Government rules out launch aid for new Airbus jet

The Government has ruled out providing British Aerospace with pounds 120m in launch aid towards the development of a new long-range Airbus jet.

An announcement about the decision is imminent although it is still not clear whether ministers will sweeten the pill by agreeing to slow down the rate of launch aid repayments on earlier Airbus programmes.

The four Airbus partners yesterday formally launched the $2.9bn (pounds 1.76bn) programme to build the A340-500/600 series, a 375 seat aircraft which will compete with the Boeing 747 jumbo jet.

BAe, which has a 20 per cent stake in Airbus and makes the wings, said it had given the three other members of the consortium a commitment that it would fund its share of the development costs. These are in the region of pounds 360m.

The company also indicated that if government support was not forthcoming it would seek to have some of the work carried out by risk and revenue sharing partners overseas. "We would hold discussions with suppliers and industrial partners to see if all or part of the launch costs could be offset in the event that government funds are not forthcoming," said a spokesman.

Airbus has launch orders for more than 100 of the new A340 aircraft worth $13bn from at least seven airlines. Among the customers are Virgin Atlantic, Lufthansa, Air Canada, Egyptair and Eva Airlines of Taiwan. Rolls-Royce has won engine orders worth $4bn from the launch customers for a new version of its Trent engine which is being developed with pounds 200m of government launch aid.