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Boeing completes B787 milestone, EADS down on military contract concerns –Supplier Share Wrap

EADS shares lost 2.4% in trading on Tuesday, amid news that two major military contracts are in danger of collapsing. EADS is partnering with Northrop Grumman for the USD35 billion US Air Force aerial tanker contract. Northrop Grumman said it could pull out of the competition with Boeing to supply the tanker, unless there were significant changes to the draft request for proposals. The US company claims the terms of the RFP favours a smaller aircraft and “places contractual and financial burdens on the company that we simply cannot accept”.

Northrop’s concerns do not appear to have ruffled any feathers. According to a US Department of Defense, talking to Bloomberg, "the Department regrets that Northrop Grumman and Airbus have taken themselves out of the tanker competition and hope they will return when the final request for proposals is issued."

In Europe, EADS has also been forced to deny media reports that it could cancel the A400M military transport programme, due to three years of delays and more than EUR5 billion in cost overruns. Negotiations between Airbus and seven EU Member States regarding the EUR20 billion project are due to commence today.

Meanwhile Boeing shares traded flat after the manufacturer announced another milestone towards getting its B787 into the air before the end of 2009. It has completed the static test necessary to validate the side-of-body modification made to the B787 and is awaiting the test results, due within 10 days. Subject to satisfactory results, Boeing now expects the test flight to take place this month.

Meanwhile, most of the aircraft leasing companies' shares rose on Tuesday, led by Genesis (+6.9%), Aercap (+5.7%), Aircastle (+5.2%) and Air Partner (+5.0%).

Selected Aviation suppliers’ daily share price movements (% change): 01-Dec-09