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France eyes airline stimulus plan  Jan 26, 2009

The French government is preparing to tell banks to lend 5bn euros ($6.5bn: £4.68bn) to airlines to help them with aircraft purchases, reports say.

Shares in EADS, parent firm of European planemaker Airbus, rose on Monday, but were later only 0.78% ahead.

Reports in France say the banks are being asked to act in return for benefiting from a 10bn-euro package of state funds to boost capitalisation.

Airbus chief executive Tom Enders has warned 2009 will be "challenging".

"We all know that 2009 will be a very challenging year for the aeronautics industry," he said last week.

'Slightly contrived'

Airbus is restructuring to cope with currency volatility and other issues.

Its Power8 cost-cutting programme has saved 1.3bn euros, but could face a revenue shortfall if the economic crisis affects customers' ability to pay.

The aerospace industry is one of France's biggest export earners and provides thousands of high-tech jobs.

"The market is struggling to get its mind around it [the package]," said Sandy Morris, analyst at ABN Amro.

"We've been expecting some increased support from the government, but it sounds a slightly contrived way to do it."


It is understood French banks would receive a further 5bn euros in state guarantees from the body set up last year to back up to 320bn euros in new bank debt.

A French finance ministry official quoted by the AFP news agency said that the plan would "permit us to respond to the difficulties of plane manufacturers' clients who can't find financing".

Airbus saw a 7% rise in deliveries to a record 483 planes in 2008.

Last week it said it had a backlog of 3,715 jet orders, which, it is estimated, would take six years to clear, although this could be reduced to four years with cancellations.

France eyes airline stimulus plan
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