France backs Airbus in funding row with Germany

Tue Oct 23, 2012 10:10am EDT
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By Tim Hepher and Jean Décotte

TOULOUSE, France (Reuters) - France backed Airbus EAD.PA on Tuesday in a row with Germany over funding for its next jetliner, in a sign of lingering tension following the collapse of a European aerospace industry merger.

Germany is unhappy about its share of work on the $15 billion A350 aircraft project and has withheld half of a roughly 1.2 billion euro ($1.6 billion) development loan, sources close to the matter say.

In a rare intervention, French Prime Minister Jean-Marc Ayrault said it was essential all partners met their funding commitments for the A350, the newest generation of aircraft in the European planemaker's fierce rivalry with Boeing (BA.N: Quote).

Speaking at the inauguration of an A350 production plant in southwest France, Ayrault did not refer to France's closest ally by name. But he left no doubt that he was referring to the rift with Germany, which has deepened since Berlin blocked a merger between Airbus parent EADS and UK's BAE Systems (BAES.L: Quote).

Speaking to over 1,000 workers, Ayrault said:

"The European partner nations...have always played a major role in the development of major aerospace projects," he said.

"It is of course the case for the A350, and it is essential that their commitments are met in full. As for France, its own commitments will be respected."

Plans for the $45 billion merger to form the world's largest aerospace and defense group fell part earlier this month with most of the participants blaming German Chancellor Angela Merkel for derailing the deal, something Berlin denies.   Continued...

The vertical tail wing of the first Airbus A350 is seen on the final assembly line in Toulouse, southwestern France, October 23, 2012.The A350 is Europe's first contribution to a new generation of jets designed to cut airline fuel bills by using mainly lightweight carbon-composite materials. Airbus inaugurated the factory with aims to compete for the demand of more than 6,000 mid-sized, long-range jets over the next 20 years, a market worth several hundreds of billions of dollars. Airbus says the A350 will take to the skies in the summer of 2013 for testing and enter service in the second half of 2014. REUTERS/Jean-Philippe Arles