Boeing hopes WTO ruling will avert Airbus A350 aid
By Doug Palmer
WASHINGTON (Reuters) - Boeing hopes a preliminary World Trade Organization panel ruling next week will force European governments to reconsider plans to help finance Airbus' planned A350 widebody passenger jet, a company official said on Thursday.
The confidential ruling comes at a "very contemporary moment as far as launch aid is concerned," Ted Austell, Boeing's vice president for government operations, told reporters.
"Since the Paris Air Show, the sponsoring European governments of Airbus have been talking about new launch aid for the A350, and we are hoping the interim decision will be informative enough that it will arrest any new launch aid for that aircraft which has the same shape and texture of previous launch aid," Austell said.
Next week's expected ruling in the biggest trade dispute in the WTO's nearly 15-year history has been years in the making, and is one that could have consequences for other countries such as Brazil, Canada, China and Russia as they contemplate aid for domestic civilian aircraft manufacturers.
"It is our aspiration that this decision will give very clear guidance to other parties that want to build large commercial airplanes," Austell said.
Britain two weeks ago pledged 340 million pounds (about $550 million) in loans to help Airbus develop the A350, which is intended to compete with Boeing's much-delayed 787 Dreamliner.
Germany would provide 1.1 billion euros (about $1.57 billion) and France 1.4 billion (about $2.0 billion), German and French officials have said.
Airbus has nearly 500 firm orders from 30 customers for the A350, which it will launch next decade. Company officials estimate the potential market for the aircraft at 2,500.
DECISION COULD AFFECT A380 LOANS AS WELL
A public ruling in the case is not expected until later this year, after which both the United States and the EU could appeal.
Boeing went to the administration of former President George W. Bush in 2003 to complain about decades of European government support they said had helped Airbus to erode Boeing's market share.
The main focus at the time was on French, German, British and Spanish "launch aid" loans to help Airbus develop its A380 superjumbo jet, which Washington has since dubbed the "most heavily subsidized aircraft in history."
The WTO ruling next week could potentially affect about $4 billion in launch aid for that aircraft which Airbus has not yet repaid, Boeing officials said.
The United States filed a formal complaint in October 2004 challenging the European loans as an illegal subsidy under WTO rules. The U.S. case also targeted various European research and development grants for Airbus and as well as German and French government infrastructure spending for aircraft production facilities in Hamburg and Toulouse.
"From my perspective, if the EC loses on launch aid, the rest just doesn't matter," said Bob Novick, an attorney for law firm WilmerHale, Boeing's counsel in the case.
'SENSELESS TIT FOR TAT'
Brussels filed a countercomplaint that focused on tax breaks and other assistance that the states of Washington, Kansas and Illinois provided for Boeing, as well as U.S. government spending for NASA and the Department of Defense that they said subsidized Boeing's commercial aircraft production.
The EU case is on a slightly slower track and a confidential preliminary decision is not expected until early next year, with a final ruling sometime in the third quarter.
Earlier this month, British business minister Peter Mandelson called the two cases a "senseless tit for tat."
Mandelson, who was EU trade commissioner when the trade dispute initially went to the WTO, said launch aid was "not a subsidy" because European governments earned a return on the loans provided to Airbus.
But Boeing, which lost more than 20 percent of its market share to Airbus between 1999 and 2003, argues the loans are a subsidy because Airbus pays a below-market interest rate, only has to repay the loan as planes are sold and doesn't have to repay them at all if the project fails.
"It's hard to imagine that launch aid isn't a subsidy. It's just hard for me to see how they (the WTO panel) could come to that conclusion," Novick said.
One possible mixed result would be if the panel were to rule that launch aid loans are a subsidy, but they have not had an adverse affect on Boeing.
That would spare European governments from having to do anything about the outstanding A380 loans, but it should still make them "think long and hard" about providing loans for the A350, Novick said.
(Reporting by Doug Palmer; Editing by Eric Walsh)
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