Buying Influence?
March 23, 2007
EADS said Thursday that Russia's UAC (United Aircraft Corporation)holding company, which brings together civil and military plane makers, would manufacture unspecified parts of the main airframe of the A350 XWB, a mid-sized long-haul airliner that is being developed by Airbus at a cost of 10 billion euros ($13 billion).
Airbus is owned by the European Aeronautic Defense and Space Company (EADS), a giant European aerospace group, which is controlled by public and state-linked French and German shareholders.
"The discussions about which components of the aircraft will be designed and built in Russia are still ongoing," EADS said.
The deal came after Russian airline Aeroflot pledged on Thursday to order 22 A350s, following more than a year of uncertainty over whether it would buy from Airbus or from its US rival Boeing.
A statement by Aeroflot confirmed the purchase did not reveal the value of the contract, but at catalog prices the order is worth about $5 billion dollars.
The tie-up with UAC will help split the heavy costs of developing the A350. Airbus has said it wants to create risk-sharing partnerships with suppliers to build 50 percent of the airframe of the A350 and is targeting investment of 1.8 billion euros.
Paris and Berlin concerned
But the step may also renew French and German concerns about oil-rich Russia's growing influence.
Worries emerged last September after the Russian state accumulated 5.02 percent of EADS via state-controlled bank Vneshtorgbank (VTB).
This prompted President Vladimir Putin to say that Russia wanted "cooperation" with EADS and had no plans for a "hostile take-over."
As well as sharing production of the A350, the deal between UAC and EADS will lead to the creation of a joint venture based in Dresden, Germany, to convert single-aisled Airbus A320s into cargo versions.
Freighter conversion centers for the A320 family of planes will be set up in Lukhovitsy, near Moscow, and at the German site.
A final settlement opens the way for UAC to buy a shareholding in an Airbus engineering center in Russia.
Tough times continue for Airbus
Airbus is in financial difficulty after running into production problems with its giant A380 superjumbo project, which is about two years behind schedule.
Despite delivering a record 434 aircraft last year, Airbus made an operating loss of 572 million euros in 2006 compared with a profit of 2.3 billion euros in 2005, prompting a major restructuring program, which foresees the loss of 10,000 European jobs.
Airbus has targeted cost savings of 5.0 billion euros by 2010 and 2.1 billion euros per year thereafter.
The A350 XWB project was launched by Airbus at the end of last year to produce a mid-sized longhaul rival to the future Boeing 787 Dreamliner. The first A350 is scheduled to enter service in 2013.
Ahead of Aeroflot's announcement of its purchase of 22 Airbus planes, chief executive Valery Okulov had said that the company would also buy about a dozen Airbus A330 jets. These would be delivered before the A350s, he said.