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Aviation History
1999
1999 - 1463.PDF
BAe/Dasa hold cargo aircraft merger talks ANDREW DOYLE/DRESDEN AIRBUS INDUSTRIE part ners Aerospatiale, British Aerospace and DaimlerChrysler Aerospace (Dasa) are in talks to form a joint venture to take over sales and marketing of their A3 00 and A310 cargo conversion and maintenance businesses. The move could be the first step towards the establishment of a "European Maintenance and Conversion Company" (EMCC), as a wholly owned subsidiary of the proposed Airbus single corporate entity (SCE). The move would mirror rival Boeing's recently formed Airplane Services unit. Agreement by the European companies would end the fierce competition between BAe Aviation Services (BAeAS) and Dasa Airbus, which operate rival A3 00 freighter conversion programmes. The German company has a commer cial agreement with Aerospatiale subsidiary Sogerma to offer A300/A310 conversions jointly and to share the modification work. Pressure is mounting for BAe and Dasa to end their rivalry in the conversion market, not least from Airbus In dustrie itself, say sources close to the discussions. Sales campaigns have fre quently pitched Airbus, offering new-build A3 00- 600 freighters, against partner companies offer ing conversions. In addition, BAe and Dasa have indicated their intention to enter the emerging A300-600 cargo conversion market, but Airbus they agree that the volume of work will not be enough to justify two players. Airbus is also planning to offer A310 multirole tanker/transport (MRTT) aircraft to operators such as the Royal Air Force, which is likely to involve converting used aircraft. "If the MRTT goes ahead, then we need BAe because thatwill involve modifications to the wings," says a Sogerma source. BAe Airbus is the design authority for the wings of all Airbus aircraft. Dasa and Sogerma have decided that the formation ofa programme company would be a "logical next conversion specialists are gathering for talks step" in their own co-operation, say the sources, and the new entity would be responsible for negotiat ing contracts with customers and for holding supplemental type certificates. More talks between BAeAS, Dasa Airbus and Sogerma execu tives are due to take place by the end of May, with the aim of agree ing a common strategy for the A300-600 and A310 conversion and maintenance markets. The managing director of the Dasa Airbus Dresden conversion centre, Dierk Minke, declines to comment on the talks specifically, saying only: "We have to agree on a common solution, and then on how to share these activities." BAeAS managing director, Cliff Duke says: "The optimum way for ward for each constituent part of the business, its customers and products will be identified and agreed by each of the part ner companies involved wherever relevant." Minke says that earlier talks on the formation of an EMCC were shelved lastyear, following a break down of the Airbus SCE negotia tions. The talks are expected to resume later this year, but no agreement is likely before the mid dle of next year. Dasa's Airbus modification and maintenance centre has converted 22 A300s and 44 A310s, and has an order backlog of 3 7 for both types. BAeAS has secured 47 orders for A3 00 conversions, and has deliv ered 20 since Channel Express took the first aircraft in 1997. • Dynamic future awaits GuSfstream after purchase GRAHAM WARWICK/WASHINGTON DC THE LONG-anticipated sale of US business jet giant Gulfstream has been announced, but the buyer is a surprise: General Dynamics (GD) has agreed to acquire the manufacturer in a one- for-one stock swap which values the company at $5.3 billion. GD was attracted by Gulf- stream's strong cashflow and sub stantial firm order backlog. Analysts expect Gulfstream's financial health to bankroll further acquisitions by GD, which in turn is expected to provide the financial resources for expansion of the for mer's products and services. Georgia-based corporate air craft manufacturer Gulfstream, which generated sales of $2.4 bil lion lastyear, compared with GD's $5 billion, says it wants to expand its fractional-ownership and short- term lease programmes, and that the deal should also boost expendi ture on product development. Gulfstream ended the first quar ter of this year with an orderbook exceeding $4 billion. GD chair man Nicholas Chabraja says that over 60% ofa 130-aircraft backlog is due for delivery from next year, with firm orders to 2003 and options to 2007. Production is expected to continue at the current high rate of 65 Gulfstream IVs and Vs a year for the next three to four years, Chabraja says. Virginia-based GD left the civil aircraft market in 1992, when it sold Cessna to Textron for $600 million - a move Chabraja views as a mistake. The company subse quently left the aircraft business entirely in 1993, when it sold the F-16 production line to Lockheed. Since then, it has focused on the armoured vehicle, warship/subma rine and defence electronics mar kets, and is the fourth largest contractor to the US Department of Defense (DoD). Gulfstream will form a fourth, aircraft group within GD, of which it will be a wholly owned subsidiary. The companies expect some syner gies, with GD helping to develop government and military variants of Gulfstream aircraft. Chabraja expects the company to benefit from GD's expertise with comput er-aided design and manufacturing. He says: "Beyond our defence core, our strategy calls for oppor tunistically pursuing businesses where we can apply our core com petencies in development, design and production - and Gulfstream is a perfect fit." Investment firm Forstmann Little, which bought Gulfstream from Chrysler in 1990 with an equity investment of $200 million, owns 23% of the company and has backed the transaction. Teddy Forstmann, who will continue as Gulfstream's chairman, says his firm and its investors will realise $3 billion from the sale and previous transactions, which included a public offering in 1996. Gulfstream is GD's second ma j or commercial acquisition - the first was Computing Devices - since the disposals of the early 1990s, the deal coming in the wake of a DoD decision to block the take-over of rival warship giant Newport News Shipbuilding. GD is among bidders for the defence electronics assets of Texas-based GTE, being auctioned for up to $1.5 billion as part of a larger telecommunications merger. • FLIGHT INTERNATIONAL 26 May - 1 June 1999 7
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