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Airbus sales chief sees some export credit cover in

Airbus (AIR. PA) expects to have access to European export credit financing on a "case by case" basis in 2017, its sales chief said on Monday, granting it a respite from a series of setbacks. European Export Credit Agencies (ECA) suspended financing for Airbus deliveries in 2016 amid a UK investigation into discrepancies in paperwork over the use of intermediaries."I would be expecting that we will get ECA cover on a case-by-case basis this year," John Leahy, chief operating officer for customers said in an interview on the sidelines of the ISTAT Americas air finance conference. Covering a range of topics on the sidelines of what could be his last such meeting before retiring around the turn of the year, Leahy said Airbus would need until at least 2018 to recoup production levels it had originally planned for its A320neo jet following production problems at engine maker Pratt & Whitney."I think Pratt has been frustrating. We are certainly capable of delivering the airframes the moment we have engines. The good news is the engine is meeting and exceeding our expectations," Leahy told Reuters. Airbus delivered 68 A320neos in 2016, well below earlier expectations, and predicts it will treble this number in 2017. Industry sources say deliveries of the new Pratt & Whitney Geared Turbofan engine to Airbus and Canada's Bombardier (BBDb. TO) fell as much as 50 percent below the original plans in 2016, raising questions over how quickly it could catch up. That has implications for the penalties that planemakers may continue to have to pay to airlines beyond 2017 and that they will in turn want to recoup from the U.S. engine maker.

Leahy confirmed the overhang of late deliveries caused by missing engines would persist into 2018."We will still be cumulatively behind by the end of 2017 but we will still be in the process of catching up. We can always hope that they will do more, but at this point their track record isn’t that impressive."PRICING SQUEEZE

Pratt & Whitney has acknowledged the industrial problems in two parts inside the engine and production of its front fan blades, but says it is well on the way to resolving them."We will execute and get this behind us," sales chief Rick Deurloo told the conference. A320 snags and high early costs for its A350 helped push Airbus margins down last year, despite higher deliveries and lower spending on research and development. Analysts say profits have also been squeezed by the legacy of lower pricing for an earlier version of A350, which was relaunched in 2006 with a bolder design and higher price tag.

Some of the airlines taking A350s are those such as Finnair which had ordered the earlier version and believed to have been granted permission to change to the new design at the same price. In all, Airbus sold more than 100 of the earlier version, a derivative of its A330, before opting for an all-new design."We did honor some firm contracts that people had for the original airplanes," Leahy told Reuters, asked about the impact of the pricing switch, adding: "We are almost through it". Airbus is also still studying a possible larger A350-2000 version, but is in no hurry, Leahy said."We are studying it but this market right now is soft for wide-bodies, so I don’t see a big queue of customers saying I want to launch a new program ... We have time to study it."The A350-2000 is a 400-seater designed to compete with Boeing's 777-9, whose development the U.S. company's marketing chief Randy Tinseth said was ahead of schedule. In a setback to the A350-2000 idea, Singapore Airlines (SIAL. SI) placed a big order for 777-9s last month.

Peugeot poised to buy GMs Opel, creating European car giant

France's PSA Group (PEUP. PA) is set to announce a deal to buy Opel from General Motors (GM. N) on Monday after striking an agreement with the U.S. carmaker and winning the blessing of its board for the acquisition. The maker of Peugeot, Citroen and DS cars said on Saturday it would hold an early Monday press conference with GM, at which the transaction is expected to be presented after Reuters reported that a deal had been struck between the two automakers. By acquiring Opel, the French group will leapfrog rival Renault (RENA. PA) to become Europe's second-ranked carmaker after Volkswagen (VOWG_p. DE) by market share. Between them, PSA and GM Europe recorded 71.6 billion euros ($76 billion) in revenue and 4.3 million vehicle deliveries last year. The tie-up was approved on Friday by the PSA supervisory board, on which the French government, Peugeot family and China's Dongfeng (0489. HK) are represented as shareholders, one source with knowledge of the matter said. Spokespeople for PSA and Opel declined further comment.

The two carmakers, which already share some production in an existing European alliance, confirmed last month they were negotiating an outright acquisition of Opel and its British Vauxhall brand by Paris-based PSA, sparking widespread concern over possible job cuts. In their jointly issued invitation to a Paris press conference at 0815 GMT on Monday, PSA and GM gave no indication of its subject. Separate briefings for the German press and Opel unions are expected to be held the same day. Sources close to the talks had reported progress on Thursday after the carmakers narrowed differences on a near-$10 billion Opel pension deficit and other issues. GM's European arm recently posted a 16th consecutive year of losses.

The negotiations had encountered problems over GM demands that a PSA-owned Opel be barred from competing against its own Chevrolet lineup in markets including China, they said. But the "non-compete" issues were finally resolved as GM agreed to inject "substantially more" into the pensions than the $1 billion to $2 billion it had initially offered, another person said. The sources declined to give further details. Detroit-based GM, which came close to selling Opel to Magna (MG. TO) in 2009, has faced investor pressure to offload its struggling European arm and focus on raising profitability rather than chase the global sales crown currently held by VW. After fending off 2015 merger overtures by Fiat Chrysler with support from her board, GM Chief Executive Mary Barra agreed to target a 20 percent minimum return on invested capital and pay out more cash to shareholders.

For PSA, the Opel deal caps a stellar two-year recovery under cost-cutting CEO Carlos Tavares, who said on Feb. 23 he would apply the same methods to Opel if the deal went through. PSA averted bankruptcy by selling 14 percent stakes to France and Dongfeng in 2014, to match a diluted Peugeot family holding. The acquisition offered an "opportunity to create a European car champion" and quickly exceed 5 million annual vehicle sales, Tavares told analysts as he presented full-year earnings. PSA also expects savings of up to 2 billion euros