Airbus Soars as U.S. Grumbles : * Aviation: Competing aircraft companies charge that government subsidies give an unfair edge to the European consortium.

As the world’s aircraft industry giants prepare to fold their tents at the biennial Paris Air Show, officials of Airbus Industrie are leaving with smiling faces and bulging order books.

The European consortium recorded nearly $3 billion in aircraft orders and options to buy from Kuwait Airlines and International Lease Finance Corp. of California. And it reportedly came close to signing a deal with Federal Express Corp. for 75 new cargo planes in a deal worth $6 billion.

Airbus, after a slow start, has become a major world competitor. While competitors charge that government subsidies give Airbus an unfair advantage, the firm has unseated McDonnell Douglas Corp. as the world’s second-largest airplane manufacturer, outdistanced only by the giant Boeing Co.

Since its launch about 20 years ago, Airbus Industrie, which is jointly owned by French, German, British and Spanish aerospace firms, has snared 1,725 firm orders of which 715 have been delivered. It has a backlog worth about $71.5 billion for 1,038 planes. That will keep assembly lines busy into the next century.

Airbus competes on all levels of aircraft with the American builders except for the 747 jumbo, long-range jet. However, the company is considering a giant jet capable of carrying 600 passengers.

Last year, Airbus captured more than 30% of worldwide aircraft orders. Although the company does not make public financial information, one company official said Airbus had 1990 profits of $100 million to $150 million on sales of $4.6 billion.

But Airbus, as well as its competitors, expect 1991’s financial performance to lag behind last year. Officials blame the U.S. recession, Gulf War and other factors that have left airlines flying with more empty seats.

“All of these have resulted in more order cancellations than orders coming in,” said Paul Turk, analyst with Avmark Inc., an Arlington, Va., aviation consulting firm.

However, in the long term Airbus will remain a worldwide leader in aircraft because “they support their product decently with good spare parts, technology and maintenance assistance and, for whatever the reason, they seem to be able to offer attractive financing terms,” Turk said.

“This is important because the access of capital has become a difficult issue for most airlines in recent months,” Turk said. But Airbus’ customer financing and rebate programs have proved costly and controversial.

The consortium has lent millions to customers that have later floundered financially, including Trans World Airlines and Pan American World Airways, which has filed for bankruptcy protection. Airbus also ended up as the biggest creditor of Eastern Airlines, which has been liquidated.

Competitors complain that Airbus has thrived by using government subsidies to undercut other bids.

A recent study by the U.S. Commerce Department says the companies that make up the Airbus consortium have been subsidized by their respective governments to the tune of $13 billion since Airbus’ founding. If commercial interest rates were applied, the value of such support would be $25 billion.

The report, titled “An Economic and Financial Review of Airbus Industrie,” found that “none of the Airbus programs--past, present and future--appears commercially viable.”

On the average, 74% of the cost to develop new aircraft has been provided by Airbus governments, the report said. Furthermore, there is little chance that the consortium’s companies will repay the loans they received from their governments, a criticism that Airbus vehemently denies.

The growth of Airbus is no small matter to the U.S. economy. The U.S. aircraft industry generated a $12-billion positive trade balance in 1989 and is one of the few industries in which the Japanese have made no major incursions.

At an average price of $45 million each, the sale of even one plane can have an impact on monthly trade balance figures.

There is “no place for subsidies,” U.S. Transportation Secretary Samuel K. Skinner said in a speech in London earlier this week.

“Neither the U.S. government nor the U.S. industry is prepared to live with the current situation in which privately financed companies compete against government-subsidized entities.”

But Airbus argues that many of the American complaints are either exaggerated or made out of whole cloth.

Airbus spokesman David Vance freely admits that some deals with North American customers were made at advantageous prices just to get a foothold in the market.

“We had to convince customers,” Vance said. “We had to make a hard sell. We needed a market cracker.”

Jean Pierson, chief executive of Airbus, adds that government financial help was needed to create the company.

“Imagine if I went to a bank (in 1970) and said, ‘I have just started this company with a management team from various European companies. I intend to make a large aircraft to compete with Boeing. Will you lend me $1 billion?’ No financial institution would have taken on such a risk.”

But this week, Airbus apparently began to wean itself from dependence upon government subsidies. The consortium said it intends to raise $112.5 million from private investors, an indication of its growing confidence in the long term, industry officials said.

Countering U.S. criticism, Airbus says that 40% of all the components in its planes are U.S. made and that Boeing and McDonnell Douglas also receive government subsidies in the form of orders from such agencies as the Defense Department and NASA.

That is nonsense, according to Torie Clarke, a spokeswoman for the White House Trade Office, which is fighting with the Europeans over the subsidies.

“And, just because some of the parts are bought in the U.S., in no way lessens the problems of massive government subsidies,” Clarke said.

Order Backlog

Orders for planes that have not been delivered as of Jan. 1, 1991

Boeing: 1,838

Airbus: 1,038

McDonnell Douglas: 575

Fokker (Netherlands): 179

British Aerospace Corp.: 45

Source: Avmark Inc. Global Airline Orders

Airbus claimed the second largest share of the $50 billion aircraft orders in 1990.

Boeing: 46.9%

Airbus: 31.9%

McDonnell Douglas: 15.0%

Fokker: 3.6%

British Aerospace Corp.: 2.6%

Source: Avmark Inc.