The overcrowded European regional jet market has moved closer to further consolidation, spurred on by continued problems at Fokker and Daimler Benz Aerospace (Dasa), the imminent approval of the joint venture Aero International Regional, and a joint European bid to partner China and Korea in building a new regional jet.

Fokker, which reported record half year losses of DFl651 million ($397 million), sent a proposed rescue plan to the Dutch government, a minority shareholder, in early September in a bid for more state cash. Majority shareholder Dasa was due to start talks with the government about recapitalising Fokker.

Fokker stresses the plan only envisages a 'financial restructuring' - it is still in the process of cutting its workforce to 6,700 by mid-1996. Debt stands at DFl4.6 billion against an equity base of only DFl50 million and Fokker is reportedly in need of some DFl2 billion in cash.

One encouraging sign for Fokker is that a Daimler Benz leasing subsidiary has agreed in principle to set up Debis AirFinance, which will take the DFl1.3 billion of leased aircraft off the maker's books.

But the problems also extend to Dasa, where leaks of a preliminary report prepared by McKinsey suggest the company could shed 20 per cent of its 75,000 workforce. Dasa was due to make a decision on a restructuring plan at the end of September.

Both Dasa and Fokker need to cushion themselves against the weakness of the US dollar. Fokker attributes DFl320 million of its half year loss to the dollar effect. A further DFl170 million came in restructuring charges. While the Dutch state will not leave Fokker in the lurch, it is understood to be pressing Dasa to show definite progress on linking with other European regional aircraft makers.

Dasa should need to look no further than Aero International Regional, the regional joint venture between British Aerospace, Aérospatiale and Alenia. But marrying Fokker's two regional jets into a portfolio which includes the Avro RJ family, for which Sabena has become the latest customer with an order for 23 RJ85s, appears an insurmountable hurdle. European Commission approval for AIR was due by the end of September.

The strongest catalyst for cooperation could be in Asia if Avic of China and KCADC of Korea accept a joint proposal by the three AIR partners and Dasa to build the next generation 100-seater regional jet. The European case may benefit from the recent signing of an MoU by Avic, KCADC and Hindustan Aeronautics of India, which has links with Fokker and BAe, for the same project. The only hurdle is Boeing, which denies reports it has dropped Japan from its own bid to woo the Chinese and Koreans into a similar project. A decision could come by the end of October.

Source: Airline Business