PARIS Airbus parent EADS EAD.PA saw its capacity for acquisitions boosted by a record 12.2 billion euro (10.7 billion pound) cash pile on Friday, weeks after governments agreed to bail out losses on a major defence project.
Swelled by deposits from airlines ready to invest in new aircraft, the growing riches of Europe's largest aerospace company confirm an industry rebound which sent its shares up 5 percent on Friday, together with upbeat quarterly results.
But the cash surplus is also potentially embarrassing for EADS which last month closed a deal with European nations for a 3.5 billion euro bailout of its A400M army plane and plans to use a disputed system of state loans for its A350 airliner.
In Germany, opposition Greens accused EADS of strong-arming European governments into agreeing to provide the extra funding by suggesting the Franco-German-led company could collapse.
"It doesn't match up. On one side EADS insists on a bailout, arguing that the company would face the end otherwise. But their balance sheet speaks a completely different language," said Omid Nouripour, a member of the German parliament and defence expert for the opposition Greens.
"Mr (former defence minister Karl-Theodor) zu Guttenberg seems to have let himself be blackmailed with false figures," Nouripour told Reuters in Berlin.
EADS chief Executive Louis Gallois defended the bailout, under which some of the money will be paid back from exports.
"I don't think it (the cash surplus) is changing anything. The bailout money is to reduce the level of losses we have," Gallois told Reuters at a Paris meeting of business leaders.
Analysts said EADS must answer to private investors calling for it to put its warchest to good use -- while targets in the protectionist defence sector are scarce -- and simultaneously maintain support from taxpayers to research and build aircraft.
"If they are unable to find suitable acquisitions or find anything else to do with the money, then they have to distribute it to shareholders through a share buyback or special dividend," said Howard Wheeldon, senior strategist at BGC Partners.
"They must retain cash for future developments but if they generate cash at this level, then they must find further use for it or give up the possibility of any future government support for developing commercial aircraft."
Rival Boeing has made much of the size of the EADS cash trove as their respective governments battle over aircraft subsidies at the World Trade Organisation, arguing Airbus does not need loan support from European nations.
The latest figures come days before an expected WTO verdict on a European Union appeal against a ruling that some of the loans amounted to prohibited export subsidies. Last month the EU won a partial victory in a counter-suit over U.S. aid to Boeing.
EADS is meanwhile still looking for acquisitions to dampen its reliance on civil airliner sales after bidding $640 million to buy Canadian repair firm Vector Aerospace RNO.TO.
EADS Chief Executive Louis Gallois has spoken of potential acquisitions worth 1-2 billion euros with an emphasis on defence and higher-margin services businesses in the United States.
On Friday, Finance Director Hans Peter Ring suggested the cash position gave the company more room than this.
"There is probably more flexibility but I don't have a scientific number," Ring told reporters.
EADS' first-quarter operating profit more than doubled to 192 million euros on revenue up 10 percent to 9.85 billion as passenger jets, helicopters and space offset a slump in defence.
The Franco-German-led group had been expected to post quarterly operating earnings of 94.5 million euros and revenue of 9.21 billion, according to a Reuters poll of 10 analysts.
The recovery is especially strong in emerging markets and has prompted Airbus to consider raising production of its best-selling A320 jet family from a planned level of 40 a month.
Industry experts said it would target a rate of 42 a month.
The company said it saw significant prospects for its latest Airbus jet, a revamped version of its best-selling medium-haul A320, and predicted good sales at the Paris air show next month.
"The emerging markets are very, very strong for European and American companies that make the right goods," said Sanjay Joshi, portfolio manager, London & Capital.
"We are going to see a significant increase in transport (with) focus on airports and passenger travel. Airbus is very well placed."
(Additional reporting by Cyril Altmeyer, Jeremy Gaunt, Editing by James Regan and Sophie Walker)