Airbus deal with Thailand will go ahead: Analysts

Airbus deal with Thailand will go ahead: Analysts

Jack Barton, Agence France-Presse, Bangkok

A major aircraft deal between Thailand and European consortium
Airbus is likely to go ahead despite threats of a delay by the
Thai government blamed on political grandstanding ahead of
national elections, analysts said.

Thai premier Thaksin Shinawatra said on Tuesday that national
flag carrier Thai Airways International would delay signing a
purchase agreement for eight Airbus aircraft, including six A380
superjumbos, while demanding that the European Union ease trade
rules covering Thailand's shrimp, poultry and farm products.

The Thai cabinet had approved the 96.3 billion baht (US$2.4
billion) deal to buy 14 aircraft for the national carrier, to be
split between rival manufacturers Boeing and the European
consortium Airbus, but it rejected a cash-only deal.

Analysts said, however, that the Airbus deal was on the verge
of being completed and the delay threat was for the benefit of a
domestic audience ahead of a Thaksin re-election bid expected in
February next year.

"They just want to show they have a great leader who is taking
good care of farmers and shrimp farmers ahead of the election,"
said one analyst, who declined to be named.

An Airbus executive was reported on Thursday as saying the
group expected to sign the deal on Friday.

Shrimp farmers have been hit hard by a 1999 EU decision to
remove the Thai shrimp industry from the EU's generalized system
of preferential tariffs (GSP), which was designed to reduce
duties for developing countries.

Thailand has complained it is paying more than rivals such as
Vietnam and China but the Thai shrimp industry is likely to be
reinstated into the scheme soon, officials said.

Farmers claim that shrimp exports to the EU have dropped more
than 80 percent in the last five years and they have been
lobbying the government for months to put pressure on the EU.

"The shrimp issue has nearly been settled in favor of
Thailand," the analyst said.

The agricultural industry has been further weakened by an EU
frozen poultry import ban imposed after the outbreak of bird flu
that swept Asia this year.

The EU on Thursday eased fears of an extension of an import
ban on cooked chicken products and hit back at claims of
unfairness, saying more than half of Thai exports entered the EU
duty free.

It said Thailand has run a significant trade surplus over the
past five years and exports to the EU in 2003 were worth 468
billion baht ($11.8 billion).

"It is possible that this is just a bid by the government to
win the people's hearts," KGI Securities airlines analyst Sarit
Panjamanond said.

He said the row was unlikely to alter the Airbus deal in the
long-term. "To scrap the deal over prawns just doesn't make
sense," he said.

"Even if the government is serious, if Thai Airways needs the
planes, then they will still have to buy them," he said.

Under the deal, the airline would buy eight aircraft from
Airbus including six A380s, the world's largest commercial
airliner able to carry 555 passengers. Thai Airways will also buy
six 777-200ER aircraft from Boeing.

The late hitch prompted speculation the Thai government was
pushing for a better deal from Airbus or even threatening to take
its business to Boeing instead.

Thai Transport Minister Suriya Jungrungreangkit side-stepped
the issue on Wednesday.

"We believe Airbus wants to sell aircraft to Thailand because
it can become the market leader if they sell many. The conditions
we ask for are the conditions of justice," he told reporters.

The airline has previously said that the A380 superjumbos
would be used on its European routes and the smaller aircraft
would be used on U.S. and Australian routes.

After launching a major share offering last year, Thai Airways
said it would use the funds to upgrade its aircraft and take on
rivals such as Singapore Airlines.