June 15, 2006, Michael Harrison (The Independent)

A furious row erupted last night between the two shareholders in Airbus after BAE Systems accused EADS of deliberately trying to depress the value of the company in order to buy out BAE's 20 per cent stake in the European plane maker on the cheap.

EADS shares fell by more than a quarter yesterday, wiping €5.5bn (£3.8bn) from the market capitalisation of the Franco-German aero-space giant after the shock announcement from Airbus that delays in the production of the A380 superjumbo would cut deliveries by two-thirds next year.

EADS, which owns 80 per cent of Airbus, calculated that the financial penalties it would now face from airline customers could cut up to €500m a year from its operating profits for the 2007-10 period.

EADS shares fell 26 per cent to €18.73, valuing it at €15.4bn. The market price of EADS will be one of the main yardsticks in putting a valuation on Airbus as it accounts for virtually all of the company's profits.

BAE said last night that "no credible or serious assessment" of the financial impact of the delay to the A380 programme could yet be made, given that Airbus has yet to present a revised production and delivery plan to its two shareholders. BAE believes the announcements from Airbus and EADS are a thinly disguised attempt to massage down the price at which its 20 per cent stake will be bought. BAE and its advisers are deeply suspicious of the timing of the announcements, coming as they did midway through negotiations to fix a price for the BAE stake. BAE began the talks looking for £4.5bn for its Airbus stake from EADS - a valuation which EADS described as "astronomical".

The failure to agree a price resulted in BAE exercising its "put" option, which sets in train a four-week timetable for completing the sale. BAE, which is being advised by Goldman Sachs and Gleacher Shacklock, and EADS have another week to agree a price or an independent investment bank will be brought in to arbitrate within 14 days.

BAE's suspicions have been further increased by EADS's admission that it hopes to give its shareholders an update on the impact of the A380 delays around the time of the Farnborough air show, which starts on 17 July. This is just after the deadline for fixing a price for the Airbus share sale.

Two of the launch customers for the A380, Emirates and Singapore Airlines, said they were considering taking legal action against Airbus, which now expects to deliver only nine of the aircraft in 2007 compared with an initial plan for 25.

The 555-seater jet is due to enter service with Singapore at the end of this year, having already been delayed by nine months. Emirates is the biggest of the 16 launch customers for the A380, accounting for 45 of the 159 on order. Emirates alone had expected to take delivery of nine next year.

Boeing rubbed salt in Airbus's wounds, meanwhile, by announcing a $4.5bn (£2.4bn) order from Singapore for up to 20 of its latest 787 Dreamliner jets. This brings orders for the plane to 383 from 29 customers - putting it far ahead in the market of the Airbus A350, which is having to be extensively redesigned.