February 2005 
Volume 03, Issue 9 
Industry Wrap

Time for discussion

U.S. and European Union trade representatives said last month they have created a framework for continuing negotiations to end government subsidies for large commercial aircraft development and production. This round of negotiations is scheduled to last three months.

Boeing President and CEO Harry Stonecipher hailed this framework agreement by saying, "We're pleased that the United States and the European Union have taken an important step toward ending subsidies to establish much-needed balance in the commercial aircraft market."

Among other things, the two sides agreed they would seek neither World Trade Organization litigation nor new subsidies during negotiations.


Airbus gets approval for A350 jet

Airbus received approval from owners European Aeronautic Defense and Space Co. and BAE Systems PLC on Dec. 10 to start taking orders for the A350, a new midsized passenger plane that will compete with Boeing's 7E7, reported The Associated Press. Airbus said on Dec. 21 that Spanish airline Air Europa was the first to commit to the new jet, signing a memorandum of understanding to buy 10 planes with options on two more. Airbus expects orders for at least 50 jets by mid-2005.

The A350 will have the same cockpit and similar onboard systems as its existing A330 jet but will weigh 8.8 U.S. tons less, allowing for its heavier engines, which initially will be supplied by General Electric Co.



China: Future jetliner orders not affected by 2005 delivery cap

China's decision to freeze commercial jetliner deliveries in 2005 shouldn't have any effect on discussions for orders of airplanes to be delivered in subsequent years.

China, the world's fastest-growing aviation market, is slated to take delivery of 147 new airplanes in 2005. The country will not approve any additional deliveries in 2005 in an effort to curb "overheated" growth in the sector and uncontrolled capacity expansion by domestic airlines, reported Reuters.

However, any purchase talks under way won't be affected. A spokeswoman with the Civil Aviation Administration of China told The Wall Street Journal that new airplane orders will continue to be signed during 2005 for delivery in 2006 and thereafter.

It typically takes a year or more before manufacturers deliver aircraft after an order is placed.

China has become a key market in air travel. Boeing has predicted that China, within 20 years, will become the world's second-largest commercial aviation market, behind the United States.

DoD weapon budget cuts expected; plan could reduce F/A-22 purchases

Lockheed Martin and Northrop Grumman stand to take the biggest hits from $30 billion in proposed budget cuts as the Pentagon tightens its belt amid the rising cost of the war in Iraq, The Wall Street Journal said.

Under the proposed cuts, mentioned in a recent Pentagon document reviewed by the Journal, Lockheed stands to lose $18 billion of business over the next six years, mostly because of reduced U.S. Air Force purchases of the F/A-22 fighter jet.

Northrop would lose some $8 billion over the same period as the U.S. Navy retires ships and scales back its next-generation fleet.

The proposals are part of a sweeping effort ordered by President Bush to cut the federal deficit.

Cuts proposed during wartime could underscore to Congress, which must approve defense spending, the administration's determination to reduce the Pentagon's budget.

According to the Journal, the F/A-22 tops the list of $30 billion in weapons programs that U.S. Defense Secretary Donald Rumsfeld wants to cut from the fiscal 2006 budget and years beyond as the Bush administration seeks to rein in spending to address the costs of the war in Iraq and a federal budget deficit.

However, F/A-22 supporters are making the case to retain the aircraft program, which has work spread over 43 states. According to the Journal, Gen. John Jumper, U.S. Air Force chief of staff, flew one over Florida on Jan. 12 and afterwards told reporters that the jet is "all that any of us had hoped it would be and more."

Boeing is responsible for the F/A-22's wings, aft fuselage, avionics integration and test, 70 percent of its mission software, and its pilot and maintenance training system.


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