European planemaker Airbus wore two masks in China on Monday -- the joy of landing what could be its biggest ever aircraft order by volume, contrasted with growing despair over the plunging value of the dollar.
The paradox is the same one dominating Beijing talks between French and Chinese leaders this week -- how to tap into China's economic expansion without being trampled by imbalances in the global currency market, which Europe blames on Chinese policies.
French President Nicolas Sarkozy and Chinese President Hu Jintao looked on as Airbus and China's state buying agency signed a framework deal that could lead to an order for 160 Airbus passenger jets worth $16.7 billion at list prices.
That tops the previous record of 150 for the biggest Airbus deal in terms of planes sold, set by Sarkozy's predecessor Jacques Chirac on a similar visit to China in October 2006.
But the strength of the euro against the dollar, the currency in which aircraft are sold, is frittering away Airbus's share of a global aviation boom as it competes with Boeing.
And the head of Airbus parent EADS did not wait for Monday's signing ceremony at the Great Hall of the People to add to recent company warnings over the impact of currency swings.
It is a vital danger, which means it is eating the margins of the company, but it's not an immediate one, Louis Gallois told Reuters.
The single European currency scaled a record peak against the dollar last week.
Airbus already plans to reduce its overhead by 10,000 staff and 2.1 billion euros ($3.11 billion) a year under so-called Power8 restructuring plans. It is also trying to sell six out of 16 factories to suppliers.
With aircraft demand soaring, Gallois said the problem was not one of jobs. But the strength of the euro could lead to massive further outsourcing if it was not reined in.
Last week the head of Airbus, Tom Enders, said the weak dollar posed a threat to the planemaker's survival.
ALL THE PRESIDENTS' DEALS
Weighing up Monday's Airbus agreement to sell to China with a similar deal signed last year -- the Sarkozy version versus the Chirac version -- illustrates where Airbus is hurting.
Not only did China sign up for 10 more planes, a 7 percent increase in volume terms, but the deal's value to Airbus should have risen 59 percent based on dollar-denominated list prices.
The rise is due to the presence of larger jets in the deal.
But translate that into euros at the exchange rates prevailing at the time of each deal, and the contract value rises by just 38 percent. The difference slices into margins.
The new deal calls for 50 wide-bodied A330 planes worth an average $182 million each at list prices, on top of 110 single-aisle A320s worth $70 million each.
Last year's 150-plane deal was for all A320s.
In euros, the Sarkozy deal is worth 11.3 billion at list prices. The Chirac agreement was valued at 8.2 billion euros based on late October 2006 dollar rates of $1.28 to the euro.
Sarkozy's spokesman said however, the actual price agreed this time was equivalent to around 10 billion euros.
Aircraft are usually sold at a discount to list prices.
Airbus plans to build a factory in Tianjin near Beijing to start production in 2009 to help supply jets sold to China.
But in Europe it is juggling having to cope with record levels of both orders and production, while selling factories to suppliers to help balance the books and cut overheads.
Unions fear more jobs will be cut.
Sources close to the company say its first line of defense against the extra costs imposed by currency movements will be its own suppliers, meaning any fresh cuts may fall there first.
Further along the road, that could lead to sharply increased outsourcing in favor of dollar countries, the sources said -- countries like Mexico or the United States itself. Airbus already pays about half its production costs in dollars.
Provisionally, Airbus is now budgeting for a euro of $1.45 as it reviews its restructuring plans, rather than the $1.35 originally used, according to these sources.
However Gallois told a newspaper the company already needed new savings of 1.5 billion euros based on a dollar near $1.50. Airbus says each 10-cent swing costs 1 billion euros in profit.