Austria to sue Airbus over Eurofighter deal

The first Austrian military jet fighter "Eurofighter Typhoon" lands on the military airport in the small Styrian village of Zeltweg, Austria, in this July 12, 2007 file photo. (Reuters)
Updated 16 February 2017
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Austria to sue Airbus over Eurofighter deal

VIENNA: Austria said Thursday that it will sue European aerospace giant Airbus over a $2-billion sale of Eurofighter jets that has long been plagued by allegations of kickbacks.
A government probe concluded that the Airbus and Eurofigher consortium had “deliberately misled the Austrian Republic on the real price, delivery capabilities and its equipment” of the deal signed in 2003.
“Austria would have never decided to buy the Eurofighter jets in 2003 without the fraudulent deception by Airbus and Eurofighter,” Defense Minister Hans Peter Doskozil said.
EU member Austria is seeking damages of up to €1.1 billion ($1.16 million) for its largest-ever defense deal, worth around €2 billion.
According to the “Task Force Eurojet” report presented in Vienna, Eurofighter knew that it would not be able to meet the delivery deadline of the 15 planes.
The five-year-investigation also found that Austria had been overcharged for costs that allegedly included backhanders.
“The two companies never informed Austria that the 2-billion-euro deal would include 183.4 million euros of legal but also criminal fees,” Doskozil told reporters.
Ahead of the report’s release, Airbus said in a statement sent to AFP that it was not aware of the Austrian findings and had received “no details” regarding the lawsuit.
However it said that Airbus has been “cooperating with the authorities in recent years, for example through its own enquiries.”
In late January, Airbus had already agreed to pay tens of millions of euros in additional taxes over an allegedly shady 90-million-euro payment linked to the Austrian Eurofighter contract.
Austrian and German authorities launched the current corruption probe into Airbus, then called EADS, to investigate whether officials had been paid millions of euros through advisory firms to secure the contract.
Prosecutors in Munich are set to publish their preliminary findings later this year.
The Eurofighter deal was first announced in 2000 by Austria’s then conservative-run government despite fierce opposition from its far-right coalition partner and the Social Democrats.
The government had initially ordered 24 jets but later dropped the number to 18 and then to 15 because of budgetary constraints.
The purchase of the military fighter jets also stirred public unease in non-NATO neutral Austria.
Shortly after the contract was signed, allegations started to circulate that politicians and others involved in the deal were receiving kickbacks.
A probe was set up in 2007 to look into possible bribes, but came to no firm conclusion.
The Eurofighter Typhoon is a major prestige product for the European defense industry. The first prototypes were made in 1989.
The four founding nations in the consortium — Germany, Spain, Britain and Italy — all use the aircraft in their own air forces.
Austria saw the first sale outside of the four consortium members, and since July 2007 the 15 Austrian jets have clocked up more than 5,000 flying hours, according to the consortium.
In 2006 Saudi Arabia agreed to purchase 72 Eurofighter Typhoons. Other contracts have been signed with Oman and Kuwait.
As well as Airbus Defense and Space, representing Germany and Spain, the consortium includes British group BAE Systems and Italian firm Leonardo.
Eurofighters were used in combat missions in Libya in 2011.


Dubai real estate market recovery to be seen as of 2022: S&P

Updated 20 February 2019
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Dubai real estate market recovery to be seen as of 2022: S&P

  • The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate
  • S&P was generally comfortable with the credit ratings of the emirate’s banking system

DUBAI: S&P Global, the ratings agency, painted a grim picture for the real estate sector in Dubai, with a meaningful recovery in property prices expected only after 2022.
At a presentation to journalists in the Dubai International Financial Center, S&P analyst Sapna Jagtiani said that under the firm’s “base case scenario,” the Dubai real estate market would fall by between 5 and 10 percent this year, roughly the same as the fall in 2018, which would bring property prices to the levels seen at the bottom of the last cycle in 2010, in the aftermath of the global financial crisis.
“On the real estate side we continue to have a very grim view of the market. While we expect prices to broadly stabilize in 2020, we don’t see a meaningful recovery in 2021. Relative to the previous recovery cycle, we believe it will take longer time for prices to display a meaningful recovery,” she said.
S&P’s verdict adds to several recent pessimistic assessments of the Dubai real estate market. Jagtiani said that conditions in the other big UAE property market, in Abu Dhabi, were not as negative, because “Abu Dhabi never did ramp up as much in 2014 and 2015 as Dubai.” S&P does not rate developers in the capital.
She added that a “stress scenario” could arise if government and royal family related developers — such as Emaar Properties, Meraas, Dubai Properties and Nakheel — which have attractive land banks and economies of scale, continue to launch new developments.
“In such a scenario, we think residential real estate prices could decline by 10-15 percent in 2019 and a further 5-10 percent in 2020. In this case, we expect no upside for Dubai residential real estate prices in 2021, as we expect it will take a while for the market to absorb oversupply,” she said.
S&P recently downgraded Damac, one of the biggest Dubai-based developers, to BB- rating, on weak market prospects.
However, Jagtiani said that, despite the “significant oversupply” from existing projects, several factors should held stabilize the market: Few, if any, major product launches; improved affordability and “bargain hunting” by bulk buyers; and a resurgence of Asian, especially Chinese, investor interest in the market.
Jagtiani also said that government measures such as new ownership and visa regulations and reduction in government fees could help prevent prices falling more sharply, as well as “increased economic activity related to Dubai Expo 2020, which is expected to attract about 25 million visitors to the emirate.”
The outlook on property was part of a challenging assessment of the credit-worthiness of the emirate. “In our view, credit conditions deteriorated in Dubai in 2018, reducing the government’s ability to provide extraordinary financial support to its government related entities (GREs) if needed,” S&P said in a report. “The negative outlook on Dubai Electricity and Water
Authority (DEWA) partly reflects our concern that a real estate downturn beyond our base case could out increased pressure on government finances,” the report said.
It pointed out that about 70 percent of government revenues come from non-tax sources, including land transfer and mortgage registration fees, as well as charges for housing and municipality liabilities, as well as dividends from real estate developers it controls, like Emaar and Nakheel.
S&P was generally comfortable with the credit ratings of the emirate’s banking system, which has an estimated 20 percent exposure to real estate. “Banks in the UAE tend to generally display a good level of profitability and capitalization, giving them a good margin to absorb a moderate increase in risks,” the report said.