Boeing May Benefit Indirectly From The Purchase

A Russian bank, VneshTorgBank (VTB), and 100% owned by the Russian government, has just spent around a billion dollars to acquire almost 5% of the European Aeronautic Defense & Space Corporation (EADS).

EADS is the parent of Airbus, and is also Europe's largest defense contractor.

The Russians were able to get more bang for their buck because EADS' share price is down almost 1/3 from its high just six months ago. Its Airbus subsidiary has seen a number of problems with its A380 superjumbo and A350 medium range designs which was reflected in their reduced stock value.

EADS, in turn, owns 10% of Irkut Corp, which is attempting to combine multiple Russian aviation businesses into a large holding company called United Aircraft (not to be confused, of course, with the former American company of the same name).

According to the Defense Industry Daily, the timing is quite interesting because a giant battle is brewing between American Boeing and European Airbus for next Air Force air refueling tanker contract, estimated to be more than $20 billion dollars.

Russian involvement in the largely German and French company may complicate the tanker battle and tilt the scales toward Boeing. The US is likely to be unwilling to share advanced technology with a country that -- while not exactly the Communist enemy it once was -- has been much less friendly of late. 

But the scales usually balance out and Airbus may be consoled with the prospect of being the likely supplier to the Russian national airline Aeroflot, which has a huge fleet of Cold-War-era airliners badly in need of replacement.

FMI: www.eads.com