We’re back, looking at the WTO’s ruling on Airbus case

While we were gone, the WTO issued its ruling on the Airbus case, which was appealed by both sides.

There’s been plenty post-ruling analyses written already, and since we’re nearly a week later, we’re not going to add much to it except to point you to Aspire Aviation’s analysis and say this: Both sides won some and both sides lost some in this case. The USTR failed to achieve its top goal, and that is to have the WTO rule launch aid illegal, so blocking aid to Airbus to make the A350 XWB was a failure.

Flightblogger has a very good take on how both sides “spin” the final appeal report. The Wall Street Journal has a balanced view on who won and who didn’t.

This is a major defeat for the US–and for Boeing.

Boeing and the US had three major goals: get launch aid declared illegal; get the A380 launch aid declared prohibited subsidies; and block A350 launch aid. The rest was icing on the cake.

Well, the icing got made but the cake collapsed in the over.

The WTO quickly ruled that A350 launch aid wasn’t part of this case. Then the panel found that launch aid, per se, wasn’t illegal, just the implementation of it had been. And finally, the WTO appeals board  reversed the initial finding of the WTO panel that subsidies for the A380 were prohibited, also a defeat for the US.

But the US did win on several “actionable” subsidy claims. And the US and Boeing did get a win in that while launch aid itself is not illegal, the preferential interest rates are and now Airbus has to draw any future aid on commercial terms, which is a defeat for the EU and for Airbus.

This begs the question of why Airbus needs launch aid in the future if it doesn’t get the money on preferential terms but is required to get it on commercial terms. The answer, to us, is that it doesn’t, except that this is a “capital market” available to Airbus that is not available to Boeing. You can argue about the fairness of this (and, as our readers know, we don’t like “corporate welfare” in any form), but at least the money is now supposed to be at market rates.

Airbus crows that it won 90% of the WTO case against it. We remember Northrop Grumman and Airbus parent EADS crowing similarly that it won 100 of 108 complaint items against the appeal of the tanker contract. It doesn’t matter how many were won; in that case, eight were lost and look who has the tanker contract now.

Airbus (the EU) won important points at the WTO, with launch aid being the big one, but the Airbus press release was hyperbolic at best. So was the US/Boeing side.

The appeal of the case against Boeing is pending, and like this one, we expect both sides to win and lose. The case will, as Aspire Aviation notes, drag on.

4 Comments on “We’re back, looking at the WTO’s ruling on Airbus case

  1. In my view all those law suits and complaints to the WTO are pure and needless lawyer’s fodder.
    Regardless of who is placing them, Airbus as well as Boeing, it’s always a loss, both of the contrahents are losing on it, as all those legal battles are only consuming mountains of money without contributing anything to construction/production of better aircraft.
    My advice: Stop this nonsense and invest the saved money into aircraft innovation.

  2. The big question for me is where does Boeing go from here? We can assume that the final Boeing report will be at as least as critical of Boeing as the Airbus one was of Airbus. Will Boeing simply give up? Will it re-enter negotiations with EU/EADS, as it seems EADS wants to do? Will it do something about removing its own actionable, possibly prohibited, subsidies? Will it continue the fight in another form?

  3. It is really high time to shut down this costly legal battle between Boeing and Airbus, which
    should NEVER have taken place to begin with!

    Yes, Airbus did get European Government subsidies in 1970, on a pay-back-if-you-can bases,
    to unify and “restart” their devided and inefficient commercial aviation industries, to be able to compete with the totally dominating US commercial aviation industries.
    Boeing, however, continued to ignore the Airbus threat, convinced that Airbus would “never
    make it,” as they repeatedly stated publicly, until it was too late 1992, when the US signed a mutual agreement with Europe, to limit any subsidies to Airbus OR Boeing, to up to 33% of the development cost of a new aircraft, repayable on commercial turns, i.e. with interest.

    Boeing in 1992, therefore, also secured the right to get US Government “subsidies” to get US
    Government financial support, if they needed it, to compete with Airbus!
    Fortunately Boeing never had to do so, which by itself confirms, that Boeing was not “suffering”
    as much as they claimed they did, up to 1992!
    Boeing CEO T. Wilson was widely quoted in the late 1980s as having responded to MDD,
    which did proposed to challenge the Europeans on their subsidies to Airbus, with the words:
    “We will look absolutely stupid, if we complain about subsidies to Airbus, while we have a 6-7
    year waiting list for every model of airplane we have in inventory!”
    That, of course, was before the financial crises of the early 1990s, which hit both Boeing and Airbus very hard, which probably contributed to the two getting together in 1992!

    However, Boeing also did received US Government financial support to develop the US SST
    program, to be able to compete with the European Concorde program in the late 60’s early 70’s.
    The conditions for that “subsidy” to Boeing, were even more attractive compared to the ones provide to Airbus, i.e. a 10/90% split between Boeing and the US government.

    The US Government also provided a similar low-cost “bailout program” or “subsidy” to
    Chrysler Motors in the early ’80s, to compete with the other giant US car manufacturers,
    which CEO Lee Iacoca proudly proclaimed to have saved the company from going under,
    when he repaid the whole amount, before the designated time!

  4. As I had mentioned in the Flightblogger comments, I suspect the EU and Airbus will merely work out some sort rework on the launch aid, in the hopes it will somehow appease the WTO. Boeing would most likely protest and then we would see what the WTO would have to say. And so on……

    i.e. Not only is it not yet settled, but I don’t see the EU & Airbus just throwing in the towel on launch aid for some time to come.

    Since you had not written anything about this last week, I had thought you did not want to cope with the firestorm of (mostly partisan) comments that would/could result.

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