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EU: Illegal U.S. Aid Cost Airbus Billions

European Union says illegal subsidies given to rival Boeing cost airplane maker Airbus $27 billion in lost revenues.

GENEVA (AP) — The United States' payment of illegal subsidies to Boeing Co. has cost rival plane maker Airbus US$27 billion in lost revenues over the past three years, the European Union said Wednesday.
Brussels added that Washington will have only itself to blame if the World Trade Organization rules that the U.S. has broken commerce rules in its financing of Chicago-based Boeing, which is embroiled in a bitter legal dispute with Airbus.
Washington said government contracts do not give Boeing an unfair advantage and noted that Airbus actually has gained 20 percentage points of market share at Boeing's expense since the beginning of the decade. The global plane market is worth an estimated US$3 trillion over the next two decades.
''The lavish subsidies ... allowed Boeing to engage in aggressive pricing of its aircraft, which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets,'' Brussels said in a statement as both sides began WTO hearings over alleged U.S. wrongdoing. ''The support clearly aims at weakening Airbus' position and competitiveness.''
The trans-Atlantic dispute, expected to be the most complicated and costly in the Geneva-based WTO's 12 year history, rests on the ability of Washington and Brussels to show that the alleged subsidies have caused their industries harm. Both have presented evidence of lost plane sales or lowered prices to back up their claims.
The U.S. accuses Airbus of taking advantage of decades of European subsidies worth the equivalent of up to US$205 billion to capture long-standing Boeing customers and become the world's largest seller of planes.
The EU refers to tax breaks, development funding and outright grants to Boeing as examples of wrongdoing by the U.S. government and the states of Kansas, Illinois and Washington. It also accuses the U.S. of providing vast amounts of hidden support to Boeing through military contracts, citing a total subsidy figure through 2024 of US$23.6 billion.
Brussels said US$5 billion in illegal U.S. subsidies to Boeing from 2004 to 2006 had a more than fivefold negative effect on Airbus revenues in that period. Senior EU trade officials, who briefed reporters on condition of anonymity because of the sensitivity of the case, rejected that plane design flaws or any other company mistakes were responsible for the revenue loss.
''The EU's claims are to distract attention from its own massive subsidies,'' said Gretchen Hamel, a spokeswoman for the U.S. trade representative in Washington. She said the EU had vastly inflated the value of NASA and other government programs involving Boeing, and cannot prove that they have harmed Airbus' development of planes or sales.
A closed-circuit broadcast of the two-day panel hearing will be aired Friday at the WTO.
The EU made its final defense in July of the government loans used to help Airbus develop new planes, before the WTO rules on whether the so-called ''launch aid'' is legal. The WTO decision could have far-reaching ramifications for the France-based plane maker, which still must decide how it will fund its midsize, long-range A350 XWB, which has already been subject to a costly redesign.
Bob Novick, a former U.S. trade lawyer representing Boeing on WTO matters, said any problems Airbus has experienced were the result of its failure to recognize early enough the importance airlines were putting on fuel efficiency, and the company's choice at the beginning of the decade to invest in the A380 sumperjumbo instead of a smaller, more efficient plane.
''When Airbus rushed out a proposed A350 model to compete with the 787, it was rejected by the market. A second proposal was also rejected,'' Novick said. ''The EU cannot blame that on contrived subsidies to Boeing.''
An interim ruling in the U.S. case against Brussels was scheduled for October, but has been delayed because of the complexity of the dispute. A decision on the EU's complaint is not expected until next year. Both would be subject to appeals.
''The U.S. case has always rested on a bizarre premise: U.S. grants to Boeing are WTO-compliant while repayable European loans to Airbus are not,'' said Geoff Shuman, Airbus' director of European affairs. ''Not a single Boeing civil jet transport aircraft program has ever been developed without massive U.S. government subsidies.''
Shuman called the 787 the ''most subsidized civil aircraft in aviation history.''
Airbus delivered the most planes last year, but fell behind Boeing on orders for the first time in six years after suffering from a series of production setbacks and leadership crises.
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