" PARIS, Jan 25 (Reuters) - The French state plans to inject 5 billion euros ($6.5 billion) into banks with the aim of financing airplane purchases to help European planemaker Airbus (EAD.PA), a French government source said on Sunday.

"There is indeed a plan to lend 5 billion euros to the banks to finance Airbus contracts," the source said, confirming an earlier report in the business newspaper Les Echos.

The source gave no further details.

Although not presented as a direct bailout, the plan appeared to be the first significant government package directed towards the aerospace industry as industrial countries pour funds into propping up industries weakened by the credit crisis.

There are also concerns that the aviation industry, one of France's biggest export earners and home to thousands of high-tech jobs, could be hit indirectly by the automobile crisis since the two industries share many of the same suppliers.

Les Echos said the state would inject the money into banks with a record of lending to the aeronautical industry.

It named Calyon (CAGR.PA), Societe Generale (SOGN.PA) and BNP Paribas (BNPP.PA).

"The aim is to prevent airlines from cancelling orders citing difficulties in raising money," said the newspaper, which did not give its sources."

More:

http://www.reuters.com/article/marketsNews...20090125?rpc=44

Can someone elaborate on what failure in the automobile industry means to the Airline industry on a nuts and bolts level?

I would think that suppliers to Boeing for commercial airplane parts in the US are very dissimilar to those of GM, Ford and Chrysler for autos. At one point you may have been able to point to TRW but no more. The unique issues for airplane supplier materials and parts makes it unlikely that parts for autos can be made in the same factory as auto parts-for financial reasons if none other. Closest impact I could think of is that if the auto manufacturers fail, there will be fewer airline customers.

Er .. how about some of the following European names, which are involved in the automotive business and the airline industry .. either directly or indirectly :

- Saab (automotive is now a division of GM)
- Fiat
- Rolls Royce (although, there is now true separation with BMW's involvement)
- BMW itself has been known to dabble in in-cabin interiors
- Recaro (supplies seating to both industries)
- Bosch etc

I am sure that if we dig hard enough there would be a significant number of names that would emerge.

Daimler used to own a 22% stake in EADS, but that's been reduced to ~14%

http://www.forbes.com/2007/02/09/daimlerch...9markets08.html

I am not sure if you are asking regarding airlines (commercial carriers) or air frame manufacturers. First, for manufacturing: Fundementally, the two inustries are tied at many levels. On a basic material level, lets say iron ore and bauxite, there are economic ties. Many companies which produce castings for for aircraft also produce auto and truck parts. If your customer base diminishes in either, the supply and efficiency curve of producing parts diminishes equally, meaning that you now have losses even if you can garner a higher price (in-and-of-itself an ulikely scenario), because the reduction on overall plant or business volume is so decreased. Other parallels can be drawn using the tire, rubber, electronics, shipping, logistics, interior (seats, etc.) glass and many other industries.


In terms of airlines, this is tied to the overall volume of business being conducted as well as the willinglness of the masses to engage in leisure travel. First, if 6% of the economy is tied to auto manufacturing, and it is slumping, there is little reason for someone to get on a plane and travel to provide service, support, etc., to the auto sector. Secondly, cash-strapped and unemployed auto workers (by some estimates, this could be as high as 29 million people across all related aut industires in North America) are likely to save their money as opposed to spending it on a trip to Disney Worls or Havanna.

One more AB article. It would seem the French are backstopping in the same way, let's say, the Fed is doing for GE.

Propping Up Airbus Won't Be Easy
Lionel Laurent, 01.26.09, 9:05 AM ET

LONDON -

The French government is flying in with financial supplies to help European plane-maker Airbus cope with the economic crisis. According to the office of Finance Minister Christine Lagarde, the aid will consist of 5 billion euros ($6.5 billion) in state guarantees to help Airbus customers get financing for their purchases. The problem is that the laws of supply and demand can't always bend to the French government's will.

With many airlines unwilling to buy new planes in the current environment, as fewer consumers take to the skies, the French government's measure is unlikely to create demand out of thin air. Instead it should function more as a safety net, helping out customers that don't want to cancel their existing orders but still need help raising the money to pay for them.

And the success of that safety net will also depend on the effectiveness of state guarantees as a perceived master key to unlock lending. The French government followed Britain in bailing out its banking sector a second time earlier this month, offering more capital and state guarantees to try and revive lending. Given that the first round of initiatives last year was also designed to loosen up lending, it is hard to feel confident that this will be a magic bullet.

"If banks weren't lending even when there were state guarantees, is adding extra state guarantees likely to increase marginal lending?" remarked Nick Cunningham, an analyst with Evolution Securities. "It's by no means conclusive that this is the solution to the problem."

Shares of Airbus parent European Aeronautic Defense and Space gained 1.0%, to 12.72 euros ($16.49), during midday trading in Paris on Monday. Arch-rival Boeing slipped 0.7% on Friday, to $41.98, in New York.

Cunningham added that the rapid fall in expected worldwide aircraft orders, which Airbus Chief Executive Thomas Enders said could decline by 50.0%-60.0% in 2009, meant that the economic crisis was hurting the aerospace sector at a faster rate than feared.

Aerospace consultant Doug McVitie was more sanguine about the effect of the crisis, and told Forbes that after three blowout years the industry was still in a relative comfort zone. "If the economic crisis doesn't last too long, I'm sure demand will pick up again," he said.

At least here in the US, banks are not lending not because nobody is qualified for a loan, but because the banks wants to "horde" the money they are receiving from the US Government to both be in a position to use it for mergers and acquisitions of competitors who are weaker then them and also to cover any future losses their existing loan portfolio generates (to help protect them from becoming targets for a merger or acquisition).

And a few need those bailouts to continue to pay out huge bonuses to executives until the government forces them to stop.

I don't see what all the crying is about. Isn't this practically the same thing as the ExIm Bank providing loans to foreign buyers of Boeing aircraft?

Airbus has access to private and government institutions that perform the same function as the Export Import Bank does for Boeing. This would just be one more, funded by the French state.

Personally, I don't see a problem with it either.

Who's crying, just reporting what is happening in the finance world of commercial airplanes.

I should have tempered my comment with a disclaimer. I wasn't referring to anyone here as much as on other boards. I am sometimes amazed at how narrow- and closed-minded some folks on other boards are.

Personally, I don't have a problem with it either. I'd go a step further and take advantage of the European love fest for Obama: cancel the WTO case and declare the U.S. government will now support Boeing with RLI (or whatever they call those airbus subsidies).