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China halts 10 more Airbus orders: sources

By Tim Hepher

PARIS (Reuters) - China has suspended the purchase of 10 more Airbus jets, two people familiar with the matter said on Thursday, raising the stakes in a potentially damaging trade row over European Union airline emissions charges.

The move to delay the purchase of extra A330 planes brings to $14 billion the value of European aircraft caught up in tensions over the EU's Emissions Trading Scheme, which has angered countries including China, India and the United States.

It comes amid urgent efforts to find a solution to the row, which airlines fear could provoke an aviation trade war capable of causing travel disruption and hitting air traffic rights.

Earlier this week, European planemaker Airbus said China had blocked the purchase of 35 long-haul A330s and 10 Airbus A380 superjumbos worth a total of $12 billion.

Airbus did not name the airlines involved, but industry sources said the A380s were earmarked for Hong Kong Airlines, 46-percent owned by HNA Group, the parent of Hainan Airlines <600221.SS>.

The row is over a cap-and-trade scheme which could levy charges for carbon emissions for flights in and out of Europe.

Foreign governments say the EU is exceeding its legal jurisdiction by charging for an entire flight, as opposed to just the part covering European airspace.

The European Commission argues the scheme is needed to cut rising emissions and help the world fight climate change.

Aviation industry sources said on Thursday that despite the latest pressure on aircraft sales, hopes were tentatively emerging of a possible formula that would give the UN's aviation body, ICAO, time to negotiate an alternative global deal.

They said one possible scenario called for the EU to suspend the application of its scheme to foreign airspace and get nations talking, something the EU is so far unwilling to do because of fears that the momentum for action would be lost.

The EU Commission was not available to comment.

There are few signs that negotiating an ICAO deal would be easy, however. The question of what role developing countries should play in curbing emissions threatened to derail a top-level meeting of the Montreal-based body this week, according to one official who attended Wednesday's meeting.

'LONG-TERM DAMAGE'

China has so far directed its threatened retaliation at wide-body aircraft capable of reaching Europe from China, not A320 short-haul jets assembled in China for the local market.

In all, 55 aircraft have been swept up in the dispute, equivalent to about 10 percent of the aircraft ever delivered to China by Airbus, which claims 47 percent of the Chinese market.

While the A380 purchase is a firm order, meaning it cannot be cancelled without losing a deposit, the threatened A330 deals are still in the pipeline -- either being negotiated or waiting for the required official approval from the Chinese government.

"Aircraft sales are different from selling wine or cars, you can't switch the sales button from off to on from one day to another. A red traffic light in aircraft sales can destroy years of sales efforts and damage-repair will take years," said Rainer Ohler, head of Airbus public affairs and communications.

Those stakes were highlighted on Wednesday when rival Boeing hinted at billions of dollars of fresh sales for its 777 long-haul mini-jumbo, which has been selling well in China.

"I think you're going to see both sales of narrow-bodies and wide-bodies (in China) continue to grow," James Albaugh, chief executive of Boeing's commercial division, told a conference.

"We sold 30 777's over there last week and had a lot of discussions with other customers about more."

A Boeing spokesman said these included 10 jets already announced. Boeing is in "advanced discussions" for the other 20.

(Additional reporting by Kyle Peterson, Barbara Lewis, Allison Martel; editing by Geert De Clercq)

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