Wherefore Airbus if the euro falls apart?

At the EADS nine-month results analysts conference call, finance director Hans Peter Ring just confirmed that Airbus has begun making sale contracts with airlines denominated in euros, breaking from the industry standard of dollar-based pricing. And, he adds: “It is a number [of contracts] which is starting to become significant.”

For EADS/Airbus, working in euros makes a lot of sense. The strength of the euro versus the dollar has at times been very painful for eurozone-based businesses, and in any case exchange rate fluctuations, while a fact of life for any multinational, do need managing. One approach in aerospace is to base some operations in the US, or at least the North America “dollar zone”, so as to have some costs and revenue in the same currency.

But the ongoing euro crisis raises the spectre of a thorny problem. A Greek departure from the euro may be on the cards, and wouldn’t probably affect EADS beyond the impact of currency market turmoil. However, what if – and it’s not a completely hypothetical if – the euro loses more members or is abandoned altogether?

In that case, what happens to euro-denominated contracts? Could either buyer or seller be forced to accept terms in a national currency?

The permutations are daunting, but one distinct possibility has got to be the dissolution of such contracts, for re-negotiation. In that case, buyers, surely, would be free to walk away?

No wonder Europe’s leaders have been insisting the euro can’t fail. The fact that they’re starting to accept that they might not be able to hold back the tide should be prompting Airbus, its suppliers and its customers to prepare for the messy transition to a post-euro world – whatever that might look like.

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