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A flying black hole

Posted by Richard Sunday, April 17, 2005

Here is something that puts the long-running dispute over Airbus subsidies into perspective, and gives an entirely different slant to Schröder's claim at the launch of the A380 "Super Jumbo" in January, when he declared that, "There is the tradition of good old Europe that has made this possible".

According to a report trailed in The Sunday Times today, it seems that this aircraft is set to make losses in excess of £4 billion over its commercial life. As a result, Airbus will never repay the £2 billion-plus state aid paid to help launch it.

The report, funded by Boeing, says Airbus could realistically have expected to sell just 496 of the large aircraft in the first 20 years of the programme. To date, the authors say, the A380 has been sold for $130m-$145m, compared with the $199m building cost.

Between 2006, the year of the first commercial flight, and 2025, the programme will produce a "net negative cashflow of $8.1 billion" the report concludes. As state-aid payments are judged over 17 years, the report also looked at the financial position between 2000 and 2017. It was judged to produce losses of $6.9 billion.

Aaron Gellman, one of the report authors, said: "The project produces a cashflow that is absolutely enormous, and I think it bears some comparison with the Channel tunnel."

George Hamlin, director of the MergeGlobal consultancy and another of the report's authors, said the A380 represented a bad investment for European taxpayers: "If it's not even breaking even, then how do you get your money back?"

Overall, if these figures are accurate, they really make a mockery of the EU's attitude to state aid. A mere £100 million to Rover, it seems, has the Rottwielers out in force, but a cool £2 billion on top of many more to subsidise an industry that could and should be standing on its own two feet, is perfectly acceptable.

One wonders whether the fact that 80 percent of Airbus is owned by the Franco-German aerospace giant, EADS, might have something to do with it. Whether or not it does, European taxpayers are funding a massive black hole in the sky.