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Last Updated: Thursday, 7 September 2006, 10:08 GMT 11:08 UK
BAE's Airbus sale marks end of an era
Robert Peston
By Robert Peston
Business editor, BBC News

BAE Systems' efforts to end its involvement in making civil passenger aircraft have not come as a surprise.

Type 23 frigate
BAE sees its future as a military manufacturer

But the British defence and aerospace group's decision to sell its 20% stake in Airbus has been a painful one.

Not because BAE wishes to remain in civil aviation; not at all, it sees its future as a military manufacturer.

The snag was that it cannot get nearly as much for its shareholding as it wanted.

The 1.87bn price tag put on it by an independent assessor, the merchant bank NM Rothshild, was half what the company expected to receive.

So BAE's board "umm-ed" and "aah-ed", and even appointed another firm, PricewaterhouseCoopers, to examine Airbus's intrinsic value.

At a board meeting on Wednesday, the directors decided that even the reduced amount of cash was preferable to holding a relatively small stake in a business that is in something of a mess.

In particular, Airbus has suffered a crisis over delays in the production of its new A380 superjumbos

Jobs on the line

So BAE recommends that shareholders vote in favour of selling the holding to EADS, the Franco-German company that controls Airbus.

Airbus A380
BAE Systems says Airbus faces a challenging future

The sale will mark the end of an era.

No UK firm will any longer have a sizeable interest in the full-scale manufacture of civil aircraft (although the UK remains an important player in aircraft engines with Rolls Royce).

That said, Airbus will - for now - continue to make its wings in the UK, even though the firm will be wholly owned by overseas interests.

In the long-term, though, there could be implications for the thousands of British jobs that depend on Airbus.

The company's British employees and suppliers will be increasingly fearful that the day when it relocates to one of those fearsome low-cost economies has moved nearer.


SEE ALSO
BAE agrees to 1.87bn Airbus sale
07 Sep 06 |  Business
BAE denies imminent Airbus sale
03 Sep 06 |  Business
BAE confirms possible Airbus sale
07 Apr 06 |  Business
BAE moves to force Airbus sale
07 Jun 06 |  Business
BAE seeks to fill pension deficit
13 Jun 06 |  Business
Low Airbus valuation blow to BAE
02 Jul 06 |  Business
BAE to carry out audit of Airbus
05 Jul 06 |  Business

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