European aerospace group EADS was considering doing without part of a development loan for its Airbus unit worth 500 million euros ($660.3 million) from the German government as a dispute escalates regarding the group moving operations from Germany, a paper reported.

EADS and Airbus therefore hope to prevent the German government from influencing its production locations, German daily Frankfurter Allgemeine Zeitung said, citing company sources, in an advance copy of a story to be published in its Monday edition.

Germany last week said Airbus should locate more of its activities in the country and hire equal numbers of French and German executives, provoking the group to say it would not tolerate such meddling.

The German government has said it would provide a loan of up to 1 billion euros, half of which has already been paid, for the development of the A350, Airbus' answer to Boeing's 787 Dreamliner in the mid-sized segment of the aircraft market.

Speaking to analysts in January, EADS CEO Louis Gallois hinted for the first time that the company could eat into its cash pile of over 11 billion euros rather than tap new loans, which were intended mainly to share out the development risk.

The spat over locations comes at a sensitive time as Germany prepares to buy a 7.5 percent stake in Airbus parent EADS from Daimler , and as Airbus Chief Executive Thomas Enders prepares to take the helm at EADS.

An EADS spokesman in Germany declined to comment on the report on Sunday. ($1 = 0.7573 euros)

(Reporting by Victoria Bryan; additional reporting by Alexandra Hudson in Berlin and Daniel Flynn in Paris; Editing by Maureen Bavdek)

Germany