EADS CEO: Many Banks Will Not Return To Aircraft Financing

The head of Airbus parent European Aeronautic Defence & Space Co. NV (EAD.FR) said Wednesday that he didn't expect many banks that stopped funding aircraft purchases to return to the market, though China will take up some of the slack.

Many banks retreated from the aircraft finance market during the credit crunch and led some airlines to cancel or defer new deliveries while the industry sought alternative sources of capital.

EADS Chief Executive Louis Gallois said at a media briefing that he expected Chinese institutions to take a more active role, while Airbus planned to boost the amount of customer finance it provides airlines this year.

Gallois forecast Airbus support would be less than $1 billion in this year but higher than the $400 million provided in 2009. It spent EUR153 million funding its own sales in the first quarter alone.

Boeing Co. (BA) executives expect to trim their own support from about $900 million in 2009 to below $500 million this year.

Gallois said he expected export credit agencies to continue their increased backing for aircraft deals--they accounted for about a third of total industry funding last year.

Airbus and Boeing recently announced plans to boost production to handle a backlog of thousands of aircraft, and Gallois said he aimed to diversify his customer base further, reducing the reliance on sales to the U.S. and Europe.

Gallois also reiterated that Airbus would decide by year-end whether to press ahead and redesign its best-selling A320 family of commercial planes with new engines to boost fuel efficiency and reduce emissions.

Airbus had hoped to make a decision by the Farnborough air show in July, but more and more industry executives believe it will opt for an all-new aircraft that may not fly until 2025. Boeing is also examining its options for re-engining its 737 family.

A400 Deal By Summer's End?

While the outlook for EADS's commercial division has been improving, uncertainty still clouds its military business.

Gallois expressed optimism that EADS will win the controversial contract to provide the U.S. Air Force with new aerial refueling tankers, where it faces competition from Boeing.

He said 200 staff are working on the bid due July 8. EADS opted for a solo bid after partner Northrop Grumman Corp. (NOC) pulled out earlier this year.

This marks the third time the U.S. has sought bids for the tanker, and delays are also plaguing EADS's European defense business.

Gallois said talks to finalize a new contract with seven European governments for its delayed A400M military transport plane were "not so easy", though the company still aims to secure a pact during the summer.

The seven nations agreed an outline deal in March to amend their contract to acquire 180 A400Ms. The aircraft made its first flight last December amid delays and cost overruns that had threatened the program with cancellation.

Germany, France, the U.K., Spain, Belgium, Luxembourg and Turkey agreed in March to boost the A400M budget from EUR20 billion to at least EUR24.3 billion.

Gallois said that none of the countries wants "to escape" or back-out from the finalizing a deal, adding the most important aspect is to keep the momentum of negotiations.

-By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; [e-mail]

 
  (David Pearson contributed to this article.) 
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