Regional Aircraft division bids to reposition itself in effort to move back into profitability

BAE Systems' loss-making Regional Aircraft division is to reinvent itself as a customer service provider for all categories of airliner after the 2001 cancellation of the Avro RJX regional aircraft programme, its only civil manufacturing activity.

Under a new managing director, Alan Fraser, it will invest £20 million ($29 million) in IT, building spares stocks over the next two years and restructuring costs associated with concentrating activity at three main sites by mid-2003.

Prestwick, Scotland, will be the hub of engineering and support by year-end, while asset management will centre on Hatfield, and spares at Weybridge. It will also maintain a support and asset management centre in Washington DC, a spares operation in Sydney, Australia, and customer training and engineering in the former manufacturing plant at Woodford, near Manchester, UK.

The Regional Aircraft sales operation in Toulouse, which was originally created through the abortive AI(R) joint venture with ATR, is to close. This will affect up to 200 employees, although some will relocate. The division's payroll should stand at 1,150 by mid-2003.

The Regional Aircraft division's yearly sales figure, excluding "residual" manufacturing, is £170 million. The aim is to maintain this while lowering costs, says Fraser.

BAE is the world's largest regional aircraft lessor by fleet size, with a portfolio of 447 BAe 146s, ATPs and Jetstream 31/32s and 41s. It plans to add other types such as Airbus A320 family models - and possibly more BAe 146s and ATP freighters. BAE won $60 million of new leasing business last year, when leasing income totalled $260 million.

Customer support is also diversifying, and accounts for around 70% of the business, with current deals to be spares provider for Embraer and Raytheon illustrating the type of business BAE wants to increase. Fraser says the engineering division, which accounts for 11% of sales, is considering converting BAe 146s into freighters, and pushing its ATP cargo conversion. "Third party" engineering work with Airbus and Boeing will also be "stepped up".

The firm is hopeful about current trading, saying its customers' spending on spares and support has returned to pre-11 September levels. But, while leasing activity is "returning", oversupply has led to "short-term rental discounts".


Source: Flight International