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Airbus Industrie and AVIC abandon AE31X

Julian Moxon/PARIS Paul Lewis/HONG KONG

Airbus Industrie and Aviation Industries of China (AVIC) have broken off negotiations on co-operative development of the 100-seater AE31X following what an industry source describes as "failure to establish a sufficient business case" .

The move will cause little surprise. The third potential partner in the AE31X programme, Singapore Technologies, had already pulled out of discussions, apparently exasperated with the failure to reach agreement.

Airbus will not comment officially on the ending of the project, but industry sources say the two sides were "-unable to put together a programme that would generate enough margin to make it worthwhile making the heavy investment necessary". In addition, the global market for 100-seaters was not seen as big enough to justify a go-ahead.

The decision reflects the more pragmatic approach of the Chinese leadership on investing in major aircraft projects without a clear economic return, particularly at a time when the Asian financial crisis is threatening to undermine the Chinese economy.

It is also clear that there were continued disagreements over the amount of aircraft technology that Airbus was willing to transfer to AVIC, as well as differences over workshare. The talks have also been handicapped by the top-to-bottom restructuring of the Chinese aerospace sector, with AVIC due to be absorbed into a new "super ministry".

"They are more interested in joining existing programmes that have already got an established market position," says the source, although it is understood that China, which has been experiencing an almost exponential increase in passenger traffic, is getting increasingly interested in becoming a risk-sharing partner in the 480/650-seat A3XX programme.

Sources deny that Airbus Industries' new chief executive officer, Noel Forgeard, was behind the decision to cancel the AE31X, saying: "The fact is that the programme was already sliding towards cancellation while Jean Pierson was still the boss."

Cancellation of the AE31X does not automatically mean that the 100-seat A319M5 project will go ahead, says Airbus, although the two aircraft are "clearly linked-it's a question of what, how and when. There is no change in the global idea of building a 100-seater, as long as the business case is proven".

Airbus Industrie Asia and AVIC are understood to have already looked at alternative programmes, including a longer term development of a new low-cost aircraft.

The two sides have been negotiating the deal since 1996 following a Chinese decision to select a European offer to co-produce a regional jet in preference to Boeing.

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