WTO rules Airbus A380 received illegal subsidies, say sources

[Twister]

Ann Keeton | September 05, 2009
Article from: Dow Jones Newswires

THE World Trade Organisation has backed a US complaint that said Airbus received illegal European government subsidies to develop its A380 aircraft plane, according to sources familiar with the preliminary ruling.

The preliminary ruling in a confidential document running to almost 1000 pages is expected to trigger a lengthy appeals process.

However, Airbus could still be forced to repay aid for the A380, whose delayed introduction amid a crisis in the airline industry is threatening turn into a money-loser for its manufacturer.

The confidential WTO decision was released to government trade officials in the US and the European Union, and won't be made public.

However, US trade officials consider the ruling "a great victory," according to a source familiar with the ruling.

A European source countered that 70 per cent of the claims made by the US had been dismissed while the panel had ruled that launch aid from governments was a "permissible" way to fund new aircraft programs.

However, the panel's ruling on other claims still left Airbus on the wrong end of the overall ruling, according to a source in the US

Boeing, the only other maker of large aircraft, had asked US officials to make the case that government funding gave Airbus, a subsidiary of the European Aeronautic Defence & Space Company, an unfair advantage; the European plane maker picked up 20 per cent of global market share between 2000 and 2007.

Under WTO rules, companies can legally receive launch aid to build new aircraft, and don't have to pay back the money if the plane under development loses money.

The WTO plans to issue a final ruling on the matter next year.

The Geneva trade arbiter is expected in six months to weigh in on a counter-claim the E.U. has filed against Boeing and the US, on behalf of Airbus.

Billions of dollars are riding on the rulings, in an industry that represents more trade dollars for the US and the EU than any other.

The decision "is a big win on paper, but the reality is, the process of appeals is likely to go on until 2013," said Brian Havel, director of international aviation law at DePaul University's college of law.

In the meantime, Boeing and Airbus will carry on with business as usual. With government help, both companies plan to introduce new aircraft, the 787 for Boeing and the A350 for Airbus.

Mr Havel said that, given the politics surrounding world trade, it's quite likely the WTO's next ruling will go in favour of Airbus, more or less levelling the playing field.

WTO rulings potentially could help set a global framework for government funding of new aircraft. But, Mr Havel said, international judicial rulings tend to be "squishy" and more open to interpretation than opinions handed down by a high court in the US or the EU.

That means new competitors coming into the market, including China and Russia, aren't likely to think twice about how they subsidise their aircraft businesses, Mr Havel said.
"Russia doesn't even belong to the WTO," he noted.

From a real-world perspective, Mr Havel said, new commercial-aircraft programs are so expensive that they must rely on some government backing.

A US politician representing the state of Washington called the WTO ruling "encouraging" and began pushing for the immediate curtailment of subsidies for Airbus aircraft currently under development.

Norm Dicks, a Democrat, is pushing for the US Defence Department to consider the WTO ruling in connection with a request for proposals it has issued in search of a new US Air Force refuelling tanker.

Article by: Anne Keaton
Published: The Australian, 05-Sep-09 (Direct Link)
Originally from: Dow Jones Newswires