SPAIN: GOVERNMENT FINANCIAL SUPPORT FOR AIRBUS

UNCLAS MADRID 000308 SENSITIVE SIPDIS STATE PASS USTR FOR MARTYN COMMERCE FOR ELLIOTT, CABLE CODE 6950 STATE FOR KOCH E.O. 12958: N/A TAGS: EAIR ECON EIND ETRD EU SP SUBJECT: SPAIN: GOVERNMENT FINANCIAL SUPPORT FOR AIRBUS REF: A. SECSTATE 10592 ¶B. PARIS 334 ¶C. MADRID 184 ¶1. (SBU) Summary. Ministry of Industry, Tourism, and Commerce officials have not responded to reftel questions on the Airbus A350. However, media reports, while inconclusive, suggest that the GOS was in discussions with Airbus in the fall to provide launch aide for this aircraft, but is now hesitating. End Summary. ¶2. (U) President of Airbus Spain Manuel Hita announced in October that the company had reached preliminary agreement with its stakeholder countries, including Spain, to finance development of the A350 through reimbursable, low interest rate loans. According to Hita, discussions would be ongoing throughout the following months to determine the terms of the loans as well as what portion of the estimated 11 billion euro development costs each country would finance. He further noted that any agreement reached would be submitted to the European Commission for approval. ¶3. (U) Media reports in late January indicate that GOS officials were having second thoughts about providing financing for the Airbus 350 project. News that the Government of France had made available 5 billion euros in credit to Airbus through prime lenders (ref B) was met by "interest" from the GOS. However, an unnamed official at the Ministry of Industry told a leading financial daily that the GOS was unlikely to provide similar type financing. ¶4. (SBU) Regardless of whether the GOS decides to provide support for the A350, this project is somewhat significant for the GOS. Minister of Industry Miguel Sebastian has mentioned the A350 project a number of times over the past year, noting that the project would result in thousands of new jobs for Spaniards. The minister has also been keen to highlight a prior agreement with Airbus in which Spanish businesses would have claim to 12 percent of the production business of A350 aircraft parts (specifically the production of compound materials to be used in the tail and other parts of the plane). ¶5. (SBU) Comment: The extent to which the GOS is willing to finance the A350 project will likely be influenced by its deteriorating public finance situation. The GOS ran a 3.8 percent of GDP budget deficit in 2008, and predict a 5.8 percent deficit in 2009, though the actual deficit may be even greater. CHACON