European Leaders May Be Ready To Fix Airbus Four-Nation Consortium Will Change Its Structure As It Strives To Be More Competitive With Boeing

Europe’s top political leaders and Airbus Industrie are sending the strongest hint yet that they are ready to remake the four-nation consortium into something more resembling a for-profit corporation.

At recent meetings in Weimar, Germany, top French and German leaders agreed that the European commercial aircraft partnership should become a limited corporation by Jan. 1, 1999 to make it more competitive with Boeing.

German Chancellor Helmut Kohl, French President Jacques Chirac and French Prime Minister Lionel Jospin have agreed to accelerate the transformation of Airbus.

Among other things, that transformation would include additional ministerial meetings among Airbus partner countries.

Speaking at the end of a two-day FrenchGerman summit, Kohl further underscored the urgency by saying that a European response to the merger of U.S. competitors Boeing and McDonnell Douglas was one of the “most urgent questions” facing his government.

“Europe just can’t sit around and wait for someone to come along and unite” its aerospace industry, Kohl said.

The reorganization of Airbus into a private corporation is considered essential for Airbus to compete with Boeing in the market for commercial airplanes.

However, aerospace analysts and Boeing officials here remain skeptical that the European aircraft maker is making much headway.

“They are not making any progress, and they are going backwards,” said Ron Woodard, president of Boeing’s Commercial Aircraft Group. “I think once they do it, it will be one of the biggest transfers of assets in the history of the world.

“And they are going to start out nice and fresh with everybody else’s money. But I think in a matter of years they will have to get at the same base as we are because somebody has to pay the piper.”

European leaders also are hopeful that an Airbus reorganization would trigger the consolidation of the European aerospace industry, which today is dwarfed by the recent megamergers of U.S. defense and aerospace companies.

“I think 1997 and 1998 are critical, at least in creating a framework for consolidation to progress,” said Sir Dick Evans, chairman of British Aerospace. “But it will take us some time to reach our end destination because the structure of the European industry is so different from the U.S.”

The French government likely will decide by the end of October the fate of Aerospatiale, a state-owned defense and aerospace giant and one of Europe’s four Airbus partners.

The key question is whether the government will privatize Aerospatiale, transfer its commercial aircraft assets to Airbus and then merge with Dassault Aviation - France’s other partially private defense and aerospace giant.

This decision must be made against the backdrop of a Socialist government that won election by opposing the privatization of strategic French industries.

Aerospatiale and Germany’s Daimler-Benz Aerospace each own 37 percent of Airbus. British Aerospace owns 20 percent, and CASA of Spain has 4.2 percent. The system has no central decision-making authority. Decisions are reached by consensus of the four partners.

Under a central management structure, the company could make quicker decisions, parceling out work to the most efficient subcontractors. Today, work on various parts of the airplane is distributed to the group’s partners based on the stakes they hold in Airbus.

The formation of a single corporate entity also would make it easier to raise private money to pay for aircraft development. Airbus plans a 600-seat superjumbo costing at least $12 billion to develop.