BAE flags retreat from Europe

DEFENCE contractor BAE Systems is retreating from Europe with the planned sale of Anglo-German Atlas Elektronik.

BAE's chief executive, Mike Turner, speaking on the eve of the Paris Air Show, also revealed that his relationship with the company's new chairman Dick Olver had not been all plain sailing. He said initial discussions with Olver on European strategy 'had their moments'.

The new chairman came from 'a low knowledge base' in defence and 'asked a few sharp questions, which we answered', Turner said, suggesting-Olver was told his management saw little future in the European defence market.

On Atlas Elektronik, he said negotiations were under way with the Federal German government, adding that BAE was also considering exiting Anglo-French-Italian missile builder MBDA.

And he warned difficulties with the A380, slated for a flying display at the show which opens today, threatened to be passed on to the A350 which is at the heart of a row between Airbus and Boeing over government subsidies.

The Airbus A380 is set to be star of the show at Paris later this week, but celebrations of the giant airliner's successful test flights may be blown off course by a trade spat with Boeing over two other jets that have yet to be built.

The Paris air show will see intensified competition for billions of dollars of orders for big jets between Airbus, owned by Europe's biggest industrial concern EADS, and Boeing as commercial aviation recovers from its worst recession.

In a double blow ahead of the show, Airbus announced a six-month delay in A380 deliveries to late 2006, drawing demands for compensation, and admitted it would lose the race for orders to Boeing in 2005 for the first time since 2000.

The two companies are locked in a dispute over aircraft subsidies affecting the development of two mid-sized long-haul aircraft that have yet to be built - Boeing's 787 Dreamliner, which is already selling well, and Airbus's defensive response, the A350.