January 25, 2009 / 11:39 PM / 11 years ago

UPDATE 2-France to support Airbus via banks - source

* French state to ease airplane purchases via banks

* Move is latest Western government bid to help industry

* Airbus, export agency to offer more credit to airlines

(Adds background, Airbus no comment)

By Anna Willard and Tim Hepher

PARIS, Jan 25 (Reuters) - The French state plans to inject 5 billion euros ($6.5 billion) into banks with the aim of financing airplane purchases to help European planemaker Airbus EAD.PA, a French government source said on Sunday.

“There is indeed a plan to lend 5 billion euros to the banks to finance Airbus contracts,” the source said, confirming an earlier report in the business newspaper Les Echos.

The source gave no further details.

Although not presented as a direct bailout, the plan appeared to be the first significant government package directed towards the aerospace industry as industrial countries pour funds into propping up industries weakened by the credit crisis.

There are also concerns that the aviation industry, one of France’s biggest export earners and home to thousands of high-tech jobs, could be hit indirectly by the automobile crisis since the two industries share many of the same suppliers.

Les Echos said the state would inject the money into banks with a record of lending to the aeronautical industry.

It named Calyon (CAGR.PA), Societe Generale (SOGN.PA) and BNP Paribas (BNPP.PA).

“The aim is to prevent airlines from cancelling orders citing difficulties in raising money,” said the newspaper, which did not give its sources.

Owned by European aerospace group EADS EAD.PA, Airbus is the world’s largest producer of civil jetliners ahead of rival Boeing (BA.N).

The two planemakers are locked in a transatlantic trade row over subsidies at the World Trade Organisation, with both accusing the other of taking illegal government handouts.

It was not immediately clear whether the plan was designed specifically to funnel money into protecting deals with Airbus, something that may open it to scrutiny from Boeing and other planemakers, or ease credit across the aerospace sector.


The French government has already pledged help on a smaller scale to help aeronautical suppliers and bolster research.

Airbus has in turn been asked for help by aircraft doors maker Latecoere (LAEP.PA), a supplier to both Airbus and Boeing.

A French industry source said the new plan, originating from the French prime minister’s office, would be broad-based and aerospace was one of several industries expected to benefit.

Airbus had no immediate comment.

The Toulouse-based planemaker said on Jan. 15 deliveries could fall and orders were set to tumble as the global recession curbs demand for jetliners.

Both Airbus and rival Boeing (BA.N) are bracing for more turbulence in an industry damaged by recent fuel price spikes as the economic downturn hits air travel. They also face a battle to prevent airlines cancelling or deferring orders.

Aircraft are usually ordered years before they are built and the financing is often not finalised until a few months before delivery, according to aviation executives.

This raises doubts over whether some aircraft ordered at the height of a three-year ordering boom that peaked in 2007 will be delivered to their original customers or leave the factories with no buyer, becoming so-called “white tails” with no livery.

Airbus has said it stands ready to boost the use of its own cash resources to offer credit financing to prevent airlines cancelling or postponing orders at the last minute. It also expects European Credit Agency financing to double in 2009.

Airbus has shelved plans to boost production of single-aisle aircraft like the A320 which ditched in the Hudson River last week as it tightens its belt to cope with global recession.

Parent EADS said earlier this month that Airbus would go even further and cut production quickly if needed. (Writing by Estelle Shirbon, Tim Hepher; editing by Ralph Boulton)

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