Joint Press Release of BAE Systems and EADS in formation
Go for AIC and A3XX
London/Munich/Paris, 23 June 2000
The partners in Airbus Industrie, the European Aeronautic Defence and Space Company (EADS) and BAE SYSTEMS, announced on Friday in Paris the formation of an Airbus Integrated Company (AIC) and agreed to give the "Authorisation to Offer" for the A3XX very large aircraft in the marketplace.
The successful completion of AIC negotiations, which have been a long-held objective, will create an organisation positioned to maximise its profitability and share of the global airline business worth around $60 billion-a-year.
EADS will hold an 80% interest in the Airbus Integrated Company and BAE SYSTEMS 20%. In addition, BAE SYSTEMS will have the right to enhanced dividends on its shareholding based on deliveries of A340-500/600 aircraft above an agreed rate over a 10-year period. Based on current economic conditions this could yield anything up to EURO 237.5m to BAE SYSTEMS. The amount will be indexed to future growth in the company.
Airbus will have a consolidated annual turnover of more than EURO 15.7 billion and provide the impetus and strength for the long-term development of the European aerospace industry and global marketplace.
A shareholder committee with five appointees from EADS and two from BAE SYSTEMS will decide on all shareholder and strategic matters. The Airbus shareholders will hold rights to approve a three-year rolling business plan. The first Chairman of the AIC will be Rainer Hertrich. An executive committee, including two nominations from BAE SYSTEMS, will be responsible for the business. The first Chief Executive Officer will be Noel Forgeard.
The AIC will be an integrated organisation under the day-to-day control of a single, focused management team with the objective of delivering customer satisfaction, improved operating performance and greater shareholder value.
Under the terms of the agreement the partners will transfer all their Airbus related design, engineering and manufacturing assets located in France, Germany, Spain and the United Kingdom to the new Airbus company. Incorporated in France, the AIC will employ some 38,000 people at locations in France, Germany, Spain and the UK.
Both shareholders will benefit from the efficiencies and savings, estimated at EURO 350m by 2004. These benefits will be achieved by bringing Airbus engineering and manufacturing assets into the new company, which will concentrate research and development and thus provide critical mass to fund new programmes internally. It will also produce economies of scale through technological leadership together with greater purchasing power.
Although all of the Airbus partners have reduced their individual cost bases over recent years, AIC will further enhance Airbus's competitive position by concentrating purchasing power, removing duplication and cutting overheads. In particular, customers will benefit from a fully integrated customer support organisation. The primary strategic objective of the new company will be to increase its competitiveness and to outperform its competitor in the interests of shareholders, customers and employees. Its priorities will be to maintain and build on its market-leading products and technologies.
Philippe Camus, Co-CEO designate of EADS said: "This is an historic day for Airbus. Our landmark agreement and the Authorisation to Offer for the A3XX are tremendous news for the European aerospace industry and testimony to the faith and commitment of those who founded Airbus Industrie so many years ago. AIC will give Airbus the industrial structure it needs to continue its outstanding success in a lucrative market. This will give additional boost to EADS right from the very beginning."
Mike Turner, COO of BAE SYSTEMS said: "Airbus has always been the flagship of European cooperation. It will now be the flagship of European competitiveness as well. BAE SYSTEMS and EADS will strongly benefit from the efficiencies and savings that a single company will bring. Airbus has grown from a standing start 30 years ago to a turnover of almost EURO 16 billion in 1999 and that position will be further strengthened by the A3XX programme. The progressive launch of an innovative, high technology family of aircraft has underpinned that growth."
Rainer Hertrich, Co-Ceo designate of EADS: "Coming from a history of loose but already very successful cooperation, we are now entering a new level of European industrial integration. The AIC will give a boost to Airbus market performance and it is the right industrial basis for A3XX - our 21st century aircraft that will set the standards for decades."
The decision to give Airbus Industrie the Authorisation to Offer to customers the new large aircraft marks another major milestone for the A3XX programme. This "Authorisation To Offer" (ATO) is expected to lead to a full industrial launch of the programme at the turn of the year.
The ATO provides the impetus to turn the significant expressions of interest airlines have already shown into firm offers, subject to obtaining enough commitments for A3XX to proceed to full launch. More than eight leading customers have already expressed interest in the A3XX family and we are confident a strong market exists for this valuable new addition to the Airbus range.
Airbus Industrie Managing Director Noel Foregard said: "The market has signalled loud and clear that it wants the A3XX, and this has been recognised by our shareholders who all fully endorse the programme. We shall now proceed to firm up the announced expressions of interest."
Physical assembly of the A3XX will take place in Toulouse, while interior furnishing and customisation will be done in Hamburg. In addition to the final assembly work and customisation, A3XX fuselage sections will be produced at the existing sites in France and Germany, as for the other Airbus airliner programmes. The wings will be produced in the UK, while in Spain the horizontal stabiliser and other parts will be produced. Some ten additional manufacturers have already signed up to participate in the development and production of the A3XX.
Customer delivery of the A3XX will be done from Toulouse and Hamburg. The programme directorate for the single aisle family of aircraft will be established in Hamburg to set up the Single Aisle Centre of Airbus including the headquarter function in this location. Based on market demand, a third final assembly line will be installed in Hamburg. This will enable the AIC to stay ahead of the competition in that sector, as well as substantially improving Airbus flexibility.
London, Munich, Paris 23rd June 2000
