S. Korean consortium, AIR plan to build 70-seat jets

S. Korean consortium, AIR plan to build 70-seat jets

SEOUL (AFP): South Korea has struck a US$1.2 billion deal with
the European aircraft consortium AIR, or Aero International
(Regional), to jointly build mid-sized passenger jets, officials
said yesterday.

"The two parties have agreed on the blueprint for the
passenger jet project," an official of the ministry of trade,
industry and energy told AFP.

The heads of AIR and the South Korean consortium, led by
Samsung Aerospace Industries, will sign a memorandum of
understanding (MOU) on the co-development of the 70-seat aircraft
today, he said.

A final contract will be sealed within three months after the
signing of the MOU, which called for a 30-to-40 percent share for
the government funded South Korean consortium, out of the total
investment of US$1.2 billion, the ministry said in a statement.

"As stipulated in the MOU, AIR has promised to transfer
necessary technology for allotted works of South Korean
companies," the official said.

South Korean firms will participate in the process ranging
from design and manufacture to assembly, he said.

The Air deal is part of South Korea's long-term policy to
catapult its aerospace industry, which has grown largely based on
defense projects, into the world top 10 by 2015.

Seoul has pledged all-out government support including tax
favors and financial aid for exports of aircraft and parts,
predicting that northeast Asia would emerge as the crucial
aviation market in the near future.

The massive aircraft project is scheduled to kick off in mid-
1997 for completion by the turn of the century.

Its first 70-seat aircraft, aimed at niche market, were due to
make a debut on the international market in 2001 to be sold at an
expected price of $20-to-$22 million a piece, the statement said.
The two partners also agreed to develop derivative 58-seater and
84-seater passenger jets, it said.

The blueprint agreement stated the first assembly line would
be built in Toulouse, France, site of the AIR headquarters, and
the possible second plant and a repair and spare parts logistics
center in South Korea, which will also have the marketing rights
in Asia.

The South Korean consortium includes Samsung, Daewoo Heavy
Industries, Korean Air and Hyundai Space and Aircraft and 10
other smaller firms.

AIR is the equally-shared consortium of British Aerospace,
France's Aerospatiale and Italy's Alenia. The European team was
the biggest producer of small and mid-sized aircraft in 1995 with
$1.4 billion in revenue, or a 28 percent share in the world
market.

The consortium forecast that their joint project would see an
annual sales of 50 jets from 2001 over the following 20 years.

By 2020, their total sales would reach 1,000 jets in the world
market, which would grow to 23,000 units over the 20-year period.

The South Korean government had pursued a South Korea-based
100-seat passenger aircraft project with China, but the project
became bogged down over differences on plant sites and other
issues in early 1996.

China has now formed an alliance with another European firm to
go it alone, setting the stage for rivalry in the mid-sized
aircraft market between the two former partners.