Airbus Decision Looms

The cost of launching the A350, a long-haul mid-sized plane with seating for 270 to 350 passengers, has been estimated by European aircraft maker Airbus at eight to nine billion euros ($10 to 12 billion).

Airbus has been struggling to overcome costly production delays to its A380 super-jumbo program, which is now running two years behind schedule.

Airbus chief executive Louis Gallois, after a meeting at the company's headquarters in Toulouse, said a decision about the A350 would be made "before the end of November."

"We cannot launch a new program if we are not sure of being in a competitive situation," he said.

Airbus and Boeing in on-going conflict

Funding for the A350 poses a dilemma for the European company and the issue has the potential to intensify trade tensions between the United States and the European Union.

Airbus is able to call on loans from European governments to cover part of the development costs of the aircraft, but the arrangement is at the center of a long-standing dispute at the World Trade Organization.

The US is set to file a revised complaint this week at the World Trade Organization in Geneva, charging that the preferential loans available from the French, German, British, and Spanish governments to fund up to one-third of new Airbus aircraft amount to illegal state aid under WTO rules.

For its part, the European Union claims that Boeing benefits from illegal state aid through space and defense contracts from the US government.

France to bail out subcontractors

On Tuesday, France announced the release about 145 million euros ($185 million) in 2007 and 2008 for the aeronautics sector in order to help Airbus subcontractors.

Speaking in Toulouse, French Prime Minister Dominique de Villepin said the government would provide 40 million euros in 2007 and the same amount in 2008 in reimbursable advances to Airbus subcontractors who have been hurt by delays to the A380 project.

The rest of the funding would be allocated to step up research and development in the aeronautics sector, he said.

A380 on test-flight

Meanwhile, an Airbus A380 super-jumbo has arrived in South Korea on the second stop in a series of test flights before the aircraft goes into service as the world's largest passenger plane.

The visit to Seoul is part of an 18-day trip to 10 different airports to test operations before it seeks an airworthiness certificate by mid-December from European and US aviation safety authorities.

The double-deck plane with a capacity of 840 passengers suffered a setback this month when US company FedEx canceled orders for 10 aircraft following repeated delivery delays.

Airbus has secured orders for 149 super-jumbos, including five from Korean Air.

Airbus has had a calamitous year in 2006, notable for management upheaval at the top of the company and repeated profit warnings because of delays to deliveries of the A380.