Farnborough Air Show: Airbus plans military arm to take fight to Lockheed: Mary Fagan on the European consortium's ambitions and the advent of the 850-seat airliner

AIRBUS Industrie, Europe's four- nation commercial aircraft manufacturer, is to take over responsibility for the military Future Large Aircraft.

Jean Pierson, president, said Airbus would impose a much- needed discipline to meeting delivery dates and costs and specifications targets. He said the European FLA is a cousin for Airbus that would grow its business and benefit shareholders and commercial customers.

FLA is battling with Lockheed of the US for the order to replace the Royal Air Force's ageing Hercules fleet. Four of the FLA partners - British Aerospace, Aerospatiale, Casa of Spain and Deutsche Aerospace - are also shareholders in Airbus. Alenia of Italy, the fifth FLA partner, has been asked to join the new Airbus military subsidiary.

Dick Evans, chief executive of British Aerospace, said the success of the FLA would secure 35,000 jobs in Europe and would add value to the entire defence industry. He warned that the project offered Britain its only opportunity to be a main partner in large military aerospace programmes.

'This is a market totally dominated by the US. The FLA is essential to ensure that the UK remains competitive, and it will have major benefits for many companies in Britain. For British Aerospace not to be in the FLA programme is unthinkable,' he said.

The rivalry between the FLA and the Lockheed C-130J has developed into the latest battlefield for the US and European defence industries. Lockheed supplied the original Hercules. Its C-130J, while not ready for delivery, is far ahead of the FLA, which is unlikely to be completed until early in the next century.

BAe believes the project would help to keep intact its Airbus wing design team at Filton, Bristol. The 1,500-strong team faces a gap in its workload over the next few years before efforts start in earnest on the next generation of Airbus aircraft.

Shareholdings in the Airbus defence arm will depend on the investment of the member companies and their governments. Mr Evans said an overriding factor in deciding the allocation of work among the companies would be cost-effectiveness. It is expected that the manufacture of the FLA would go to Alenia.

Mr Evans said the decision to have the FLA programme run by Airbus was made because the main issues under consideration were industrial. 'The critical driver is the cost base. We certainly do not want to see a large amount of government interference in what will be an industrial programme.'

Meanwhile, prospects for a very large aircraft providing sophisticated entertainment have moved forward with the announcement by Airbus that it is talking to 12 international airlines.

Airbus said there was a market for up to 1,000 of the aircraft - dubbed the A3XX - which could be ready for service in less than a decade. The very large aircraft would carry up to 850 people on two decks and cost dollars 8bn ( pounds 5.3bn) to develop.

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