THE outlook for British Aerospace's civil aircraft business, which

includes the Jetstream assembly line at Prestwick, has brightened with

the formal signing of the group's deal with Taiwan for the joint

production of its regional jet aircraft.

The Taiwanese are to buy a half-share in this business for #120m plus

a further #16m when the first aircraft rolls off the Taiwanese

production line next year.

The deal, first mooted last September, is a major plank in the

reorganisation of BAe's lossmaking civil aircraft side. It will enable

the group to release part of the #750m of provisions made to fund the

possible closure of the regional jet business which will help the

financial position of the whole civil division.

The restructuring has already led to heavy job losses, particularly at

the group's traditional base at Hatfield. But the remaining workforce

will be more secure after the Taiwan deal.

Prestwick gained 500 jobs as a result of the shake-up as production of

the ATP twin-turboprop airliner was transferred there. The factory

already makes the Jetstream 31 and the new 41, the first of which has

just entered service with Loganair. It also makes parts for the regional

jet.

If the Taiwanese had not come in BAe would have been forced to close

down the production line of the 146 and its new derivative the Regional

Jetliner (RJ). This would have put 4000 BAe jobs plus several thousands

more at sub-contractors at risk and would have been very costly because

the bulk of the 200 146s sold were leased by BAe to airlines. Their

second-hand value would have plunged had production ceased and

provisions against this loss of value would have had to be made.

BAe has spent #150m in developing the RJ, which looks externally like

the four-jet 146 but has a new flight deck and interior design and

improved engines giving better economy and lower maintenance costs.

Having four engines gives it more flexibility and is advantageous in

getting in and out of small airports but it goes against the trend and

BAe has guaranteed that its operating costs will be no more than an

equivalent two-jet aircraft.

There are 33 RJs on order with the first due for delivery in April and

the Taiwan connection will greatly improve its sales prospects in the

Pacific Rim which has the fastest-growing air traffic in the world.

Taiwan is very keen to become a significant force in civil aviation but

there are doubts in aviation circles about how BAe will get on with the

new Taiwan Aerospace Corporation.

The new joint-venture company, Avro International Aerospace, revives

the Avro name, one of the most famous in aviation history because of the

Avro Lancaster and Vulcan bombers, and a BAe spokesman said that the

Taiwanese were particularly pleased to be associated with such an

illustrious name.

BAe shares have rallied strongly since the dark days of last

September, when the group revealed losses of #140m, as the market has

become more confident that chairman John Cahill would succeed in pulling

the business round. They gained 9p to 194p yesterday.