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The announcement in the FT on August 29th, that Russian state bank Vneshtorgbank has accumulated a 5 percent stake in European aerospace firm EADS (Paris:EAD.PA – News), a Russian business daily reported, helped lift shares in the Airbus planemaker on prospects of new opportunities in Russia. After the problems reported on the A380 we had expected an outside investor to come in to mop up EADS shares on the market. Sources close to BATTLESPACE suggested that Middle Eastern money would be the most likely source, perhaps this will follow once the BAE shares are sold?

Quoting sources close to the bank and government officials, Vedomosti said on Tuesday the former Soviet foreign trade bank, which is Russia’s second-largest bank, spent around $1 billion buying EADS shares on the market. VTB and EADS, the maker of Airbus planes, declined to comment on the report, while the French market watchdog AMF says it was unaware of the VTB move.

EADS shares were up 2.4 percent at 23.18 euros at 0900 GMT after having risen as much as 3 percent earlier on the report.Some traders pointed at new business opportunities in Russia for the maker of Airbus, but some analysts were skeptical.

“It is probably going to worry institutional investors if you have yet another party taking a big stake in the company. It is not helpful. They already have a foot in Russia, so this would not change the situation,” said an analyst in London.

EADS, the leading European aerospace group, is keen to expand in Russia, where it is competing with U.S. rival Boeing (NYSE:BA – News) for a multi-billion-dollar contract to renew the aging fleet of Russian national carrier Aeroflot (AFLT.RTS).

The report comes as British firm BAE Systems (London:BA.L – News) considers selling its 20 percent stake in Airbus to EADS. It also comes as Russia plans to relax its curbs on foreign investment in commercial aviation projects to allow foreign capital to own stakes of up to 49 percent. Currently foreign companies can only own less than 25 percent.

The move appears in line with a trend of consolidating state control over strategic Russian industries and then inviting in foreign companies as minority shareholders. Meanwhile Russian firms, especially in the booming energy and commodities sector, are on the prowl for Western assets. EADS is poised to become the primary foreign partner in the newly created state-controlled aircraft holding firm Russian United Aircraft Corporation, set up in February in an effort to consolidate Russian plane makers into one body, after it bought a 10 percent stake in private combat plane maker Irkut (IRKT.MM (IRKT.RTS).

Irkut, one of two makers of Sukhoi fighter jets, is expected to provide the core of the Unified Aircraft management team, analysts say. (Additional reporting by Emelia Sithole and Marie Maitre in Paris).

To bring in such a controversial shareholder at a time to sell tankers in particular may be seen as a risky move in some quarters. But, EADS, may have calculated that an eastern move is more lucrative at a time when the U.S. market is expected to top ouyt in 20087 and with no large acquisition on the cards the company can look East. The move also gives EADS the availability of advanced Russian fighter technology which it could use to develop the next generation of fighter aircraft pot-Typhoon now that the U.K. has turned its back on this market.

In a Defense News article, underlying this eastward trend, on August 29th EADS announced that it has set up a subsidiary in India as part of its long-term strategy to establish a presence in the growing Indian aerospace market. Company spokesman Gregor Kursell said Aug. 29 that EADS will hold 100 percent equity in the subsidiary, EADS India Private Ltd., which will operate from here.
The details of the investments and business plans have not been made available.

Aviation major Hindustan Aeronautics Limited (HAL) and glob

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