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Airbus, Boeing trade blows after WTO edict

by





An Airbus A380 takes off for a flying display at the 47th Paris Air Show at Le Bourget airport near Paris, June 21, 2007. REUTERS/Pascal Rossignol
An Airbus A380 takes off for a flying display at the 47th Paris Air Show at Le Bourget airport near Paris, June 21, 2007. REUTERS/Pascal Rossignol

 

By Sui-Lee Wee and Alison Leung

HONG KONG (Reuters) - Airbus <EAD.PA> on Tuesday rejected U.S. calls to renounce government loans for its next airliner after the WTO gave a preliminary ruling against earlier loans, while a Boeing executive hit out at unfair "subsidies."

In an unpublished draft ruling on Friday, the World Trade Organization said government loans used to develop planes such as the A380 superjumbo were "actionable" subsidies harming rival Boeing <BA.N>, according to sources familiar with the case.

It also ruled that some of the loans, including part of the funds lent by governments to help build the A380, violated an even tougher ban on export aid, the sources said.

The findings, which came in a confidential 1,000-plus page ruling, are the latest chapter in a decades-old battle between Boeing <BA.N> and Airbus for dominance of the global aircraft market, a major source of jobs on both sides of the Atlantic.

The outcome of the case and a European Union counter-claim against alleged U.S. support for Boeing could determine the options for funding Airbus's next airliner model, the A350.

Washington reacted angrily when Britain, which builds wings for Airbus aircraft, said last month it would provide $565 million in further loans to help develop the mid-sized jet. France, Germany and Spain are expected to follow suit.

Airbus has "absolutely no plans to change the funding for the A350 at the moment," Christopher Buckley, executive vice-president for Europe and Asia Pacific, said on Tuesday.

"From the Airbus point of view, we strongly believe, as we've always done, that reimbursable launch aid is a very good way of launching aircraft programmes," Buckley told Reuters in an interview at the Asian Aerospace exhibition in Hong Kong.

COMPLEX DISPUTE

Sources familiar with the WTO case said Washington failed in a bid to ensure its complaint applied to future models such as the A350 by describing the loans as one single pot of subsidies.

But a Boeing executive renewed pressure on Airbus to give up loans for the A350, which competes with Boeing's 787 Dreamliner.

"I think the result of the trade case would determine whether or not that direct subsidies are allowed," said Rob Laird, vice president of China, East and Southeast Asia sales.

"I assume it will have implications on any new programme that is not yet funded," he told Reuters in an interview.

The 787 and A350 compete in the jet market's most promising segment, covering long-range aircraft with 210-350 seats.

Analysts say that could generate thousands of orders worth hundreds of billions of dollars as prosperity returns in coming decades. Airlines have so far ordered 850 787s and 493 A350s .

"We started selling it (787) in 2003," Laird said. "We had a few years head start, so is it appropriate then for a subsidised product to come in afterwards and start selling and start taking market share? That is an issue that has been debated."

Backed by their respective governments, the spat between Airbus and Boeing, the biggest single U.S. exporter, has become the WTO's most complex and commercially significant dispute.

Washington says Airbus, a subsidiary of EADS, received a boost equivalent to $205 billion in today's money from advantageous loans and other perks from France, Germany, Spain and Britain over two decades, giving it an unfair edge.

Brussels argues the loans came on commercial terms and says Boeing in turn got illegal subsidies from U.S. agencies including NASA plus state tax breaks worth some $24 billion.

Buckley said Airbus was not worried about the impact of the WTO case on a potential $35 billion, 179-plane U.S. order for air force refuelling tankers that Airbus, together with partner Northrop Grumman <NOC.N>, hopes to clinch against Boeing.

Some Boeing backers in Congress want Airbus excluded from the race if it is found to have benefited from subsidies.

Brazil also has a stake in the outcome of the case since it is locked in a long-running aviation subsidy row with Canada.

Brazilian planemaker Embraer <EMBR4.SA><ERJ.N> may sue in the European Court of Justice over alleged UK subsidies to a Northern Irish subsidiary of Canada's Bombardier <BBDb.TO>, sources told newspaper Valor Economico.

(Additional reporting by Guillermo Parra-Bernal, Writing by Tim Hepher; Editing by Charles Dick)

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