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.