At Long Last, WTO Faults EU Launch Aid for Airbus

These aircraft cases have set new benchmarks for duration and cost to prosecute. However, we finally get the report from the WTO dispute settlement mechanism (DSM) on the Boeing versus Airbus side of their respective countersuits (DS 316). In essence, it finds that Airbus received illegal government subsidies for the A300, A310, A320, A330, A340 and A380 models. Since the case was filed in 2004, the decision doesn't cover development of the upcoming A350 model meant to compete with Boeing's 787 Dreamliner.

Despite Boeing's "victory," note that details of the Airbus versus Boeing countersuit
will arrive on the 16th of July (DS 317). EC Trade Commissioner Karel de Gucht is already signalling that commentators should await the release of that decision's details before forming an opinion of where both the US and EU stand in relation to Boeing and Airbus. As the texts have been circulated to some extent among the litigants, I (again) fully expect matters to come out as more or less a wash. That is, settlement of these countersuits after years of costly and protracted litigation in Geneva will most likely result in Phyrric victories for both sides as each others' faults cancel each other out:

The World Trade Organization found Airbus SAS benefited from illegal European government subsidies, with money for the A380 jumbo topping the list of violations. The panel opinion, made public today in Geneva after a confidential ruling nine months ago, supports U.S. arguments that loans by European governments constituted unfair aid. In the case of the A380, the panel ruled the aid constituted the strongest violation, because interest rates on loans were too low and the support was linked to export performance.

The ruling raises the prospect of Airbus having to repay a portion of the aid provided by the governments. European governments paid out about $4 billion in so-called launch loans for the A380, the world’s largest passenger plane. The WTO didn’t specify what portion of that figure broke the rules and would require payback. It also said France’s loans for the A380 weren’t considered prohibited.

Boeing, which lost its industry lead to Airbus in 2003, called the WTO ruling a “sweeping legal victory,” saying the verdict called for Airbus to repay $4 billion in illegal launch aid for the A380, a statement that Airbus said is “deliberately misleading” and “wrong”...

About a third of Airbus’s development costs come from European governments in the form of loans that are repaid with interest only if the aircraft is a commercial success. The A380, launched in 2000, is a 550-seat plane that began service in 2007. Airbus has said the program is years from breaking even.

The ruling comes six years after the U.S. abandoned a transatlantic accord on aircraft aid over European Union objections and filed a case against the EU, alleging that aircraft development loans awarded by France, Germany, the U.K. and Spain constituted illegal support that helped Airbus develop new models to Boeing’s detriment.

The EU filed a counter-case, alleging that Boeing received illegal aid. A preliminary judgment on that case is scheduled for July 16. “This final report needs to be read together with the forthcoming interim report on subsidies provided in the U.S. to Boeing,” said EU Trade Commissioner Karel De Gucht in a statement provided upon release of the document. “The EU remains committed to a negotiated outcome to the dispute with no pre-conditions on either side.”

And the EU, cannily enough, hay have learned from these proceedings to administer aid in a manner which doesn't run afoul of WTO strictures:

The French government will continue to give development loans to Airbus, the transport ministry said in an e-mailed statement after the ruling. The U.K. also said its plan to offer launch loans for the A350 wouldn’t be affected by today’s ruling...“As the EU has reiterated in the past, support to the A350 is not within the scope of the proceedings,” an official for the U.K. Business Dept. said today. The official called government loans for aircraft development “a perfectly legal market based instrument.”

For those into trade minutiae, the IELP has a detailed breakdown of the ruling's text as well as a copy of the full ruling. Remember, both Airbus and Boeing can still enter the appeals process, adding further time and complexity to these already protracted affairs. The dogfight continues...