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.