Isra-Mart srl: China blocks billion-dollar Airbus order

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China has blocked a multi-billion dollar order for 10 Airbus superjumbo aircraft in a sharp escalation of Beijing’s protests against Europe’s plan to bring international airlines into its emissions trading scheme from the start of next year.

A Hong Kong Airlines order for the planes worth $3.8bn at list prices was due to be formally announced at the Paris air show earlier this week, according to industry executives familiar with the deal.

But Airbus, a division of the European aerospace group, EADS, learned over the weekend that the agreement was being blocked by Beijing and the announcement did not go ahead, the sources said.

“These are not the only orders taken hostage by the Chinese. The A380s are the first,” said one executive, adding there were other Airbus deals with Chinese carriers in the pipeline.

China and the United States have expressed opposition to the European Union’s move to make all airlines flying into Europe pay for their pollution, the most ambitious step yet by Brussels to make the rest of the world comply with its climate change rules.

But China’s action is the most dramatic sign of retaliation against the measure. It is not expected to have any immediate effect on Airbus’s production rates. The manufacturer won 730 orders and commitments from airlines around the world at the Paris air show.

But it may embolden other countries to consider action against the European trading scheme. Airbus declined to comment.

Tom Enders, Airbus chief executive, wrote a joint letter with European airlines recently to the EU climate commissioner, Connie Hedegaard, to warn that it was “madness to risk retaliation” from such influential players as China over the issue.

Ms Hedegaard and José Manuel Barroso, the European Commission president, have both made it clear Brussels has no intention of caving in to such threats.

To do so would set a worrying precedent, said Ms Hedegaard, because “it is up to the Europeans to decide European legislation”.

Until now, large polluters based in Europe such as power companies and cement factories have been covered by the emissions trading scheme the EU launched in 2005.

The scheme forces companies to pay for permits for each tonne of carbon dioxide they emit above a certain level or cap.

It was agreed several years ago, after much debate, that airlines would be brought into the scheme from January 2012.

A lawsuit brought by US airlines that challenges the legality of the scheme is to be heard in the European Court of Justice on July 5.

The US administration formally expressed its concern to EU officials at an aviation meeting in Oslo earlier this week, but there was no talk of retaliation and any further move by the US is not expected until the outcome of the airlines’ court case is known.

A judgement is not expected for some months.