Merger talks between Europe's leading aerospace and defence companies were thrown off course during the show as France stepped up its protest against a widely expected military merger between British Aerospace and Germany's Daimler-Benz Aerospace (Dasa).

Foreshadowing a ministerial meeting at the show involving the Airbus partner nations, France, Germany, Spain and the UK, French transport minister Jean-Claude Gayssot warned that any merger between BAe and Dasa would upset progress towards creating the Airbus Single Corporate Entity (SCE).

Gayssot upset industry leaders and sparked several statements during the show about the implications of a possible merger of BAe and Dasa's military aircraft activities and the difficult bargaining process ahead for the four industry partners in attempting to forge a single civil aircraft company.

Yves Michot, Aerospatiale president, warns, however, that a BAe/ Dasa merger "-would change the landscape. We would have to look again at the picture," he says.

A BAe/Dasa combination would create a strong Anglo-German entity which could imbalance negotiations with the French on the SCE and, ultimately, the planned single European Aerospace and Defence Company.

Aerospatiale, BAe, CASA and Dasa have just begun working on a valuation dossier to establish the financial worth of the Airbus entity and the stakes represented by the partners. The integration of the four companies' Airbus interests into a single company is due to be completed by mid-1999.

Noel Forgeard, Airbus' new chief executive, dismissed Gayssot's warning, saying at the show that a BAe/Dasa military merger would not affect the Airbus SCE integration plans "only the shareholders". He added that any developments towards an EADC incorporating combat aircraft, missiles and space with the Airbus commercial aircraft company a "business cluster" beneath the holding company must be in parallel with the SCE endeavour and not wrapped up with it.

"The EADC cannot delay the process for the integration of the Airbus SCE which is necessary to fund projects like the A3XX," Forgeard warned.

BAe chief executive John Weston agrees that the SCE remains the priority for 1999 ahead of any plans for the EADC, but declared his intention to continue to build teaming agreements in line with the EADC objective.

"We will do what is possible in moving towards this end objective," Weston said, adding that linking with Sweden's Saab was one step, and bringing Dasa's military aircraft activities into a single European military aircraft business would be next. He is circumspect, however, about France's plans to bring its fighter aircraft capability into the fold.

Source: Flight International