BAE sends new profits warning

BAE SYSTEMS issued its second profits warning of the year as it abandoned manufacture of the remaining British-owned and made civil airliner, the RJ-100 (formerly the BAE 146), with the loss of an estimated 1,669 jobs.

The setback will lead to a £ 370m exceptional charge in the current year, with the civil side of the aircraft business now reduced to a 20% stake in the European Airbus, the manufacture of spares for RJ-100s, freighter conversions and parts for other airliners built by the group in the past. Even these activities will be reduced. Most of the job losses will be at the group's Woodford plant near Manchester.

Since 11 September orders for short-haul regional airliners have plummeted and chief executive John Weston said: 'Regrettably, it has been concluded that our regional jet business is no longer viable.'

Orders for the Airbus have been reduced to 300 from 320 following September's events. Weston said the aircraft is 'expected to be profitable at this revised level of output' but he warned that there could be further job losses and exceptional charges as 'operating profit expectations for Airbus next year have been reduced significantly'.

The RJ-100 has been used by the Queen's Flight of the RAF and has been flown on numerous occasions by Prince Charles. At the weekend one of the jets crashed in Switzerland leaving 24 dead.

BAE has been making 16 a year but Weston said BAE was to 'draw a line under the company's exposure to regional aircraft making and secure the company's financial exposure in this market'.

BAE's core business will now be almost wholly concentrated on defence, where it recently won a share of the $200bn (£142bn) contract for the US Joint Strike Fighter that is to be manufactured by Lockheed Martin. This deal could be worth £1.8bn to BAE during just the development stage of the US fighter. This will rise to £10bn under the contract's full life. It will give BAE a vast American interest.

Following today's closure 90% of BAE's business will be in defence-related projects. Weston said 'These businesses are expected to make good progress next year.'

BAE shares fell 4p to 321p, with analysts surprised at the size of the £370m exceptional charge.

BAE also warned that European aircraft consortium Airbus may lay off staff in coming weeks, with 900 contract workers at Broughton, northern England first in the firing line. BAE holds a 20% stake in Airbus, which is struggling with a fall in demand following 11 September. Airbus' US rival Boeing has already said it will cut up to 30,000 jobs due to the sharp decline in the commercial aerospace market.