By Valerie Insinna

PARIS (Reuters) – Lockheed Martin has raised concerns with the U.S. Defense Department and Federal Trade Commission (FTC) about L3Harris’s acquisition of Aerojet Rocketdyne, Lockheed’s chief operating officer said on Tuesday.

Frank St John told Reuters that Lockheed, Aerojet’s biggest customer, wanted L3Harris to ensure access to rocket motors, fair pricing and IP protections, adding that it had received “little response” from L3Harris over its concerns.

“To date, we’ve been unable to gain a commitment from L3Harris for those provisions as a merchant supplier,” St John said in an interview at the Paris Airshow.

“This is really concerning to us because they are going to be vital to meeting the increasing demand that we’re seeing on multiple weapons systems,” such as the Javelin missile launcher and Patriot air defense system.

If L3Harris continues to be unresponsive, Lockheed wants the Defense Department or FTC to put in place a mechanism to guarantee access to technology, St John said.

A spokesperson for L3Harris did not comment on the concerns raised by Lockheed directly but said: “We are in an FTC process and expect the transaction to close the second half of 2023.”

The FTC declined to comment, Aerojet Rocketdyne referred requests for comment to L3Harris and Defense Department did not immediately respond to emailed requests for comment.

L3Harris said in December it would buy Aerojet for $4.7 billion in cash as it looks to tap into rising demand for missiles because of the Ukraine conflict.

Lockheed previously attempted to buy Aerojet in a $4.4 billion deal, but walked away from the acquisition in February 2022 after the FTC sued to block the deal, citing concerns that Lockheed could hinder competitors’ fair access to Aerojet products.

RTX executives, who opposed Lockheed’s failed bid for Aerojet, have signalled they would not do the same in L3Harris’ case, with RTX CEO Greg Hayes saying that L3Harris is not a competitor in the missile business in an interview with trade publication Defense One.

RTX Chief Operating Officer Chris Calio told Reuters in an interview on Monday that “any transaction that can bring investment, capability and capacity would be helpful. I don’t think status quo is an option.”

(Reporting by Valerie Insinna; Editing by Mark Potter and Barbara Lewis)

By Gabriel Araujo

PARIS (Reuters) -Brazilian planemaker Embraer on Tuesday notched fresh orders from American Airlines and Spanish carrier Binter for its E-Jets in deals announced at the Paris Airshow that are seen totaling about $1 billion.

The new firm orders come amid an influx of deals at the world’s largest air show, which is at Le Bourget for the first time in four years and took off on Monday with Airbus bagging a record 500-plane transaction.

Embraer, the world’s third-largest planemaker after Airbus and Boeing, said the new orders follow expansion goals of regional carriers such as Binter and Canada’s Porter Airlines, underscoring positive momentum for its planes in global markets.

Despite the new deals, shares of Embraer slipped more than 4% in midday trading in Sao Paulo, making it the biggest faller on the benchmark Bovespa stock index, as analysts at JPMorgan said the firm had a “slow start” in Paris.

“We were expecting Embraer to announce at least 30 new orders during the event,” they said. “We believe that additional new orders could be announced in the coming days, as in the last Paris Air Show Embraer divided its announcements into 3 days.”

Binter has placed a firm order for six E195-E2 aircraft, marking its fourth order of E2 jets to bring its fleet to 16 when delivered. The deal was valued at $504.7 million at list price, with deliveries commencing in the second half of 2024.

The carrier’s president Rodolfo Nunez touted the aircraft as “a game changer” for the company and “the perfect aircraft to lead our continued growth”, citing better-than-expected fuel burn and maintenance.

“The best orders are repeat orders,” Embraer’s Chief Commercial Officer for commercial aviation Martyn Holmes said.

That also applies for American Airlines which ordered seven E175 planes for its Envoy Air subsidiary, whose fleet of E-Jets will grow to over 141 aircraft by the end of 2024 after the new $403.4 million deal.

Leasing firm Avolon meanwhile signed a sale and leaseback agreement with Porter, already an Embraer customer, for 10 new E195-E2s in a transaction priced at $841.2 million, according to Embraer.

That is “another sign that the momentum the E2 is enjoying in the market is set to continue”, Holmes said.

The Brazilian company expects its commercial aircraft unit to deliver from 65 to 70 jets this year, up from 57 in 2022, and had previously said sales were also enjoying strong performance as travel rebounds post-pandemic.

The firm has restored its backlog to pre-2020 levels and is working to achieve 100 commercial deliveries a year within 3-4 years.

(Reporting by Gabriel Araujo in Sao Paulo; Editing by Steven Grattan, Jan Harvey, Alexandra Hudson)

By Brenda Goh and Casey Hall

SHANGHAI (Reuters) -Alibaba Group on Tuesday said its CEO and chairman Daniel Zhang will step down from the roles to focus on its cloud division as the Chinese e-commerce giant moves ahead with a plan to split into six business units.

Zhang has been concurrently serving in three roles since December when he took over as head of the cloud unit after it suffered an outage that it described as its “longest major-scale failure” for over a decade.

The CEO role will be handed over to Eddie Yongming Wu, chairman of Alibaba’s Taobao and Tmall Group, while Executive Vice Chairman Joseph Tsai will take over Zhang as chairman.

Both appointments will take effect on Sept. 10, Alibaba said.

“The appointment of Daniel to focus on running cloud is really a show of confidence and trust in him to take the most precious business and run with it to develop it in the right way given this age of generative artificial intelligence (AI),” said Brian Wong, a former Alibaba employee and author of the book, “The Tao of Alibaba”.

“The idea or expectation that one person could manage the business’ crown jewel Cloud and at the same time manage the entire Alibaba Group is an unreasonable expectation.”

The surprise reshuffle comes after a tumultuous two years that saw Alibaba heavily targeted by increased regulatory scrutiny and after the group announced in March that it would restructure into six units, each with their own boards and CEOs.

Its China-facing e-commerce division, which includes the Taobao and Tmall marketplaces, will stay wholly owned by Alibaba, but the other five units will be spun off, with Alibaba saying in May it aimed to complete the public listing of its cloud unit within the next 12 months.

Zhang, in a memo to staff seen by Reuters, said the cloud spin-off was approaching a crucial stage and that it was the right time for him to dedicate his attention to the business.

“From a corporate governance perspective, we also need clear separation between the board and management team as the Cloud Intelligence Group proceeds down the path to becoming an independent public company,” he said.

“It would be inappropriate for me to continue serving as chairman and CEO of both companies at the same time during the spin-off process.”

Analysts have estimated the cloud unit to be worth $41 billion to $60 billion but have said the reams of data it oversees could put it in the cross-hairs of regulators at home and abroad.

SINGLES DAY

Zhang, a former accountant, joined Alibaba in 2007 and is known for being the architect behind the company’s annual flagship “Singles Day” shopping festival. He has served as CEO since 2015 and took on the chairmanship in 2019, succeeding both roles from Alibaba co-founder Jack Ma.

Alibaba thanked Zhang for his “extraordinary leadership in navigating unprecedented uncertainties affecting the company’s business over the past few years.”

Alibaba’s Hong Kong-listed shares fell 1.5% after the announcement, in line with a 1.6% decline in the benchmark index, as analysts viewed the reshuffle as being in line with the overall restructuring previously announced.

“Under the new structure, the group will play a smaller role in setting strategies for the six business groups, so instilling Alibaba founders Joe and Eddie as chairman and CEO likely serves the purpose of ensuring smooth leadership transition and maintaining culture,” Shanghai based Independent analyst Eric Chen, who publishes on Smartkarma, told Reuters.

Wu, who co-founded Alibaba alongside Ma and Tsai over two decades ago, will continue to concurrently serve as chairman of Taobao and Tmall Group, Alibaba said. His previous roles include chief technology officer of Alipay and chairman of Alibaba Health.

Wu’s elevation to CEO “is a natural transition and signals the unswerving importance of e-commerce in the company’s roadmap,” said Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, a Beijing-based e-commerce consultancy.

Cooke said he did not see the leadership changes as signalling a major strategic shift within Alibaba, given that the individuals are co-founders and close associates of Ma.

“If anything, it emphasises the increasing importance of AI in the company’s focus, while also underscoring that e-commerce is the core business unit.”

COMPETITION

Ma, China’s best-known entrepreneur, has stayed out of the public eye since late 2020 after a speech in which he criticised Chinese regulation, and which is widely seen as triggering an ensuing crackdown.

Ma left mainland China in late 2021 – appearing in photographs in Japan, Spain, Australia and Thailand – and returned in March, a day before Alibaba announced its restructuring. He has not made any public comments during that period.

Last week, Alibaba president J. Michael Evans said Ma remained Alibaba’s biggest shareholder and cared very much about the company. He said Ma was teaching at a university in Tokyo and was also spending more time in China.

Chinese tech news outlet LatePost on Monday reported that Ma convened a meeting with leaders from Taobao and Tmall Group where he highlighted severe competition and discussed the need to return focus to users, the internet and Taobao – whose merchants are mostly individuals or small businesses – to stay relevant.

Alibaba did not respond to a Reuters request for comment on the LatePost report, which cited company sources.

(Reporting by Abinaya Vijayaraghavan in Bengaluru and Brenda Goh in Shanghai; Additional reporting by Scott Murdoch in Sydney and Anne Marie Roantree and Josh Ye in Hong Kong; Editing by Muralikumar Anantharaman and Christopher Cushing)

(Reuters) -Groundbreaking on U.S. single-family homebuilding projects surged in May by the most in more than three decades and permits for future construction also climbed, suggesting the housing market may be turning a corner after getting clobbered by Federal Reserve interest rate hikes.

Still, even with the Fed skipping a rate hike this month for the first time since early 2022, credit conditions remain in the process of tightening, and that could make it challenging for builders heavily reliant on construction and development loans to keep pace with May’s rebound in the months ahead.

Indeed, economists noted that multifamily construction projects that had secured financing last year contributed to May’s gains and may level off as the year progresses as new financing becomes harder to obtain.

Housing starts rose to a seasonally adjusted annual rate of 1.631 million units last month from April’s downwardly revised 1.34 million, the Commerce Department said on Tuesday. May’s rate was the highest since April 2022, which was then the highest since 2006.

The 291,000-unit increase in starts was the most since January 1990, and the 21.7% rise was the largest percentage gain since October 2016.

“While housing starts data tend to be volatile and this figure may be revised down in coming months, the enormity of the increase suggests that builders are broadly expanding operations this summer,” Nationwide Senior Economist Ben Ayers said in a note.

Starts rose by double-digit margins in the South, Midwest and West while declining by nearly 19% in the Northeast. Single-family starts were up 18.5% with multi-family projects of five units or more climbing 28.1%.

Not all economists were convinced May’s upswing represented the start of a continued surge.

“The strength is so far off trend that it calls sustainability into question,” Jefferies U.S. economist Thomas Simons wrote. He noted the nearly 67% surge in starts in the Midwest, for instance, may be the product of rebuilding efforts after a damaging spring tornado season, which is unlikely to be repeated.

The housing market has taken the biggest hit from the Fed’s fastest monetary policy tightening campaign since the 1980s, but recent data have suggested the worst may have passed.

A survey on Monday showed the National Association of Home Builders/Wells Fargo Housing Market index in June rose above the midpoint mark of 50 for the first time since July 2022 as a dearth of previously owned homes supported new construction. The index has rebounded by 77% since December.

The average rate on the popular 30-year fixed mortgage has come down somewhat from last November’s high above 7%. It averaged 6.77% in the latest week, according to data from the Mortgage Bankers Association.

But tightening credit conditions could make it harder for builders to access funding for new projects, a prospect NAHB’s chief addressed alongside the association’s data release on Monday.

“(A)ccess for builder and developer loans has become more difficult to obtain over the last year, which will ultimately result in lower lot supplies as the industry tries to expand off cycle lows,” NAHB Chairman Alicia Huey said in a statement.

After lifting rates by 5 percentage points since March 2022, the Fed this month took a breather to assess the effects of its actions taken so far, though rate hikes are likely to resume next month with inflation still too high.

Nonetheless, most Fed officials see only one or two more quarter-point rate hikes as necessary, and businesses in rate-sensitive sectors like housing are showing signs of upward momentum as a result.

Permits for future construction, for instance, rose 5.2% to the highest since October at 1.491 million units, led by a 27.1% surge in the Northeast. Permits for single-family projects rose 4.8% while multi-family were up 7.8%.

Bill Adams, chief economist at Comerica Bank, said home construction is set to add to U.S. economic growth in the second half of this year. Residential construction has been a drag on gross domestic product growth for eight quarters in a row.

(Reporting by Dan Burns; Editing by Conor Humphries and Andrea Ricci)

By Shreyashi Sanyal and Bansari Mayur Kamdar

(Reuters) -German stocks fell on Tuesday as shares of speciality chemicals maker Lanxess plunged after lowering its earnings forecast, while a modest interest rate cut by Beijing did little to lift investor sentiment among Europe’s China-exposed shares.

Germany’s DAX index closed 0.6% lower, retreating further from a record high hit on Friday. The continent-wide STOXX 600 index also fell 0.6%.

Lanxess slid 15.4% to its lowest level in over three years after cutting its second-quarter and annual core profit forecasts, saying it saw no demand recovery in June as customers continued to destock.

The chemicals index slid 0.9%.

China cut its lending benchmarks on Tuesday, with investors worrying that it may be too small to jumpstart a slow economic recovery and awaited a wider stimulus package.

“The China reopening story has been one of the real disappointments,” said Steve Sosnick, chief strategist at Interactive Brokers.

The market feels that the Chinese have been a little timid, that they really have not been as aggressive as they can be, Sosnick added.

The China-exposed basic resources index dropped 2.2%, while luxury giant LVMH shed 0.9%.

Defensive sectors such as utilities and healthcare capped losses on the STOXX 600.

Sanofi supported the healthcare index as it rose 3.7%.

The French drugmaker said the International Chamber of Commerce ruled in its favour in an arbitration case over claims by Boehringer Ingelheim that Sanofi should be liable for ongoing Zantac litigation in the United States.

British auto retailer Lookers jumped 33.9% as Global Auto Holdings said it would buy the peer for about 465.4 million pounds (about $595 million) in cash.

Also in the UK, the focus is on elevated mortgage rates ahead of key inflation data due on Wednesday and the Bank of England’s policy meeting on Thursday.

London’s FTSE 100 index slipped 0.3%.

UBS Group fell 2.4% after report on Monday that the bank faces hundreds of millions of dollars in penalties over Credit Suisse’s mishandling of Archegos Capital.

Investors now await the testimony from U.S. Federal Reserve Chair Jerome Powell on Wednesday and Thursday for further cues on the monetary policy outlook for the world’s largest economy.

(Reporting by Shreyashi Sanyal, Siddarth S and Bansari Mayur Kamdar in Bengaluru; Editing by Eileen Soreng and Alison Williams)

By Manya Saini and Hannah Lang

(Reuters) -Private equity firm KKR has agreed to purchase a substantial portion, or up to 40 billion euros ($43.71 billion), of payments company PayPal’s buy now, pay later (BNPL) loans in Europe, the companies said on Tuesday.

Even though BNPL remains popular after the pandemic-led surge in its use among millennials and Gen Z customers, the sector’s fortunes turned last year as rising interest rates and red-hot inflation dampened the purchasing power of consumers.

PayPal shares were last up 1.7% following the news of the deal, which is expected to generate about $1.8 billion in gross proceeds and close in the second half the year.

The company said its growth forecast for adjusted profit, made in May, of about 20% on a per share basis, which was above Wall Street estimates, already included the deal.

After the deal closes, PayPal expects to allocate roughly $1 billion to incremental share repurchases in 2023, contributing to an updated outlook of about $5 billion in total share repurchases so far this year.

“Strategically, we like this move, as we view offloading credit risk as a positive for payment processors,” Brett Horn, a senior equity analyst with Morningstar Research Services, said in a note.

“Additionally, given the still nascent nature of BNPL offerings and the uncertainty around future performance of BNPL offerings, we think this deal removes an element of risk for PayPal,” Horn added.

The companies said private credit funds and accounts managed by KKR will purchase up to 40 billion euros loan receivables originated by PayPal in France, Germany, Italy, Spain and the United Kingdom.

PayPal last year processed more than $20 billion of BNPL payment volume globally, up nearly 160% from 2021. Since launching its BNPL service in 2020, PayPal has issued more than 200 million loans to more than 30 million customers globally.

The company said it will continue to remain responsible for all customer-facing activities, including underwriting and servicing associated with its European BNPL products.

($1 = 0.9151 euros)

(Reporting by Manya Saini in Bengaluru and Hannah Lang in Washington; Editing by Arun Koyyur and Will Dunham)

By Joanna Plucinska and Valerie Insinna

PARIS (Reuters) – India dominated the Paris Airshow for a second day on Tuesday, as Air India finalised a huge order for 470 planes from Airbus and Boeing.

The agreement, when sketched out in February, was the largest ever plane deal by number of aircraft. But it was surpassed on day one of the Paris show by Indian rival IndiGo’s order for 500 Airbus narrowbody jets.

Finalising the deal puts it in the aerospace industry’s order backlogs as firm orders. Until now, it was only a preliminary deal. Air India said it was worth $70 billion at list prices, though airlines typically get discounts on big orders worth at least half the headline price, analysts say.

Efforts by Indian airlines to keep pace with the world’s fastest-growing aviation market, serving the largest population, have sent industry records tumbling even though manufacturers are struggling to meet output goals due to supply chain snags.

But some analysts have expressed concern that airlines could be over-ordering jets in pursuit of the same passengers.

Air India’s deal includes 250 planes from Airbus and 220 from Boeing. The Airbus part comprises 210 A320neo and A321neo narrowbody jets and 40 A350 widebodies. Boeing’s deal is for 190 narrowbody 737 MAXs, plus 20 787 Dreamliner and 10 777X widebodies.

“Our ambitious fleet renewal and expansion programme will see Air India operate the most advanced and fuel-efficient aircraft across our route network within five years,” Air India Chief Executive Campbell Wilson said in a statement.

The buying spree by Indian airlines adds to signs of strong global demand for civilian aircraft as travel rebounds from the pandemic and airlines look to reduce their environmental impact with more fuel-efficient new models.

Demand has been hottest for short and medium-haul narrowbody jets, but engine maker Rolls-Royce said on Tuesday the market for long-haul widebodies was also coming back strongly.

However, planemakers and their suppliers remain concerned about their ability to meet bulging order books amid rising costs, parts shortages and a scarcity of skilled workers.

Lars Wagner, CEO of MTU Aero Engines, said on Tuesday labour shortages and problems with the production of castings were the biggest strains in the engine supply chain.

INDIAN RIVALRY

Air India, with its maharajah mascot, was once known for its lavishly decorated planes and stellar service, but its reputation declined in the mid-2000s as financial troubles mounted.

Its renaissance under the Tata conglomerate aims to capitalise on India’s growing base of fliers and large diaspora, currently mostly served by foreign rivals such as Emirates.

The mega-order will also put Air India on a stronger footing to compete with budget rival IndiGo, which has a majority share of the Indian market and a strong position in regional flights.

Elsewhere at the show on Tuesday, Ethiopian Airlines said it expected to announce an order for about 130 Airbus and Boeing planes shortly after the event.

Leasing company Avolon finalised an order for 40 Boeing 737 MAX 8 planes, while Philippine Airlines firmed up an order for nine Airbus A350-1000 widebody jets and Qantas finalised a deal for nine Airbus A220-300s, confirming a Reuters report.

(Reporting by Tim Hepher, Joanna Plucinska, Allison Lampert, Valerie Insinna and Aditi Shah; Editing by Mark Potter)