EADS frustrated by delay in WTO ruling

* Determined to make money on tanker deal

* Still eyeing acquisitions in United States

* Sees fair chance to win U.S. tanker contest

By Andrea Shalal-Esa and Matthias Blamont

FARNBOROUGH, England, July 18 (BestGrowthStock) – EADS (EAD.PA: )
Chief Executive Louis Gallois said he was “enormously
frustrated” about another delay by the World Trade Organization
in ruling on the European Union’s case against the United
States over alleged illegal subsidies to the company’s
arch-rival, Boeing Co (BA.N: ).

“I think it’s not a fair situation,” Gallois told reporters
ahead of the Farnborough air show, noting that a preliminary
ruling from the WTO on the EU case had been postponed three
times now, and the delay could affect an aerial refuelling
plane competition in the United States valued at up to $50
billion.

EADS and Boeing have been battling for a contract to build
179 refuelling planes to begin replacing the ageing U.S. fleet
of Boeing-built KC-135 tankers, which are nearly 50 years old
on average. [ID:nN02192170]

The competition is a key part of EADS’ drive to expand its
foothold in the United States, which accounts for half the
world’s defence spending.

News of the delay in the WTO panel decision on the EU
countersuit came shortly after the WTO released a final ruling
in the U.S. case, which said EU export subsidies to Airbus had
hurt Boeing and must be scrapped. [ID:nL8377482]. The European
Union is widely expected to appeal the WTO panel ruling.

EADS had hoped the decision on the EU case would take the
sting out of Boeing allegations that the A330 being offered to
the Air Force was only made possible by illegal subsidies.

A preliminary ruling in the EU countersuit had been
expected on Friday, but has now been put off until September.

Pentagon officials have said they will not consider the WTO
ruling at all in the tanker competition, which has angered some
U.S. lawmakers supporting the Boeing competition.

EADS still felt that it had a fair chance to win the U.S.
tanker competition, Gallois said, noting that the U.S.
government was treating the European company fairly and EADS
remained convinced it was offering a better plane.

The 8,800-page EADS bid was submitted to the Air Force last
Thursday, Gallois said. A third competitor, U.S. Aerospace Inc
(USAE.OB: ), submitted a last-minute bid together with Antonov,
the state-owned Ukrainian plane builder.

Gallois said the tanker competition was clearly “a big
deal” for EADS and a victory would make the European company,
with big factories in France, Germany, Spain and Britain, “a
citizen of the U.S.” in terms of manufacturing aircraft.

But he said EADS planned to expand its U.S. presence
whether it won the tanker deal or not, given the huge size of
the U.S. defence market.

“We have to be in the U.S. It is a huge market and clearly,
we need to win in this country,” he said, although he noted the
tanker order would involve production of just 15 to 18 planes a
year, a small fraction of the 500 planes EADS builds each year
for commercial and government customers.

EADS is also keen to build a new plant in the dollar zone
to hedge against currency fluctuations, but Gallois welcomed
the euro’s move to what he called “a more reasonable rate.”

“We know we have to adjust the company to a weak dollar so
if the dollar is stronger, it’s upside for us,” he said. “We
don’t think that the euro is weak at 1.20 (dollars).”

Gallois also rejected speculation by some U.S. critics that
EADS had submitted a money-losing proposal. “We prefer to lose
(the competition) than not to get money,” he said.

He said EADS was also still looking for acquisitions, after
its board backed away from a deal valued at around $1 billion
in late 2008 after the start of the global economic crisis.

The board was now more supportive of acquisitions, he said,
given EADS’ strong cash position and the improving economy.

Gallois said EADS was ready to spend “a reasonable amount”
on an acquisition in the United States, but declined to give
details about any kind of price target.

Marwan Lahoud, chief marketing and strategy officer for the
company, which is based in Munich, Paris and Madrid, said EADS
was focused on several areas for possible acquisitions,
including services and unmanned aerial vehicles.

“We need to find those targets that make the difference,
whatever the size,” he said.
(Reporting by Andrea Shalal-Esa and Matthias Blamont)

EADS frustrated by delay in WTO ruling