Russians raise the stakes at EADS

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The Independent Online

The political machinations surrounding EADS, the embattled parent company of Airbus, intensified yesterday as Russia increased its stake in the group and the German government indicated that it too was prepared to become a shareholder.

Russia's state-owned bank Vneshtorgbank is understood to have increased its shareholding from 5 per cent to between 6 and 7 per cent as the Kremlin seeks to gain more influence over the Franco-German aerospace and defence giant. President Vladmir Putin has said he would like to gain a shareholding of about 10 per cent in EADS. Russia is pushing for board representation but has been rebuffed by the two co-chairmen of EADS as well as France's President, Jacques Chirac, and Chancellor Angela Merkel of Germany.

Russia began is stake-building two months ago, taking advantage of an EADS share price that has been battered by two profits warnings caused by delays and cost-overruns on the Airbus A380 super-jumbo. EADS has said problems on the A380 will knock a €4.8bn (£3.23bn) hole in its profits over the next four years.

An EADS spokesman re-iterated yesterday that the company had no plans to change its corporate governance arrangements to accommodate a Russian representative on the board. The company has said, however, that it is interested in further co-operation with the Russian aerospace industry.

The core shareholders in EADS are DaimlerChrysler with 22.5 per cent, the French government with 15 per cent, the French media group Lagardère with 7.5 per cent, and the state-owned Spanish holding company SEPI with 5.4 per cent.

One option would be for Germany's state-owned development bank KfW to acquire part of the DaimlerChrysler shareholding. Another possibility would be for some of Germany's 16 regional states to buy stakes. Bavaria, Hamburg and Lower Saxony have indicated this is an option.

Russia's stake-building in EADS is consistent with Mr Putin's policy of "closer co-operation" with the defence and the aerospace manufacturer. In an interview with German daily Suddeutsche Zeitung during a state visit to Germany this week, he said the Kremlin's EADS stake might in time be transferred to a new, state-controlled "United Aircraft Manufacturing Corporation" conceived as a Russian state aerospace champion. Mr Putin insists that EADS has nothing to fear. "We don't have any plans for a hostile takeover - this is a very sensitive business," he said earlier this week. He said that a debate was still going on within Russia over what to do about EADS.

"Some people think we shouldn't do it [acquire a blocking minority] while other specialists think that we should because overall it would raise our technical levels and will make the United (Russian) Aircraft Manufacturing Corporation more competitive on world markets. Personally I'm in favour." If the Franco-German company continues to resist Moscow's formal overtures, Mr Putin promises he will not press the matter. "We'll simply get on with things ourselves without bad blood ... We'll find other forms of co-operation with EADS."

There was a rare piece of good news yesterday for Airbus after Emirates, the biggest customer for the A380 with 45 on order, said it did not plan to cancel deliveries. Speaking in Singapore, the Emirates president, Tim Clark, said: "We have invested a lot in ground facilities so we have to stick with the order for now." He did not rule out cancellation, however, if there were further delays. Virgin Atlantic, which has six of the 555-seater jets on order, is expected to defer orders in return for compensation.

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