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Algora Publishing - Europe:Aerospace Competition With America Is Growing
                                               For a Kinder, Gentler Society
Tuesday,
Europe:Aerospace Competition With America Is Growing
By William Pfaff
Los Angeles Times Syndicate / International Herald Tribune

PARIS - Last week's Concorde tragedy near Paris cast a dark shadow over the Farnborough air show simultaneously under way in Britain. That show, which alternates annually with the Paris air show, is worth comment, however, as these have become more than simple trade events. They have become the public manifestations of an aeronautical competition between the United States and Western Europe which feeds a growing trans-Atlantic political competition.

This year the Farnborough show opened with new players on the European side. Airbus has been a familiar name as an international consortium but is now an integrated manufacturing company with its own stockholders.

Of those, the largest is another new company, the European Aeronautic Defense and Space Company, EADS, amerger of Germany's DaimlerChrysler aerospace with France's Aerospatiale Matra and CASA of Spain. It now is the world's leading manufacturer of helicopters, its second largest manufacturer of commercial transport aircraft, and its third largest maker of advanced military aircraft.

Another new European player is BAE Systems, grouping the former British Aerospace and Britain's GEC Marconi Electronic Systems. The new company owns 20 percent of Airbus and manufactures the wings for its aircraft.

A year ago some of these companies were regarded as potential American takeovers. Europe's aerospace industry seemed in American eyes weak and divided, open to trans-Atlantic mergers generally expected to make the Europeans subdivisions or subcontractors to the American giants.

Instead, BAE Systems nowis buying Lockheed Martin's aerospace electronics unit and has other American ambitions. It holds a 10 percent investment in the American joint strike fighter program (despite that project's political and bureaucratic uncertainties in Washington). It also has a leading share in manufacturing the four-nation Euro-fighter Typhoon, and is in a 50-50 joint venture with Saab to make Sweden's Gripen fighter.

The big American mergers happened three years ago. Boeing took over McDonnell Douglas in 1997, and Lockheed and Martin merged. The consolidations in America's arms industry have not proved to be the expected successes. One reason is that corporate ''cultural'' problems made trouble. Another is that the aerospace market has not only become competitive in a way that was never the case before but has shrunk with the post-Cold War decline in defense spending.

The European mergers now threaten the markets of American companies, and European governments are buying European aircraft and weapons rather than going to America for them. Britain was the latest to rebuff White House pressure to buy military transport and advanced air-to-air missiles from American companies. The Blair government has invested instead in new European projects.

NATO expansion and modernization were supposed by Washington to keep American companies prosperous, but that hasn't worked, either. A Pentagon procurement official once again complained, just before Farnborough, about ''Fortress Europe,'' as if it were disloyal for the Europeans to buy from their own companies.

Trans-Atlantic mergers tend to be blocked by both American and European fears about losing technological advantages. Britain's BAE Systems is being forced to set up a separate company with a board composed of Americans and a secure technology unit controlled exclusively by Americans in order to work on part of the joint strike fighter project. This compromises BAE in future European projects in the same technology areas. The ''Fortress'' is American as well as European.

Airbus took more aircraft orders last year than Boeing, and the two are running neck-and-neck in sales this year. Airbus now, of course, intends to launch a $10.7 billion project to produce a super-jumbo, the A3XX, meant to break Boeing's monopoly in very big transport aircraft and eliminate the profit advantage that it has given Boeing.

The launch aid funds for this will come in refundable loans from the European governments. Boeing says it will challenge these, but the U.S. government and the European Commission signed an agreement in 1992 which allows European public subsidies of up to 33 percent of the development costs of aerospace projects, in counterpart for indirect U.S. government subsidy of American manufacturers through dual-use military and space research. Airbus says it will strictly respect the 1992 agreement.

All this is a normal development, even though it upsets Americans accustomed to a dominant position in aerospace.

In World War II, German aircraft (including the first operational jet fighter) were as good as or better than the Allies'. Britain's Spitfire, Typhoon and the all-plywood Mosquito - fastest aircraft of its time - were all superior to their American counterparts. Only its borrowed Rolls Royce engine made the U.S. Mustang a competitive fighter. America's first postwar jets had British engines.

France was an aviation pioneer, which is why airplanes today have fuselages, ailerons, engine nacelles, etc. - the early vocabulary was largely French. France and Italy were aviation leaders in the 1930s, until the war wiped out their independent industries.

The Europeans had to be expected to come back in aviation. Had it not been for the failureof the first jet airliner, Britain's Comet (because of crashes caused by metal fatigue), and the commercial failure of Concorde (the 1970s oil price crisis coincided with its launch and made it uneconomic), they would have done so before now.