans in Brussels.)

07:53 12-19-00

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Tue Dec 19