07 November 2006

And so it begins...

Launch customer for the troubled Airbus A380 freighter, the US freight giant FedEx, has decided to bail out – possibly the first of many.

It has cancelled its order for ten of the Superjumbo aircraft, ordering instead 15 new Boeing 777 Freighters, with options to purchase another 15.

However, we should not be at all triumphal. Two weeks ago, Ambrose Evans-Pritchard wrote that British taxpayers stood to lose up to £700m of launch investment unless Airbus succeeded in winning a new wave of orders for its flagship aircraft.

So far, the government has invested £530m of our money in the A380 and a further £250m in aid to Rolls-Royce for the Trent 600 and 900 engines. It said the funding would lead to 22,000 Airbus jobs in Britain, where the wings are built, and safeguard a further 62,000. In fact, Airbus now employs 13,000 people in the UK – and the number can only go down.

The way the system works is that a royalty is paid on every aircraft sold, but the taxpayer foots the bill if the jet proves to be a flop. With its 159 orders now reduced by ten, even the original, rather optimistic break-even of 270 aircraft looks unreachable, much less the current estimate of 420 – which means that we stand to lose our shirt on this European white elephant.

Without even the technical troubles though, I could have told you that this thing was a non-starter. In fact, I did … which, after his comments when the A380 visited London recently, makes chancellor – soon to become prime minister - Gordon Brown look like a bit of a prat.