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France, Germany halt Airbus export credit amid UK probe

Saturday, April 9, 2016 - 09:06

[PARIS] France and Germany have joined Britain in suspending export credit facilities for Airbus jet deliveries, expanding the fallout from a potential corruption probe in Britain, several people familiar with the matter said on Friday.

The move follows Britain's decision last week to suspend financing and alert the Serious Fraud Office after Airbus Group said it had found anomalies over the declaration of overseas agents and that it had itself notified the UK authorities.

Unusually, it leaves the world's two largest planemakers, Airbus and Boeing, both facing paralysis over government export financing as Congressional delays leave US Export Import bank unable to support Airbus's US rival.

In Europe, Airbus draws on financing support for some sales from Britain, France and Germany where its main factories are.

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The nations typically act in concert, offering guarantees in proportion to the industrial work in each country, but declining to take up the slack whenever one of them refuses to take part.

A German economy ministry spokesman confirmed that the financing, provided on its behalf by Allianz unit Euler-Hermes, was no longer available.

Berlin is also examining whether the UK episode could have consequences for export credits already awarded, he added.

In France, three sources said export guarantees were being withheld for the time being.

"Audits are being carried out in the UK and we are waiting for the conclusions for those," a French government official said.

Airbus Group declined to add to a previous statement that it was co-operating with export credit agencies and that it expected financing to be resumed in the near future.

For now, the market impact is seen as limited as the use of export credits has dwindled to around 6 per cent of deliveries from 40 per cent at the height of the 2008-10 financial crisis.

But the unprecedented halt raises doubt over the financing for some upcoming deliveries, pushing up demand for commercial loans and placing pressure on Airbus to offer bridge financing.

"The problem is that deals financed with export credit are usually the tough-to-finance ones, so finding a commercial alternative is not always that simple," a market source said.

The agency which underwrites aircraft exports in Britain has said it will not support Airbus deliveries until it gets assurances about Airbus's current practices on overseas agents.

The UK case involves discrepancies over the amount of agents' fees disclosed in applications for export support, or missing names of third parties, in some cases dating back several years, two people familiar with the matter said.

A person responsible for overseeing some of the information supplied in export credit applications is no longer with the group, people familiar with the matter said. Airbus Group declined comment.

The decision by Airbus to report itself reflects efforts by many aerospace companies to toughen compliance and review their records for past failings after a series of industry scandals.

In its just-published annual report, Airbus said a newly centralised compliance team was revising the procedures on hiring consultants and warned investors this may "lead to additional commercial disputes or other consequences".

Europe's largest aerospace group says it is co-operating with four existing criminal probes into suspected irregularities in defence or security markets, including a British investigation into a US$3.3 billion communications deal with Saudi Arabia and a German probe into the sale of fighter jets to Austria.

REUTERS

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