* Agrees to buy Salzburg Muenchen for undisclosed sum
* Regulatory approval expected this year
* Plan originated as safe haven during credit crunch
* Airbus Group says move will expand flexibility
By Tim Hepher and Natalie Huet
PARIS, Feb 14 Airbus Group pressed
ahead with post-Lehman plans to acquire its own banking licence
on Friday, saying it would buy small German lender Salzburg
Muenchen Bank AG to boost its financing options.
The European aerospace group, formerly known as EADS, first
dislcosed the plans in 2012 after becoming concerned about where
to place its large cash pile during the credit crisis.
Owning a banking licence would allow the world's
second-largest aerospace group to deposit funds with the
European Central Bank, as well as potentially draw on ECB funds.
The plan follows in the footsteps of engineering companies
such as Siemens, whose banking licenses have allowed it to tap
the ECB's low-interest loan programme directly.
But in announcing the deal to buy Salzburg Muenchen Bank for
an undisclosed sum, Airbus Group made plain its reasons had
evolved - even though the option of using the euro zone central
bank's coffers as a safe haven still stands.
"In principle, it does entitle the bank to liquidity from
the ECB; however, Airbus Group has no need to access any
liquidity of the ECB at this stage," a spokesman said.
"Also, the bank will provide Airbus Group with the
possibility to deposit funds directly with the ECB."
Airbus Group identified other possible uses including
carving out some flexibility in areas that it said were usually
reserved for banks, such as providing liquidity to
non-controlled joint ventures.
The bank "may provide trade financing with suppliers, hedge
book services, etc to support Airbus's production and delivery
efforts," RBC Capital Markets analyst Rob Stallard commented.
Both Airbus and rival Boeing, which has an aircraft
financing arm called Boeing Capital Corp, are increasing
production after a boom in aircraft orders. Both companies face
concerns about the ability of the supply chain to keep up.
NO AIRLINE FINANCE IMPACT
The bank is, however, seen as unlikely to handle the airline
customer financing carried out by Airbus and which is already
well established through a Dublin subsidiary.
Industrial companies have traditionally been wary of the
increased regulatory scrutiny - potentially involving tens of
millions of euros in extra audits and management time or
processes - that such a move would bring.
Airbus and Boeing both offer customer financing to support
aircraft sales as a last resort - an activity that has recently
rarely been used as Asian lenders step in to fill the gap left
by once-dominant French banks.
U.S. and European export credit agencies have also helped to
fill the gap left by capital-constrained European lenders.
Now, those export credits are returning to more normal
levels as commercial banks return and new money pours into the
$100 billion annual market for new jets.
Airbus said it aimed to close the acquisition, subject to
approvals, "as early as possible in 2014". Once that happens,
the Munich-based lender will be renamed Airbus Group Bank.
Airbus Group did not say whether the bank would be run as a
distinct company segment with its profits reported separately,
or merely facilitate activities across the rest of the group.
It said there would be no immediate impact on the bank's
existing activities involving small and medium companies.
"In a normal environment they would not be able to do
anything different. They don't want to get overly exposed to
their customers or the supply chain," an aircraft finance
industry executive said, asking not to be named.
However, Airbus Group would gain a "backstop capability in
case of market disruption," he added.
The idea of getting a bank licence had been floating around
for at least a decade at EADS.
Shortly after it was founded in 2000, top executives at the
Franco-German-Spanish company debated whether it was needed to
create a European titan in the vein of General Electric.
The U.S. conglomerate's massive GE Capital arm helps it
finance the sale and lease of Airbus and Boeing jets as well as
financing and leasing its own jet engines and other products.
Later, the EADS banking project was revived and gathered
pace as the company looked for a safe port for its 10 billion
euro cash pile following the 2008 collapse of Lehman Bros.
EADS changed its name to Airbus Group last month, subject to
formal approval by its shareholders expected in May.