France pumps in $6.5bn to bail out Airbus

European plane maker Airbus said a French plan to provide up to 5 billion euros ($6.5 billion) to support plane purchases would help secure aircraft deliveries as government aid for the ailing economy spreads beyond banks and cars.

The government will channel the money to the aerospace industry via French banks, which will receive a further €5billion ($6.5billion) in state guarantees, a finance ministry official confirmed on Sunday night. This is specifically to enable banks to advance funds to airlines that are struggling to finance payments for aircraft ordered earlier.

While many critics slammed the move as a direct bailout for Airbus, France's trade minister Anne-Marie Idrac defended the move, saying it would not distort competition and that the state was not giving money directly to Airbus, owned by Franco-German aerospace group EADS.

The German government said it was unaware of the plan.

Although not presented as a direct bailout, the plan appeared to be the first significant government package targeted at aerospace as countries pour funds into propping up industries weakened by the credit crisis.

EADS chief executive Louis Gallois said earlier this month that banks were failing to provide airlines with loans needed to finance aircraft deliveries even when backed by state export credit agencies.

"We welcome the strong initiative of the French government to try to secure our deliveries, which are at risk due to the credit crunch," an Airbus spokesman said on Monday.

Airbus is the world's largest producer of civil jetliners, having overtaken former market leader Boeing. The two companies are locked in a transatlantic trade row over subsidies at the World Trade Organisation, with both accusing the other of taking illegal government handouts.

If it emerges that the French decision is designed mainly to funnel money into protecting deals made with Airbus, it could be open to scrutiny by Boeing and other plane makers. However, Boeing has declined to comment on the matter.

There are concerns that the aviation industry, one of France's biggest export earners and home to thousands of high-tech jobs, could be hit indirectly by the automobile crisis, since the two industries share many of the same suppliers.

Les Echos, which first broke the story, said the state would inject the money into banks with a record of lending to the aeronautical industry. It named Calyon, Societe Generale, and BNP Paribas.

According to the Financial Times, this is the first time the French government has used the Société Financement de l'Economie Française, or SFEF, which was set up in November to stabilise the banking system, to support other industries directly. The SFEF earmarked €1 billion last year for the finance arms of Renault and Peugeot Citroën. But these finance arms are, strictly speaking, banks and regulated as such.