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Thursday, June 22, 2006

Airbus crisis causes ruckus in French parliament

EUObserver: Delays in production and a plunge in the value of its shares have provoked concerns about the Franco-German board of the European aerospace giant, EADS.

The saga descended into melodrama on Tuesday in the French parliament when French socialist MPs stormed out of the National Assembly after the prime minister accused the socialist opposition leader, Francois Hollande, of cowardice.

"Mr Hollande, I denounce the ease, and I would even say, face-to-face, the cowardice, the cowardice of your position," said Dominique de Villepin reacting to criticism by the socialists about the Airbus A380 production delays.

According to media reports, the prime minister had to be surrounded by parliamentary stewards to guard him against leftist deputies advancing toward him and chanting "resign."

The French government has come under increasing pressure following the recent plunge in shares of the Airbus parent company, EADS, which is 15 percent owned by the French state.

French media report the ministers are divided on whether the cabinet should dismiss the EADS directors - suspected of profiting from insider trade - despite public support from president Jacques Chirac for the French director, Noel Forgeard.

Mr Forgeard has been fighting for his job after it emerged last week that he and other directors sold shares worth millions months before share prices fell due to announcement of a six-month delay in delivering the super jumbo.

The dispute has cast a shadow over the Franco-German pact in the aerospace group, with Berlin reportedly trying to benefit from the scandal by replacing the French EADS leader with one of their own people.

"What do they [the French government] want, to rationalise EADS or dissolve the stock owners' pact? I hope the politicians are aware that, in Germany, the main problem is the presence of the state in the centre of the group," an official for one of the biggest investors in EADS said, according to Liberation.

But the French government is trying to relieve tensions and avoid further dispute with the Germans.

"The government's priority is not to change the pact, but to provide answers to the problems that have caused the delay of the Airbus 380," a cabinet spokesperson indicated.

The current chaos has raised questions about the European company's management and its general strategy of producing super jumbos while rival US company Boeing bets heavily on smaller and more fuel-efficient aircraft.

Singapore Airlines, one of the biggest A 380 clients, said it was unhappy with the delays and has demanded compensation. It also announced it would buy 20 aircraft from Boeing while taking options on another 20 planes.

Meanwhile, International Lease Finance Corp has said it might pull its Airbus A380 orders worth $3 billion, with another big client, Malaysian Airline System, making similar noises.
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