Airbus Encroaches on Boeing Territory

Airbus is set to get a key foothold in the United States after making plans to build a $600 million plant in Mobile, Alabama, to produce A320 passenger planes. The factory is expected to generate almost 1,000 jobs and add spark to the declining fortunes of American manufacturing. However, it is also being seen as a direct aim at Chicago-based Boeing (NYSE:BA), with whom Airbus competes for aircraft and defense deals in the country.

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While EADS, Airbus’ parent company, has assembly operations in Columbus, Mississippi, for its Eurocopter helicopter unit and is a key Pentagon supplier, it has been trying to get a larger American identity for several years. EADS, Europe’s largest aerospace group, had lost a $35 billion deal to Boeing to build U.S. Air Force tankers two year ago.

“Our vision is to be leading prime contractor within 10 years and expand our U.S. citizenship,” the group’s North America chief executive Sean O’Keefe had said last year.

With the latest plan, EADS could also be hoping to water down Boeing’s support in Congress as well as with U.S. airlines such as Delta Air Lines (NYSE:DAL) and the United Continental Group (NYSE:UAL). The European group may be hoping that creating jobs in the U.S. will help defeat Boeing’s arguments that European subsidies to Airbus have harmed the nations’ aerospace industry.

“Strategically in the long term, this will help EADS make a good solid industrial argument to the Pentagon and it will be stronger with an established footprint than the promise of a footprint,” independent U.S. aerospace analyst Scott Hamilton told Reuters.

However, the France-based Airbus faces criticism for the decision back home after its unions called for guarantees over European jobs. EADS is a mixture of public and private shareholdings and is held together by a Franco-German power-sharing pact. The Alabama plan was still under discussion a few months ago when France was in the middle of its presidential election campaign and both mainstream political parties were promising to crack down on industrial offshoring. For months, Airbus and Alabama state officials reportedly held secret meetings in locations away from Mobile.

Airbus’ 150-seat A320 is used in short- and medium-haul flights. Boeing is stepping up production of its 737, which competes directly with the A320.

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