UPDATE 3-EADS exits U.S. defence deal to save cash

* Second aborted U.S. defence deal, cash is priority

* Airbus could cut production

* Banks criticised for withholding credit (Adds U.S. analyst comment)

By Tim Hepher and John Bowker

NEWPORT, Wales, Jan 13 (Reuters) - European aerospace group EADS said on Tuesday it had abandoned a "significant" defence acquisition in the United States to conserve cash as it props up jetliner sales to crisis-hit airlines.

The Airbus parent company is under pressure to offer credit financing to airlines to ensure they honour contracts and also faces new provisions for delays to its A400M military airlifter.

Airbus and rival Boeing Co (BA.N) saw new aircraft business roughly halve last year after a record 2007 as airlines endured first a record spike in oil prices, then a slump in passenger and cargo demand. [ID:nN07521602] [ID:nN09303414]

"We want to protect cash so we are focusing and reducing our investment expenses," EADS (EAD.PA) Chief Executive Louis Gallois told an annual news conference.

"We need this cash to protect the company and sometimes support our suppliers, in particular when they are in common with the auto industry."

Gallois declined to say what cash level EADS would find comfortable, but revealed that, even while closing out 2008 with a 2 billion euro net increase in the bank from 2007, it had cancelled an acquisition in the United States to save cash.

"We were on the way to sending the cheque and we pulled out at the last minute. It was a unanimous position by the board."

EADS was forced to abandon the purchase of a U.S. military drones designer in 2007 after a split on its board.

Gallois declined to name the latest target, but said it had recently won a Pentagon contract. Another executive said the price tag on the aborted deal was in the region of $1 billion.

EADS last year bought emergency control room specialist PlantCML for $350 million and targeted at least one other acquisition in 2008 to boost its presence in the United States.

It showed interest in defence electronics firm DRS before DRS was bought by Italian company Finmecanica SpA (SIFI.MI).

"EADS has shown a marked interest in homeland security companies," said Phil Finnegan, director of corporate analysis at the Washington-based consultancy, Teal Group.