PARIS, Jan 26 (Reuters) - Shares in Airbus parent EADS rose on Monday on signs the French government was preparing to inject 5 billion euros ($6.5 billion) into banks to help finance the purchase of airplanes.
"There is indeed a plan to lend 5 billion euros to the banks to finance Airbus contracts," a government source said on Sunday, confirming a report in the business newspaper Les Echos.
Neither Airbus nor EADS could immediately be reached for comment on Monday.
Shares in the European aerospace group rose as much as 1.6 percent on Monday but by 1012 GMT, they were up only 0.60 percent at 12.57 euros, roughly in line with the CAC 40 index of French blue chips, which was up 0.5 pct.
Although not presented as a direct bailout, the plan would be the first significant government package directed at the aerospace industry, one of France's biggest export earners and source of thousands of high-tech jobs.
"The market is struggling to get its mind around it (the package)," said Sandy Morris, analyst at ABN AMRO. "We've been expecting some increased support from the government but it sounds a slightly contrived way to do it."
Morris said financing might not be the main issue.
"If air traffic doesn't grow in 2009 and 2010 because of the recession, airlines simply won't need more aircraft," he said.
Les Echos said the state would inject the money into banks with a record of lending to the aerospace industry.
It named Calyon, Societe Generale, BNP Paribas and Natixis.
"The aim is to prevent airlines from cancelling orders citing difficulties in raising money," said the newspaper, which did not give its sources.
EADS Chief Executive Louis Gallois earlier this month accused banks of failing to provide adequate lending to Airbus customers even when the loans were backed by state export credit guarantees.
Airbus is the world's largest producer of civil jetliners, ahead of rival Boeing.
The two planemakers are locked in a transatlantic trade row over subsidies at the World Trade Organisation, with both accusing the other of taking illegal government handouts.
It was not immediately clear whether the plan would be designed specifically to funnel money into protecting deals with Airbus, something that may open it to criticism from Boeing and other planemakers, or to ease credit across the aerospace sector.
Boeing was not immediately available for comment on Monday.
Airbus and Boeing are bracing for more turbulence in an industry damaged by recent fuel price spikes as the economic downturn hits air travel. They also face a battle to prevent airlines cancelling or deferring orders.
Aircraft are usually ordered years before they are built and the financing often is not finalised until a few months before delivery, according to aviation executives. ($1=.7719 Euro) (Reporting by Astrid Wendlandt, Tim Hepher and Helen Massy-Beresford; editing by Karen Foster)