Friday, February 14, 2014

Airbus Buys Bank: Aerospace Group Says Move Will Improve Financial Flexibility

The Wall Street Journal 

By  Ruth Bender

Feb. 14, 2014 4:47 a.m. ET

PARIS— Airbus Group said Friday it will acquire a small Munich-based bank as it forges ahead with its project of setting up an in-house bank that will help the aeronautics company secure access to credit.

Airbus Group—formerly known as European Aeronautical Defence & Space Co.--said it reached a deal with Austria's Raiffeisenverband Salzburg to buy Salzburg Muenchen Bank AG, a lender which works with small and medium-size companies and private clients.

Airbus, which didn't disclose financial details of the deal, said it would rename the bank 'Airbus Group Bank' if the acquisition is approved by German authorities. It aims to close the deal "as early as possible" in 2014.

The parent group of the plane maker with the same name first laid out plans to form an in-house bank to protect its own access to credit and that of its customers in 2012, when Europe's financial crisis showed little sign of coming to an end.

Airbus, the commercial aerospace unit of the group, operates in a capital intensive sector. The commercial aviation industry requires more than $100 billion in financing annually for new airplane deliveries.

During the financial crisis that began in 2008, Airbus, its U.S. rival Boeing Co. and other plane makers relied heavily on government-subsidized funding support, known as export-credit financing. But these guarantees have become increasingly controversial and new international rules have curtailed their use.

"In the coming years the whole group can benefit through increased financing flexibility," Airbus finance chief Harald Wilhelm said in a statement.

The European aircraft maker has also had a run-in with the German government, ending talks about Berlin's possible funding of its new A350 passenger jet. Airbus has received billions of euros in preferential loans from European governments to support the development of new jetliner models over the past four decades. This includes a €500 million ($681.8 million) loan from Germany for the A350 four years ago. An agreement on a second loan, for €600 million, remains outstanding because Airbus Group has balked at the terms being imposed by the German government.

Airbus and Boeing are forecasting strong continued demand from airlines for new aircraft as growth in passenger traffic, particularly in Asia, Africa, and the Americas, rises inexorably.

Airbus's latest forecast is for airlines in the Asian-Pacific region to buy planes valued at $1.8 trillion industrywide over the next 20 years. That view was close to the $1.9 trillion estimate from Boeing Co.

Asian-Pacific airlines will need 10,940 new planes in the next 20 years, Airbus said, 4,100 of which will be widebody jets that typically carry 300-500 passengers. Boeing expects the region to take 12,820 jets. 


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