China Delays Unveiling Airbus Deal

China's anger with the European Union's emissions-trading scheme for airlines has delayed the revealing of a major Airbus deal and could undermine upcoming deals, according to people familiar with the situation.

Airbus, a unit of European Aeronautic Defence & Space Co., had expected to announce at the Paris Air Show this week that Hong Kong Airlines Ltd. ordered 10 of its A380 superjumbo jetliners, with a catalog value of almost $4 billion. The deal's unveiling was put on ice by officials in Beijing, who must give final approval, these people said.

The Chinese government held off because it disapproves of the EU's intention to regulate greenhouse emissions of foreign airlines operating to and from the 27-country bloc, according to the people close to the talks.

For now, China's anger is unlikely to hurt the European plane maker, which has an order book of more than 3,500 planes for customers globally. But China is the biggest growth market world-wide for aviation. Airbus in 2009 opened an assembly plant in Tianjin, China, to tap the local market and curry favor with the government.

Airbus had also hoped that a major Chinese order would be announced when German Chancellor Angela Merkel meets Chinese Premier Wen Jiabao in Berlin next week. That planned contract could now be significantly shrunken or delayed, said one of the people familiar.

The EU's pollution-control plan, which is set to include aviation starting in January, forces any carrier departing or arriving at an EU airport to buy credits for greenhouse-gas emissions above specified levels, with large fines for noncompliance .

China's move appears to be the first retaliation against the EU program. China, the U.S., Russia and other countries have strongly objected to the plan. They see it as unilateral and potentially illegal because it may assert extraterritorial jurisdiction on carriers from other countries.

European Pressphoto Agency

An Airbus A380 is seen during a demonstration flight at the Paris Air Show June 23.

"A global issue needs a global solution," said the Airbus spokesman, who called the plan "a bureaucratic tiger." Airbus and the Association of European Airlines last month wrote to top EU officials to warn about potential retaliation from China.

EU officials have repeatedly said they won't retreat on their program.

Christoph Franz, chief executive of German giant Deutsche Lufthansa AG, said on a recent trip to China that threats of retaliation against the EU plan indicate it is not working as expected. The EU had hoped that its program would prompt countries around the world to adopt similar measures.

Some European airlines have recently held back on asking for permission to increase capacity on Chinese routes because they expected applications to be rejected, said one person with knowledge of the situation.

The U.S. government on Tuesday formally presented its opposition to the EU plan for the first time at a meeting with EU officials in Oslo. A group of U.S. airlines has separately filed suit against the EU plan. The first hearing on that case before the European Court of Justice is due on July 5.

Concerns of countries outside the EU "must be taken seriously," said Ulrich Schulte-Strathaus, secretary general of the Association of European Airlines. The EU "needs to address these objections and come up with a solution which balances the priorities of the environment and international relations."