1,200 Page Report Widely Seen As Boosting Boeing

The World Trade Organization released a 1,200 page report Tuesday essentially saying that the European Union provided cheap loans to Airbus, lowering manufacturing costs and pulling market share from rival Boeing.

The ruling is widely seen as a win for the Chicago-based planemaker, which could influence Congress in its decision as to what company should build the next generation tanker for the U.S. Air Force.

The New York Times reports that the report found that loans from European governments for the development of the A380 were "prohibited subsidies," and it said they should be withdrawn in the next three months. It also found that the governments had illegally subsidized nearly every Airbus model, from the A300 to the A340. The report said that if the governments had not stepped in to help the company, it “would not have been possible for Airbus to have launched all these models, as originally designed and at the times that it did,” and said the level of debt Airbus would have had to assume would have been "massive."

While the ruling does not cover pledged loans from European governments for the new A350 aircraft under development, one U.S. trade official said he would be "very disappointed if any member states moved forward with disbursing aid for the A350." Work had not begun on the new composite Airbus, which it is developing to compete with Boeing's Dreamliner, when the original complaint was filed.

A380

In a statement, Boeing Chairman, President and Chief Executive Officer Jim McNerney said "This is a landmark decision and sweeping legal victory over the launch aid subsidies that fueled the rise of Airbus and that continue to provide its products a major cost advantage. The Office of the U.S. Trade Representative deserves tremendous credit for today's decision. We now join the U.S. government in urging full compliance with the ruling and a permanent restoration of fair competition within our industry,"  Boeing interprets the ruling as meaning that Airbus must repay the $4 billion it received in launch aid for the A380.

Airbus, understandably, sees the ruling in a different light. A statement on the Airbus website says that the WTO panel report in the U.S. case against the EU confirms Airbus’s earlier predictions: 70 percent of the US claims were rejected and wild allegations have been proven wrong. Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus. 

“These results are in line with the previous versions of the WTO panel’s findings. Airbus, the EU and the Member States are closely analyzing the report in advance of a possible review by the WTO Appellate Body”, said Rainer Ohler, Head of Public Affairs and Communications of Airbus.

Airbus says that research grants were condemned with important implications for the coming report on U.S. subsidies to Boeing. Airbus expects the WTO to issue the interim report on Boeing subsidies very soon. “Only the availability of the report on the parallel case on Boeing subsidies will bring the necessary balance to allow for a possible start of negotiations, without any preconditions,” Ohler added. 

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Airbus says that it expects this WTO dispute to continue for a few more years, but Boeing says that it thinks the case is as good as closed. "A successful conclusion to this longstanding dispute is now in sight. Within a year, the U.S. government will have authority to act decisively to ensure compliance if Airbus has not entirely restructured the A380 program so that it is financed and funded on objectively verifiable commercial terms," said Boeing Executive Vice President and General Counsel J. Michael Luttig.

FMI: www.wto.org/english/news_e/news10_e/316r_e.htm