Asian deal doubts hit BAe shares: Chairman tries to sort out Taiwan problems

BRITISH AEROSPACE shares fell 14p to 435p yesterday amid growing concern over the proposed pounds 250m regional jet joint venture with Taiwan Aerospace Corporation.

John Cahill, BAe's chairman, is in Taiwan this week trying to finalise the deal, which was conditionally agreed in January but which has met obstacles along the way.

BAe has declined to comment on the problems, which are thought to centre on bank financing. Failure to resolve outstanding issues would be a serious blow to BAe, as the venture is regarded as the key in turning the ailing regional jet business around.

Last year, BAe's commercial aircraft operations lost more than pounds 300m. Regional jets and turboprops accounted for the bulk of the deficit. The link with TAC would give the regional jet arm access to Taiwan's domestic airlines and help in promoting the aircraft into the expanding Asian markets.

Under the terms of the 50-50 venture the BAe RJ jetliner, a follow-on from the 146, would be built partly in the UK and partly in Taiwan.

The joint venture agreement allows for a study on the development and manufacture of a new aircraft, the RJ-X, which would be a two-engined version of the four-engined RJ.

The meetings in Taiwan this week are expected to involve politicians as well as financiers, as TAC is 29 per cent state-owned.