Sunday, June 12, 2011

French Government urges Air France to place Airbus order

French parliamentarians have launched a petition calling on Air France-KLM to place a USD$20 billion - USD$25 billion plane order with Airbus and not Boeing -- but airline officials said they would split the order.

Bernard Carayon, a member of President Nicolas Sarkozy's ruling conservative UMP party, who claims authorship of the popular term "economic patriotism" to defend French firms, said he had collected signatures from 102 members of parliament.

"When the Americans buy American, Europeans should buy European," said Carayon, whose list of signatories amounts to more than one in six members of the lower National Assembly.

Air France-KLM is negotiating with Boeing and Airbus and their engine makers after launching a tender for 100 mid-sized Airbus A350 or Boeing 787 jets to renew its long-haul fleet.

The order for the latest carbon-composite aircraft is seen as one of the biggest industry battles in the coming year.

Airline officials said the contract would be designed according to the needs of the group's two main networks and would probably be split between Boeing and Airbus.

"My view is that at some point in the future, both types of aircraft will be flying on both of our networks," Peter Hartman, chief executive of Dutch carrier KLM said.

Air France and KLM merged in 2004 to form Europe's largest airline by revenues but they kept separate networks and brands.

Historically, KLM has tended to buy Boeing aircraft and Air France has a mixed fleet with emphasis on Boeing for long trips.

Asked whether the Air France-KLM group would miss out on the best price by stating in advance that it was ready to split the order, Hartman said: "Half of 100 is still a lot of planes."

A final decision is not expected for several months.

Carayon's intervention is unlikely to have an immediate impact on the negotiations but is seen as an early warning of the potentially volatile backdrop to the deal as employment once again looks set to dominate French elections due in 2012.

Aerospace is a major source of high-tech jobs in France.

Aircraft industry executives say plane orders such as this one tend to trigger intense lobbying from both sides of the Atlantic, often dragging in the heads of respective governments.

The contest is also happening as the United States and European Union draw towards the close of the world's largest trade battle involving mutual allegations of aircraft subsidies.

Any sign of interference in the Air France-KLM deal will likely be seized on by Boeing as evidence of unfair competition.

The French government owns 15.7 percent of Air France-KLM and 15 percent of Airbus parent company EADS.

Airbus and Boeing are the world's only manufacturers of aircraft in the 250-300 seat class targeted by Air France-KLM. They face the threat of new competition from China, Canada, Russia and Brazil for their best-selling smaller models.

Airbus has sold 2,894 planes to North America in its 40-year history, according to data on the company's website. Over the same period, Boeing has sold 4,100 planes to Europe including to Air France and traditional Boeing buyer British Airways.


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