FRANCE: EADS board close to deal on launching Airbus A350

The board of European aerospace group EADS is 90 percent certain to agree on Friday (December 1) to finance the launch of Airbus's planned A350 XWB mid-size, long-haul jet, a source close to the board told Reuters. Airbus is launching the A350 XWB in the wake of cash shortages caused by a two-year delay in deliveries of its A380 superjumbo. The company has said it will outsource up to 1.8 billion euros of A350 work to hold down costs and help it streamline its production methods. "The question is, can EADS find the money needed to absorb the A380 delays and launching an all new aircraft and that's what they are talking about and have been talking about since the Farnborough airshow in July," said aviation analyst Pierre Sparaco. The A350 extra-wide body, or "XWB", plane is essential for Airbus to compete with U.S. rival Boeing in the mid-size jet market, although its launch comes as the pan-European firm is struggling to deliver on other key projects. "If we abandon this part of the market we will no longer be able to take on Boeing on equal terms," said Julien Talavan, Airbus union chief. "It's essential we launch this aircraft and that our shareholders take a lead role by investing. They have made a lot of money due to Airbus success in the past. Now we have to make this plane whatever the cost." Britain's Financial Times (FT) reported on Friday that EADS's shareholders had agreed details of a 10 billion euro (13.2 billion U.S. dollar) financing package to launch the A350. However, the FT's French sister paper, Les Echos, said the outcome of Friday's meeting was uncertain. "We have got out of the impasse, but there's no agreement yet," it quoted one unidentified source familiar with the situation as saying. The Financial Times, citing people close to the talks, said the financing package included 4 billion euros in external financing backed by state guarantees from France, Germany, Britain and Spain, the countries that have backed Airbus. The French government, which holds 15 percent of EADS, agreed to provide a guarantee for part of the financing plan, according to the newspaper. The French finance ministry could not immediately be reached for comment. The remaining 6 billion euros of development cost would be funded internally by EADS, possibly through the issue of hybrid debt, the FT said. The decision on the jet has been complicated by uncertainty over Airbus parent EADS's future shareholder structure, with the German government having announced it will soon present a plan to guarantee German interests in Airbus. DaimlerChrysler AG has said it will sell a 7.5 percent stake in EADS, and sources familiar with the situation have said that the buyer is likely to be a consortium of banks, possibly including German state bank KfW. French newspaper Le Figaro reported on Friday that the German carmaker wanted to sell its entire EADS stake. But a DaimlerChrysler spokesman responded: "Our comment is the same. We are reducing our stake to 15 percent." Daimler will not comment on the EADS meeting, he said. The United States has voiced fierce criticism of the use of European government loans to fund Airbus projects. An earlier design for the A350 called for government loans of a little over 1 billion euros, but the cost of the project has more than doubled. U.S. officials have indicated that any increase in government loans could escalate a trade row between the European Union and Washington over mutual allegations of unfair subsidies. Les Echos reported separately on Friday that the World Trade Organisation had appointed three new judges in a case against Boeing subsidies brought by the European Union.

ITN Source | December 2, 2006

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