Bloomberg News

French Pro-Airbus Pressure Clouds $4 Billion Vueling Order

June 17, 2011

(Updates with comments from CEO starting in eighth paragraph, today’s share price in 13th.)

June 17 (Bloomberg) -- Vueling Airlines SA, the Spanish discount carrier controlled by Iberia and British Airways, said a decision on a $4 billion plane order may be complicated by French political pressure favoring Toulouse-based Airbus SAS.

Placing a contract for Boeing Co.’s 737 rather than the European company’s A320 could make it harder for Vueling to get permission for night flights at Paris Orly airport as it seeks to build a base there, Chief Executive Officer Alex Cruz said.

“It would be crazy to decide on a manufacturer without taking into account the effects it may have on our network development,” Cruz said in an interview when asked whether France’s pre-election political climate could affect the order.

Pierre-Henri Gourgeon, CEO of Paris-based Air France-KLM Group, was summoned to a meeting with Trade Minister Pierre Lellouche on June 15 to discuss a petition by more than 100 legislators urging the carrier to favor Airbus in a planned $20 billion order. President Nicolas Sarkozy’s government, which holds a 16 percent stake in Air France, is paying “close attention” to the fleet plans, spokesman Francois Baroin said.

Randy Tinseth, marketing vice president at Boeing’s jetliner division, declined to comment on the French stance during a briefing for reporters in Paris yesterday. “We’re confident of our chances in any campaign,” he said.

Discussing Jobs

With Sarkozy trailing his main rivals in opinion polls less than a year before elections, the CEOs of Renault SA and PSA Peugeot Citroen SA have also been called in by ministers to discuss domestic employment concerns in recent weeks. Airbus has manufacturing facilities in France, Germany, Spain and the U.K.

Barcelona-based Vueling aims to order a “brand-new fleet” from Airbus, Boeing or Bombardier Inc. of Canada to replace 47 Airbus planes on leases that expire within six years, Cruz said.

While changing manufacturer would impose significant training and maintenance costs, it could make sense if price concessions made up for the outgoings, he said, citing U.K. discount carrier EasyJet Plc’s 2002 decision to switch from Boeing to Airbus jetliners.

“We’re very happy with Airbus, but I think if we’re placing a very large order we need to have a good fair look at what’s available,” Cruz said.

Orly Slots

Vueling is looking to double its takeoff and landing slots at Orly and needs noise regulations relaxed to allow earlier flights before it bases aircraft there. Speaking in a telephone interview this week, the CEO said discussions were in progress with French authorities to amend the rules to reflect reductions in engine noise achieved in the last decade.

Cruz and his management team met French Transport Minister Thierry Mariani in late May to discuss Vueling’s Orly base plan and the noise rules, a spokeswoman for the airline said.

Current noise regulations impose a curfew at Orly between 11 p.m. and 6 a.m. and limit the airport to 250,000 takeoffs and landings each year. Eric Heraud, a spokesman for France’s DGAC civil aviation Authority, said he had no immediate comment on the request for a regulation change.

Vueling was trading down 0.5 percent at 8.56 euros as of 12:33 p.m. in Madrid after earlier slumping as much as 4.1 percent. The stock has declined 12 percent this year.

The Spanish carrier is controlled through a 46 percent stake by International Consolidated Airlines Group SA, the company formed by the merger of Iberia and British Airways.

--Editors: Jim Silver, Chris Jasper.

To contact the reporter on this story: Laurence Frost in Paris at lfrost4@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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