BUSINESS/ECONOMY

Catching the Airbus

D'ARCY JENISH March 28 1988
BUSINESS/ECONOMY

Catching the Airbus

D'ARCY JENISH March 28 1988

Catching the Airbus

Over the past 17 years, Airbus industrie of Toulouse, France, has sold almost 800 jet aircraft to buyers in 71 countries. The aircraft have all been designed and produced by companies in the four member nations of the Airbus consortium—France, Britain, West Germany and Spain. Now the consortium is about to award a first contract to a non-European company— Montreal-based Canadair Ltd. Since early 1987 Canadair has been negotiating for a contract to build sections of the fuselage of a new generation of Airbus aircraft. The contract is valued at about $1 billion and could create 1,000 jobs over a 10to 15-year period. It could also put Airbus in a favorable position to sell aircraft to Air Canada.

The four governments that have provided $12.5 billion in financial subsidies for Airbus gave their approval last June for production of two new aircraft. Airbus has already concluded over 100 sales, with deliveries scheduled to begin by 1993. The member companies of the consortium have agreed, under pressure from their governments, to award up to three per cent of the work on the new generation of aircraft to outside firms. Aviation industry analysts contend that using non-European subcontractors will allow Airbus to minimize the impact of fluctuating currency rates and to improve its chances of selling aircraft in North America. The consortium prices its aircraft in U.S. dollars, but most of its expenses are in European currencies. As a result, costs have risen as the greenback declined and forced the consortium to request additional government subsidies.

For Canadair, a former Crown corporation now owned by Montreal-based Bombardier Inc., the contract would mean stable revenue and steady jobs. Canadair currently relies on sales of its Challenger corporate jet for 45 per cent of its revenue, and 20 per cent is a result of parts production for major American aircraft manufacturers. Canadair president Donald Lowe said that he wants to achieve a better balance—and Lowe suggested that Airbus may award Canadair more work if Air Canada agrees to buy the European aircraft as part of its fleet-renewal program. But for now, Lowe will settle for a first contract and what he called “the pile of jobs” that it will create in Montreal.

—D’ARCY JENISH with PETER LEWIS in Brussels

D'ARCY JENISH

PETER LEWIS