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British Airways, Air France End Concorde Thu Apr 10, 9:48 AM ET Add Business – Reuters to My Yahoo!

By Daniel Morrissey and Noah Barkin

LONDON/PARIS (Reuters) – The Concorde began its final descent on Thursday as British Airways and Air France said they would stop flying the world’s first and only supersonic jetliner because flagging passenger demand could not cover its rising costs.

The decision to retire the slender, needle-nosed jet to museums after 27 years of service brings down a potent symbol of Franco-British engineering prowess and the jet-set lifestyles of the rich and famous who flew on Concorde.

“Concorde changed the way people traveled,” British Airways Chief Executive Rod Eddington told reporters on Thursday. “With its going, we must lose some of the romance from aviation.”

But the costs associated with the fuel-guzzling jet had become too onerous for the only two airlines that fly the 100-seat plane. Both carriers said falling revenues and rising maintenance costs was behind their decision.

Air France, Europe’s second-largest airline, said it was halting Concorde flights from May 31, while British Airways, Europe’s biggest airline, said it would stop commercial flights in the days leading up to the end of October.

The plane’s demise comes nearly three years after the crash of one an Air France Concorde shortly after take-off from Roissy Charles De Gaulle airport near Paris in July 2000.

The crash, which killed 113 people, forced both airlines to ground the planes for over a year.

When they resumed transatlantic service in November 2001, the global economy was slowing and the civil aerospace market heading into its worst ever downturn following the September 11 attacks in the United States.

Although the Concorde has always been linked in the public eye to champagne-quaffing, lobster-dining celebrities with money to spare, the reality is much different.

Eddington said more than two-thirds of Concorde’s passengers were business travelers. Falling stock markets, a drought in mergers and acquisitions and weak economies have forced City of London and Wall Street banks to cut tens of thousands of jobs and even high-flying CEOs to rein in their outlays.

“Recently, we were filling only about 20 percent of the seats,” Air France Chairman Jean-Cyril Spinetta told a news conference.

HIGH COSTS, LOW REVENUES

British Airways said retiring its Concordes would result in $130.5 million of write-off costs for the year that ended March 31, 2003, while Air France estimated the cost of retirement at between 50 million and 60 million euros ($64.63 million).

Spinetta said this one-time writedown would be partly offset because the plane would no longer be a financial drain on the company.

He said Concorde had dragged down profits by about 50 million euros in Air France’s most recent fiscal year, which ended on March 31. Operating costs for the plane per seat-kilometere, had surged 58 percent since the July 2000 crash, Air France executives said.

That forced carriers to charge high ticket prices for London-New York and Paris-New York flights, which took under three-and-a-half hours on the supersonic speedster.

The $6,980 average price tag for a Concorde flight from London to New York, which has passengers paying $39 a minute for a three-hour flight, looks a lot steeper these days than it did in recent years of economic opulence.

“The problem at the moment is because of the economic downturn there are far fewer people that are prepared to pay that price,” BNP Paribas analyst Nick van den Brul said.

In addition, spare parts were hard to come by and the planes were in need of constant maintenance.

Pieces of the rudders used to steer the jets, which cross the ocean at up to 1,350 miles per hour, have fallen off in flight at least six times during the past 13 years.

Air France said manufacturers had made it clear that new costly parts programs would have to be launched soon to ensure continued service.

Concorde’s four Olympus 593 engines, designed by Britain’s Rolls-Royce and Snecma of France, are the most powerful pure jet engines on any commercial plane, but consume vast amounts of fuel.

NEXT GENERATION

Eddington said there would be a “significant gap” before the next generation of supersonic aircraft was built, and it would have to overcome the problem of the sonic boom. Regulators do not allow Concorde to fly at supersonic speed over land, limiting its route potential.

Aircraft maker Boeing Co proposed building a jet dubbed the “Sonic Cruiser” that would fly just under the speed of sound at Mach 0.98. But the idea met with little interest from airlines, which instead wanted a more efficient aircraft to save on operating costs.

Instead, Boeing is now developing a mid-sized wide-body jet known as the 7E7, which it says would cut fuel burn by up to 20 percent compared to similar sized jets in the air today.

“There does not seem to be a viable market, at least in the current environment, for the premium service that a supersonic airplane would offer,” said Todd Blecher, a spokesman for Boeing’s Seattle-based commercial jet unit.

Both Air France and British Airways said they would turn over their combined fleet of 12 Concordes to interested museums.

($1=.6435 Pound)

($1=.9283 Euro)

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