October 11, 2012 Merger Denied! EADS and BAE Systems
If you haven’t been following the European aviation industry, there was a proposed merger between BAE Systems and EADS. I say was because German Chancellor, Angela Merkel blocked the merger. BAE systems is a large British defense firm. While primarily a British company, their US subsidiary is one of the largest DoD contractors. EADS is the parent company of AIRBUS and is a joint French/German company. On paper this was a match made in heaven, and why the Economist in the link below was non-plused as to why the merger was not approved.
BAE Systems is a large defense contractor. Through “Special Security Agreements” the company is allowed to do business with the U.S. DOD. As such the BAE provides everything from avionics to personnel carriers. They were in commercial aviation as recently as 2006. In that field they are known for the Bae-146, a four engine regional jet. You still see those planes in service. Offhand Swiss is one of the type operators. This merger would allow BAE to re-enter the commercial aviation market with a much stronger product line. Personally, I met one of BAE’s lobbyists on a flight to Austin. Nice guy and a Flyertalker to boot. On the other hand, EADS also stood to gain a lot from this merger. First, they claw back some of the defense market. Their current offering the A400M and A330MTT are not popular. A couple of years Airbus won then lost the contract to replace the US Air Force KC-135 tanker fleet. The merger with BAE would give EADS a better foot hold in the U.S. defense market and put them is a position to compete against Boeing. Airbus broke ground on what will be an A320 assembly line in Mobile Alabama. That facility can no doubt be expanded to manufacture and assemble military aircraft.
While the benefits of the merger were clear to company management and owners, the German government did not see it that way. Angela Merkel rejected the merger for unknown reasons. The Economist speculated the merger was rejected for nationalistic reasons. If that is true it marks a split be the French and German governments, while this fits historically (See WWII for more information) recently they have been on friendly terms. A split between Germany, the largest economy in the EC and France, another large economy, would be bad for the future of the EU. While the political effects will be felt in the EU, the practical effects of the failed merger will be seen in US.