EU-China Battle Stalls Sales of Airbus Jets

Source: Wall Street Journal By Daniel Michaels and David Pearson PARIS—The chief executive of Airbus parent EADS accused European Union officials of sparking a fight with China over aircraft emissions that threatens to cost the plane maker $12 billion in jetliner orders. Louis Gallois said that European Aeronautic Defence & Space Co. is a "hostage" to the dispute between Beijing and Brussels, which has put the fate of 45 unbuilt large planes in question. "China is putting on hold orders already agreed with airlines but not approved" by industry overseers in Beijing, Mr. Gallois told reporters at a press briefing. "We are worried that this conflict is becoming a commercial war." The EADS chief executive blamed Chinese officials' anger at the EU's levies on emissions of carbon dioxide, which this year were extended to include aviation. Any airline operating at a European airport must have special credits to offset its carbon-dioxide emissions through a program known as the emissions-trading system, or ETS. Airlines have said the system will cost them billions of dollars. Governments outside the EU charge that the 27-country bloc is exerting extraterritorial authority by charging for emissions that occur outside the EU. Officials at the European Commission, the EU's executive arm, have said the system is legal. A top EU court last year backed that position. Talks that might resolve the dispute are now ongoing in the United Nations' International Civil Aviation Organization, but their prospects for success remain unclear. China is one of more than 25 countries that have vocally opposed the EU program. "We're asking the EU to take into account the global opposition of almost every country outside Europe against this scheme," Mr. Gallois said, and urged agreement through the ICAO. Staff at the Chinese Embassy to the EU declined to comment on the situation and officials in Beijing weren't available for comment. A spokesman for EU Climate Commissioner Connie Hedegaard, the top official overseeing the ETS program, declined to comment on "possible commercial decisions." The involvement of Airbus in China's dispute with the EU emerged in June, when the announcement of an order for 10 Airbus A380 superjumbo jetliners by Hong Kong Airlines Ltd. was put on hold. Airbus officials have said the freeze was due to Beijing's anger over the ETS program. More recently, 35 smaller Airbus A330 widebody planes have also been put on hold, Mr. Gallois said. None of the planes is yet being assembled, but parts for 25 of the A330s were already being produced, Airbus officials said. Nine were to be delivered next year and 16 in 2014, they said. Customers make installment payments as a plane is built and pay most of its price upon delivery. More than one of every five Airbus planes currently produced is for China, an Airbus spokesman said, so a holdup in deliveries could significantly affect EADS. EADS said Thursday that in view of strong market demand, Airbus has decided to ramp up production of its A330 to a rate of 11 a month in the second quarter of 2014 "provided the ETS doesn't harm orders." "But we have to take into account of what is happening in China," Mr. Gallois said. The production increase depends on Chinese airlines obtaining government approval for their orders, he noted. China hasn't explicitly forbidden its airlines from buying Airbus planes. Air China Ltd. spokeswoman Joyce Zhang said she didn't believe China had banned airlines from ordering Airbus aircraft, adding Air China has no plans to cancel existing orders. China Eastern Airlines Corp. and China Southern Airlines Co. couldn't immediately be reached for comment. Instead, EADS officials say Beijing isn't signing off on permission for commercial deals that require government approval. EADS earlier Thursday said it is on track for significant growth in sales and profit in 2012 and beyond as it ramps up production of new and remodeled Airbus jetliners. The Franco-German aerodefense giant said net profit in the three months to Dec. 31 rose to €612 million ($804.7 million) from €355 million a year earlier, surpassing analysts' expectations mainly because of a foreign-exchange gain. EADS more than doubled its annual dividend and reassured investors there have been no further delays to its multibillion-euro A350 wide-body jetliner program. Fourth-quarter revenue jumped 16% to €16.44 billion from a year earlier, above the market consensus of €15.45 billion. Full-year revenue rose 7% to €49.13 billion. Mr. Gallois said he estimated the cost of fixing wing cracks discovered in the 67 Airbus A380 superjumbos Airbus has produced so far at €105 million. from China Travel & Tourism News http://www.chinatraveltourismnews.com/

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