Airbus wins landmark Polish airline order in Europe 'reset'

By Tim Hepher, Paul Sandle and Joanna Plucinska

PARIS (Reuters) -Airbus sealed a landmark order for 40 A220 jets from Polish national carrier LOT on Monday, marking the airline’s largest-ever investment and signalling a broader reset in political ties between Poland and France.

The deal, which was first reported by Reuters on Friday, follows a hard-fought contest between France-based Airbus and Brazil's aerospace champion Embraer to capitalise on Warsaw's plans to equip an ambitious new East European hub.

It ends LOT's longstanding reliance on non-European airplane suppliers.

"This is the largest investment in the history of the Polish national carrier. We are building a leader in air transport in Europe," Polish Prime Minister Donald Tusk said on X.

LOT executives stressed the A220 had been selected purely on economic grounds, with CEO Michal Fijol telling Reuters: "I only do numbers". Airbus' roughly 130-seat small jet edged out the smaller Embraer by a very narrow margin, he said.

But the large contingent of ministers and diplomats - from Poland, France and Canada, where the A220 is mainly built - at a packed news conference made clear the politics at stake.

"We have a good understanding of the economies of both countries; if we have a good understanding of business people from Poland and France it supports also the political alliance," Polish Infrastructure Minister Dariusz Klimczak told Reuters.

The year-long competition had attracted attention as LOT offered a significant prize for that size of plane at a time when it has been weighing alliances amid concerns about security support from the U.S., according to aviation and defence sources, diplomats and analysts.

In May, France and Poland signed a treaty to increase cooperation on defence, nuclear energy and other measures, in a sign of deepening alliances between European nations.

Poland's pro-European coalition government won a vote of confidence last week, an outcome that Tusk hopes will give his cabinet new momentum after it was shaken by a setback in a recent presidential election.

In 2016, Poland cancelled a $3.5 billion deal for 50 H225M Caracal military helicopters, sparking a furious public response from both Airbus and the French government, which said it would review defence cooperation with its eastern European NATO ally.

A220 BOOST

The A220 deal is worth up to about $3.5 billion, including 44 options that could eventually bring the order to a total of 84 jets, according to Cirium Ascend analysts.

"It is part of a major reset of Franco-Polish relations by the Tusk government," said Paul Taylor, a senior visiting fellow at the European Policy Centre.

"Part of this is to show that Poland wants to think European and specifically wants to make goodwill gestures to France for the rupture under a previous government, following the cancelling of the Caracal contract."

Industry sources said Airbus, in which both France and Germany hold 11% stakes, also eyes potential sales of military equipment to Poland including MRTT tankers and A400M airlifters.

Asked whether Airbus saw the new deal as an opportunity to rebuild bridges with Poland, Airbus commercial planemaking chief Christian Scherer denied any connection with past disagreements.

The order is also a shot in the arm for the A220 programme, which has plans for higher production but has had uneven sales since Airbus bought it from Canada's Bombardier in 2018.

"This puts the A220 further on the path towards breakeven," said Agency Partners analyst Sash Tusa.

Embraer said it respected LOT's decision, while suggesting that European politics had played a role.

"We understand we are living in an exceptional moment where geopolitics play an important role," the Brazilian company said, adding that it would continue to support LOT's existing fleet that includes older Embraer jets as well as larger Boeings.

(Reporting by Tim Hepher, Paul Sandle and Joanna Plucinska. Editing by Mark Potter)