Japanese manufacturers will have to cover mounting Boeing 7E7 development costs with their own resources for at least three more months because of delays in securing government-backed loans.

Industry sources say Japan requires launch orders and a contract with Boeing to be in place before a loan or subsidy scheme is approved. Japanese manufacturers, which were tapped last year to build 35% of the 7E7's airframe, are hoping both these come through by July.

Japanese industry sources are confident Boeing will formally launch the programme around mid-year, with initial orders from All Nippon Airways, Singapore Airlines and at least one non-Asian carrier. Sources say Boeing and the Japanese Aircraft Development Corporation (JADC), on behalf of Japan's three largest aerospace manufacturers, have already forged some preliminary agreements and are aiming to conclude a master programme contract by mid-year.

The government will then be willing to approve a subsidy scheme designed to help Japanese manufacturers - namely Fuji, Kawasaki and Mitsubishi - cover 7E7 development costs. These companies have had to begin development efforts without any loan from the government. Sources say they are trying to secure the loans as soon as possible because development costs are quickly spooling up and their profits this year are being adversely affected by the decline in the US dollar.

Boeing says it expects an agreement with JADC to be be finalised "within the next few months", but declines to provide any details.

JADC is seeking a government loan to cover 70% of development costs with terms similar to the loan it secured for the Boeing 777 (Flight International, 17-23 February). JADC would have to repay the loan and all interest, which initially would be covered by the government.

Although the loan scheme has not yet been set, Airbus has questioned its legality and asked the European Union to investigate. This may be causing the government to take more time in deciding on a loan scheme. Last week the Japanese parliament approved its fiscal year 2004 budget, including about $25 million for 7E7 development, but it has not yet taken up the loan issue.


Source: Flight International