Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
EU files subsidy complaint over 777X WA State tax breaks; we raised issue at the time
The European Union has filed a complaint with the World Trade Organization over $8.7bn in tax breaks offered by Washington State to Boeing in exchange for locating the 777X assembly site and wing production plant in the state.
Reuters has this report.
We raised concerns at the time the breaks were offered that these were illegal. These were extensions of the state tax breaks provided in 2003 for the Boeing 787 program, which were ruled illegal in 2012 under a separate EU complaint to the WTO.
Our stories are here and here. Boeing recently issued a card talking about the tax breaks. This may be found here.
Reuters reported earlier that the 777X complaint might be filed.
Update, 1:00pm: Boeing provided this statement in response:
“The EU already failed to make these claims as part of the current proceedings.
“The EU’s effort to again raise this issue is a mere diversion from the fact that European governments have provided, and continue to provide, massive amounts of illegal launch aid to Airbus for every airplane development program. It is an effort to further delay EU compliance with the WTO’s 2011 ruling that launch aid is an illegal, market-distorting subsidy.
“The tax measures the EU challenges today are not market-distorting subsidies. They are available to all aerospace companies, including Airbus and its suppliers.”
Isn’t 777x the most subsidized airliner in the history of commercial aviation? One only wonders at what price Boeing is selling them…
One must first understand what subsidies are under the GATT92-WTO rules and how they are subverted. Thus it is not clear how they apply on the 777.
Under GATT, soverign governments could give low cost loans and finance certain ‘ research” $$$ based on some shady estimates. Airbus for many years played the game of ‘ breakeven” based on sales would be x00 by yy date. If sales then did not meet the estimated ‘ breakeven”, then the loans would be forgiven. Mostm of the Aibus marketing somehow managed to only repay part of the ‘ special loans” involved. A380 an example.
What’s all the fuss about? Washington State has NO Personal or Corporate Income Tax………….every Individual or Corporation in Washington State is treated the same…………a Big Fat Zero.
Socialist Marxist in the EU;the economy is based by un-sustainable-overwhelming proportion on taxation……What UK now………..some 54% of the economy is Tax-Based(with roughly half the USA National Debt and yet with only 70 million folks)………a recipe for economic failure.
The USA as a whole has an in-line 15-20% tax based economy………meaning there are less individuals/Corporations “on the dole” in some form.
Hey Folks, Let’s be like Airbus, Design and Build a White Elephant (the A380) or A350 versions that nobody really wants and blame Boeing,planet Saturn,God or whatever for their own stupidity and bad economic decisions.
Every Airbus/EADS product that comes off the line receives a CASH subsidy,because every completed airplane is considered a “developmental project”,a process instituted what 40+ years ago…starting with the A300 Series.
You could have fit that in a single sentence of about three words 😉
[Edited] Boeing fanboy? Though, I’m not sure if fanboy is one word or two
UK tax revenue is 25.3% of GDP, not 54%.
http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS
Fair play to you for even bothering to fact-check that tirade 😉
They must count pensions and NHS turnover too for that high a value ( Germany is much lower with a similar setup).
BBC report 2013, It a Government Supported Entity in its own research pegged it at 54%+………..the figure is probably much higher. Places like Ireland,Scotland Wales, the economy is 75-80% + dole related.
Even by their own admission US citizens have the best paying (many cases income tax exempt) in the surrounding London area. UK/EU would collapse without USA Unclassified/Classified Installations there……….as we funnel billions there each year.
Let’s say you have a grocery store,retail store,car lot,etc. in Birmingham, UK and most of your customers have a tax-based job…………..none of those businesses are actually helping the economy………..because they are dependent on dole recipients to keep them open. When you have more than 50% of the workers dependent on the 46% for their livelihood…..the only way to sustain that enterprise is too raise taxes on the 46%………which in-turn reduces their spending power and gives them less motivation to contribute to an economy.
54% that get taxed or take out(educators,law enforcement,nurses,dollar store workers,barristers, social welfare recipient) is irrelevant…………because their “income tax” or deductions is fake income…………and the needs of the 54% + always exceeds what the Treasury/Tax Collector takes in………….
Places like Ireland,Scotland Wales, the economy is 75-80% + dole related.
Always refreshing to read from somebody who has obviously done his/her research…
At the end of October UK unemployment was 1.96 million, of an adult population of about 30 million, which is about 6%. By my calculation that leaves the remaining 94% paying tax. I grant that some of these will be on pensions, but most will have sufficient income to pay some tax – and virtually 100% will pay the indirect taxes such as VAT, local council taxes etc on top of income tax . So even dole recipients return some of it as tax – but you probably have much the same in the USA (sales tax for example) don’t you?
Good thing I went to Costco to buy a box of popcorn, ’cause this thread will be interesting….
Any estimates around for what Boeing expects to have to invest into the 777X upgrade ( on the developement side as well as on the manufacturing side) ?
7-10 Billion when all factors are included.
A bit of history for the folks who do not understand what WTO-Gatt92 and complaints are about. In 2000 -2001-2002 i was very involved in doing analysis for SPEEA ( BA engineering union ) prior to filing a CVD ( CounterVailingDuties ) petition. At that time -prior to 911- BA was strictly hands off re involving SPEEA in such a filing. After 911- re CVD and Tankers, everything changed. As it so happened, a very good friend of mine ( now deceased ) just happened to be at the GATT92 meetings which essentially set up the whole issue now known as WTO as regards LCA ( large commercial aircraft ) which at that time were really undefined- such that almost anything that carried more than 3 or 4 passengers could have qualified. realistically, the game was about Airbus- Boeing- and DCA ( which was already on the downslope ). OK – with the above thumbnail- I’ll post a few old documents which may help to frame the issue- and see if I can make a unique website to post the longer stuff data for those interested. Keep in mind the data is now out of date, but the same general issues apply. Also remember that BA a few years later ( 2004-2005 ? ) filed approximately the same type of complaint.
First up on this post will be a copy of a document from the agency explaining just what CVD is or was at that time.
Countervailing Duties What Are They?
In today’s global marketplace, the lack of a level playing field can make it difficult for American businesses to compete. Unfair foreign pricing and government subsidies distort the free flow of goods and adversely affect American business. Import Administration, within the International Trade Administration of the Department of Commerce, enforces laws and international agreements to protect U.S. businesses from unfair competition within the U.S. resulting from unfair pricing by foreign companies and trade distorting subsidies to foreign companies by their governments.
This article provides a brief overview of how Import Administration provides a way for firms to seek relief from unfairly traded imports by filing a petition seeking the imposition of countervailing duties on imports of the unfairly traded merchandise. Countervailing duties offset the effect of unfair subsidies. Countervailing duty trade remedies have been successfully pursued by a variety of domestic industries, including producers of steel, industrial equipment, computer chips, agricultural products, textiles, chemicals, and consumer products.
What is a Countervailable Subsidy?
Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. The amount of subsidies the foreign producer receives from the government is the basis for the rate by which the subsidy is offset, or “countervailed,” through higher import duties. While governments can take many actions which could be said to confer benefits on their producers, not all of these actions are viewed as countervailable subsidies. Generally, the benefit must be limited to a specific group of firms or industries or to a firm’s export activities in order to be a countervailable subsidy. The U.S. statute and regulations establish standards for determining when an unfair subsidy has been conferred.
How is Subsidization Remedied?
If a U.S. industry believes that it is being injured by unfair competition through subsidization of a foreign product, it may request the imposition of countervailing duties by filing a petition with both Import Administration and the United States International Trade Commission (ITC). While Import Administration determines whether and to what extent unfair subsidization is occurring, the ITC determines whether the domestic industry is suffering material injury as a result of the imports of the subsidized products. The ITC considers all relevant economic factors, including the domestic industry’s output, sales, market share, employment, and profits. Both the ITC and Commerce must make affirmative preliminary determinations for an investigation to go forward.
How Long Does it Take for Countervailing Duty Orders to be Issued?
The investigation begun by a petition proceeds as follows. Import Administration will review the petition and determine within 20 days of the date of filing whether the petition meets the statutory requirements for initiating an investigation. If the petition is accepted, within 45 days of the date the petition was filed the ITC will make a preliminary determination of whether there is a reasonable indication that the domestic industry is injured or threatened with injury by reason of unfairly traded imports. If the ITC believes there is no indication of injury, the investigation is terminated. If the ITC’s preliminary determination is affirmative, Import Administration will make its preliminary determination of whether unfair subsidization is occurring by analyzing sales information provided by foreign producers and exporters in response to detailed questionnaires that Import Administration sends to them.
If both the ITC and IA make affirmative preliminary determinations (within 190 days of an initiation of the antidumping investigation, or 130 days for a countervailing duty investigation) importers are required to post a bond or cash deposit with the U.S. Customs Service to cover an estimated amount of duties which will be collected if a countervailing duty order is issued upon the completion of the investigation.
After the preliminary determination, the investigation proceeds with on-site verification of the data submitted by the foreign party doing the subsidizing. A final determination is announced within 75 days of the preliminary ruling. If the finding is negative the investigation is terminated. If it is affirmative, the investigation continues. The ITC typically makes its final determination on injury within 45 days of Import Administration’s final ruling. Typically, the final phases of the investigations by Import Administration and the International Trade Commission are completed within 12 to 18 months of initiation.
What Relief is the End Result of a Countervailing Duty Investigation?
If both Import Administration and the ITC make affirmative findings of injury, Import Administration instructs the U.S. Customs Service to assess duties against imports of that product into the United States. The duties are assessed as a percentage of the value of the imports and are equivalent to the subsidy margins, described above. For example, if Commerce finds a subsidy margin of 25%, the U.S. Customs Service will collect a 25% duty on the product at the time of importation into the United States in order to offset the amount of subsidization.
How Are Subsidy Rates Calculated?
Subsidy margins are calculated using information collected from the foreign producers and exporters of the subject merchandise. Subsidy rates are calculated by determining the value of the benefit provided by subsidies for the manufacture or export of the subject merchandise. Import Administration calculates the value of the benefits on a company-specific basis using the information obtained from the companies and the government in response to Import Administration’s questionnaires and from other sources. Subsidy rates may also be revised in an annual review process.
What are the Requirements for Filing a Countervailing Duty Petition?
Petitions may be filed by a domestic interested party, including a manufacturer or a union within the domestic industry producing the product which competes with the imports to be investigated. To ensure there is sufficient support by domestic industry for the investigation, the law requires that the petitioners must represent at least 25% of the domestic production of the product that competes with the imports to be investigated. The statute requires the petition to contain certain information, including data about conditions of the U.S. market and the domestic industry, as well as evidence of dumping or unfair subsidization.
========
The Import Administration Can Seek Relief for U.S. Firms from Unfairly Traded Imports
(First Published in Business America, August 1998)By Andrew Stephens, Office of Policy Import Administration and Lauren Baker Office of Public Affairs, International Trade Administration Additional information can also be found at the Import Administration web site: http://www.ita.doc.gov/import_admin/records/
I’ll try to set up a website unique to this in a bit
Don
I’ve dug up some old docs and data from 2001 and posted a few on a new website
https://sites.google.com/site/oldcvd2001/
Some may find the details/analysis I did in 2001 of interest.
I’m sure some will argue that may data was wrong, etc and ask me to explain in more detail. But consider that for me to go back 13 plus years to nitpick and defend is not of any use to anyone. On most of the pages, I did show where I got the data. And although I made the spreadsheet and the analysis, I had a few VERY knowledgeable people help out and critique.
Of course rational comments are welcome 🙂
Several months After things were dropped partly due to 911 and the then Tanker games – I queried some top level types in BA as to why BA worked behind the scenes to stop the filing. And I got some interesting answers. The short version was that a majority of BA sales at that time were with certain EU countries, and BA did not want to jepordize those sales. What was unknown at that time was the sleazy dealings re the tanker program – which although NOT really related to CVD had the net effect of killing the filing- but thats another story.
https://sites.google.com/site/oldcvd2001/
If you’re a good customer in good-standing and have excellent credit/ down payment order record,repayment ratings…………… decent batch of 777 300 ER order will cost about 150,000,000………….and yes Boeing does still make a ton of money as the tooling was paid for years ago.
Doing business in a State that has zero Income Tax for Individuals.Corporations is not a Tax Subsidy……………everybody in the State pays zero Income Tax.
EU/UK citizens have been programmed to believe by a Dictator,Chancellor,Prime Minister,Inbred Aristocrat,Queen/King…that it is ok to robbed by your own Country of Origin.
I live in the Northwest………Oregon/Washington Border, just an ordinary citizen that is not required to pay sales-tax or Income Tax……….everybody takes advantage of the loopholes,more so…since ingrained USA values are low/no taxation and little Government Intervention. Citizens here like their Independence and so do Corporations like Boeing.
FYI, Oregon/Washington do just fine providing basic necessities to society without extorting an Individuals’/Corporations’ wallet.
You guys in the EU/UK will never get it……….life,society,the economy is better off with low/no Taxes and minimal Governmental Interference.
“You guys in the EU/UK will never get it……….life,society,the economy is better off with low/no Taxes and minimal Governmental Interference.”
When will the US get it?
Got luck to you with bashing everything you spot, hopefully more informed and exponentially more insightful with every future post..
I guess Mr. M did not get the word that sword cuts both ways!
Not that anything will happen anytime soon.
Boeing is lying as usual. RLI was never deemed illegal.
Don’t worry. A million dollar carbon tax on every 777 that flies off the lot.
nope BA simply flies tehem to oregon for a touch and go and signs the papers in oregon-
No, they don’t. The delivery center is in Everett. Here’s a recent delivery flight. http://flightaware.com/live/flight/CPA3339 Everett to Hong Kong. What? Are you telling me that Everett is in Oregon?
For many years BA avoided the state taxes involved on delivery of Aircraft by doing as I explained. Took appropriate customers aboard, and flew down to oregon. Papers had been made out but NOT signed. Notified portland airport they were to do a touch and go. As the plane touched down, the papers were signed. Thus, legally they were signed in Oregon, and while they had to pay an airport fee- compared to the taxes involved, they were zip. Also at times a flight out to sea out of federal/ state offshore limits was sometimes used- depending on carrier.
Eventually, the state gave up on the then extreme taxes. And at that time, the delivery center was in seattle – king county airport ( AKA Boeing field )
Should the state try that game again- the results would be the same.
I knew a few who were involved in that years ago.
A million dollar carbon tax that flies off the Line for every 777?
Congress passed an Amendment that stated EU/UK will be punitively punished in “support” and Military Infrastructure if the EU/UK fines any USA carrier a carbon tax landing in the UK/EU…….we have yet to pay a dime in your PONZI tax scheme…………as the EU/UK survival depends on welfare survival from the USA…and both mainland Europe and the UK know it. Putin would swoop in on you guys in a heartbeat without constant USA oversight.
Everything that the UK/EU wants and does want do to us (USA) in the form of Marxist-Socialist Ideals Taxation Ideals…………..comes with USA consequences, as your National Security and Economy would crumble without our 365-24/7 Military Support and Monetary Support….to keep you guys from plundering back into the “Black Plague/Middle Ages” way of life.
That’s what is different than US versus UK/EU outlook….you guys are always squabbling like dysfunctional marriages/inmature punks, where as the USA is the Master Parent with long term ideological/political scope………….carrying nothing about your menial short-term 1000 year old+ squabbles.
Remember this, the Pound and Euro are based on the USA dollar-rate, both EU/UK currencies would have little value without the USA mighty dollar
Insecure much?
As I´ve pointed out before, the last time this happened EU imposed duties to recover what WTO said US subsidies had cost it by putting duties on farm products and other things, not aircraft, that would affect the competitive position of European airlines.
Washington´s subsidies probably won´t affect Washington, so why not? Not good for the USA, but great for Boeing.
Boeing’s position is disingenuous at best.
In making it’s point about the same benefits being available to all aerospace companies they are stating truth, but not the degree of the benefits to be gained vs the costs involved.
Boeing it already in Washington. it’s infrastructure, expertise, and workforce was already there. It’s money already spent in the larger sense.
Airbus, in order to reap the same level of largesse would have to spend many billions of dollars moving into the same state, building at today’s prices, and attempting to hire away people from Boeing.
In short, the costs associated with the benefit are a solid disadvantage to airbus, and all gravy for Boeing.
And Boeing can object to Airbus’s patrons and their money, any time they wish. They bluster a lot, but never used their influence to halt the supposed massive unfairness by the EU.
for Boeing RLI is an absolutely frightening concept.
They’d actually have to be productive with the available money.
Back to topic , Boeing receives more huge state subsidies, wounding the free market economy and destroying European jobs. Its a sad example of hidden socialist market distortion.
😉 🙁
Every aerospace venture I know gets substantial government support in a 100 different ways. R&D institutions, space programs, defense technology/ fat orders, tax breaks, orders by state controlled entities, salaries compensations, facilities, trade deficit political lobbying, you name it.
all aerospace is semi-gov’t at best, and else wholly state owned. Landing rights, fuel cost reductions, “Joint” R&D, Military (and other gov’t) contracts – it’s all state support.
Is that a bad thing? yes and no
it isn’t in the developing world where aviation is a vital infrastructure and a national interest. It is bad in the US/EU where these companies should be able to stand on their own. Unfortunately, since it is such a global business, EU/US aerospace must compete with developing aerospace, and can’t win.
So we’re at an impasse.
I’m not surprised of the Alabama plant for Airbus hasn’t been mentioned. If you read the entire article you’ll see that Airbus took a page out of Boeing’s playbook by baiting the location of the new plant and so on. Keesje, if Boeing is destroying European jobs and “wounding free market economy”, explain exactly what Airbus is doing in this similar scenario??
http://mobile.businessweek.com/articles/2013-04-18/alabama-opens-its-wallet-to-lure-airbus-factory
As I read that article Airbus received something for building the plant and not just for producing something like Boeing.
What I found:
More important, Bentley came through on incentives totaling $158 million. According to the Alabama Department of Commerce, they include $82 million in funds for capital investments in the plant and other expenses; and $51.9 million for a 40,000-square-foot on-site training center where workers will be prepared, at state expense, for their new jobs. The deal also includes tax breaks on manufacturing equipment and a state corporate income tax credit.
At $160m quite the bargain for >1000 jobs IMHO.
Compare to Boeing taking $8.5B for not destroying existing resources.
Some people just don’t have access to a balanced viewpoint.
I am no apologist for Boeing anymore (when they acted like a real company and not just another non taxpaying corporate welfare feeding at the public trough I felt much differently)
That said they are building a plant for the 777 wings.
And I do not see the difference in welfare to a company that has huge profits regardless of what form it takes.
And add to the discussing this
http://www.bizjournals.com/seattle/blog/2014/12/boeing-scoops-up-huge-intermec-building-in-everett.html
I’m not surprised of the Alabama plant for Airbus hasn’t been mentioned. If you read the entire article you’ll see that Airbus took a page out of Boeing’s playbook by baiting the location of the new plant and so on.
They did, and personally, I’m as little a fan of that as I was of Boeing’s demands when they were shopping around for potential 777X locations outside Washington.
That’s beside the point here, though. The issue at hand are aids that were already ruled to be illegal for the 787, and which got extended for the 777X. Leeham and other pointed this out at the time, so nobody can be surprised that a complaint is being filed about them, just like Boeing/the US would file a complaint if Airbus got an extension of aids that were ruled to be illegal before.
Airbus/EADS is collapsing-in on itself; producing its products in the EU…….People like Merkel,EU Labor Syndicates/Unions,EU Tax Collectors place too many demands. The only way Airbus/EADS can survive is by coming to America where our economy,currency,(competing States with full localized tax authority) and Labor Force is dependable.
Airbus (you watch) will end-up end in-time transferring assembly of A330s and A350s to the USA.
EU labor forces/EU Government impedes on the whole concept of making a buck. Look at Siemens, BMW,Mercedes Benz,Rolls Royce,etc. their most productive/profitable enterprise are located here in the USA.
Let’s not forget the Orion Service Command Module, why NASA gave that contract too EADS/Airbus is beyond belief. At least we have some one to blame when/if they ever deliver us defectives and something bad happens .
Airbus/EADS is responsible for the whole program being over-budget and delayed until 2021-2022………..cross your fingers………and let’s see if there is a successful launch by then.
What US-led contractors put the Saturn/Space Shuttle programs (concept to completion) in less than 10 years time. Orion Project will be at least 20 years in the making with no guarantees as of yet.
You ignore the fact that Europe has some major successes their credit, the latest being the Rosetta mission.
Frankly they treat their people far better than Boeing, I would love to be employed by them!
We are no longer in the financial position to throw unlimited money at a project and choosing where to spend your money and where you can leverage an existing project (ATV).
Frankly I think it makes good sense.
Any delays will be NASA who is now a hide bound bureaucracy that exists only to supply welfare to Alabama, Florida and Texas (that same NASA who suddenly pulled out of a commitment to the ExoMars project)
Nice job reneging on an international commitment.
Every single thing you have written in here is a complete fabrication.
Please go back to your corner and leave us alone!
I’ll bite
KC-46a
Seeing 80% orders of the 777X is from the state owned middle east princes, I see some more “state” money flowing into the program from the other direction 😀
Yup…………..Arabs/Saudis seem to waste a lot of dough on planes(both from Airbus and Boeing)…….when instead they could be investing that money for the Arabian Peninsula to become a long-term Global Industrial Equal to the West/Asia………..for when the oil tap LOTTERY eventually runs dry.
It won’t matter to the Middle East when the oil dries up. They switch to peroducing hydrogen using solar power, of which they have a much more inexhaustible source – and that’s where they should be investing right now.
What direction is that? So it’s okay to dislike the model because she’s better looking and grabs most of the modeling jobs than her peers. She can’t control that’s she’s a pretty face same way the ME3 can’t help where they are located. They’re gonna use their money from oil, taxes, or whatever to fund their enterprises the same way that pretty face is gonna sag and everything goes south later on so it’s in her/their best interest to use it now while they have it to use. Sorry to drift off topic but come on.
I’m simply suggesting that it would be sensible to start investing now i developing the technology that will be the source of their second wave of wealth. They are geographically well positioned to take advantage but the technology is in its infancy.
Yep, look at Alaska, spent all the money and with the crunch in oil prices nothing to replace it.
What happens when the oil runs out completely?
Back to territorial days when there were 50,000 up here (just to keep the Russians out)
I’m inclined to think that when the globe starts noticing output declines, the technology should be available to extract the hardest, the most elusive oil. Halliburton just purchased Baker Hughes acquisition because of the technology they possess to find and extract the oil in question. The issue after that is that it will cost WAY more than normal to bring it out, thus reflective in the price of fuel.
What the Airbus apologists refuse to acknowledge is there are two major areas of welfare involved (for Boeing or Airbus). Read the WTO report on who got what subsides and what magnitude those were.
Add a third in that Europe has hugely benefited from the US (NASA in its good form) of aeronautics research that they got free from the US (paid for by US taxpayers)
Each country in Europe had infrastructure packages for the various plants, be it from building to roads etc. In the past in the US it was general roads and bridges that everyone benefited from, now its very specific companies.
What keesje will not acknowledge is that the US at the time of airbus founding did not have anything remotely analogous to the so called launch aid (and unless the program is wildly successful that does not have to be paid back, i.e. you can write it in such terms that even a moderately successful program does not have to). that is plain and simple welfare.
The WTO ruling made it clear that the various smaller forms of welfare pretty well offset, it was the launch welfare that did not.
what is thrown out is the indirect benefit that (now Boeing) got from its government contract.
this is pure hypocrisy on a number of fronts. European countries leverage its military programs into the making of civilian aircraft. To say the US has military program that this occurs in and insist its the same as launch aid is a spurious argument. Europe problem is that each country wants its own program and the small scale scattered nature is extremely inefficient and you do not get as much benefit as the homogenous US market (you want scale then form a Union like the US and get that scale). To blame the US for that is beyond belief (i.e. don’t blame us if you can’t get your act together, and no I don’t say the US is a poster child for that)
What is new in the US is massive state welfare packages by the states themselves. In this case the corporation use the system to play states off against each other.
I am not against or think its an issue to get benefit from a military program into a civilian one (or vice versa as electronics are much quicker and fast developed in the civilian sector than the military now)
I do object to Boeing getting a huge welfare package in Washington or , Alabama or anywhere else.
The US manufacturing was not founded on feeding off the public trough. It was founded on people like Ford, Chevy, Lockheed, Boeing etc putting their money into a project in the expectations they would make product that got them a return.
In the end all it gets is a classic welfare case that can’t compete. Boeing is showing the indications of that.
ther should be no luaain welfare, state welfare of any sort.
Researh and the supporing infurature I am willing to listen to discxisons on.
RLI is repayable no matter how well the program succeeds. Period.
“RLI is repayable no matter how well the program succeeds. Period.”
That is wrong.
Free Launch Aid (FLA) is based on a secret agreement where you sell a large number of airframes before you repay it.
Said agreement is only put out to public (A320) when they reach it, otherwise no one knows what the terms are.
A380 is probably 800 before it has to be paid.
Like WA State, that is pure welfare feeding off the public trough. Both should be stopped
you obviously do have some coroborative information or even a link for this ? ( freeper links aren’t acceptable ,-)
launch aid (and unless the program is wildly successful that does not have to be paid back, i.e. you can write it in such terms that even a moderately successful program does not have to).
That’s not correct. Not even close.
On top of paying back launch aid (plus interest), Airbus also pays royalties for every single frame ever delivered of a type that was developed with RLI. So for every single A320, A330 delivered, Airbus is to this day writing a cheque to the original launch aid investors. (I’m not sure how this’ll work for NEO, but as both NEOs are simply derivatives, I would imagine the same royalty payments are still due.)
I haven’t found any concrete numbers, but according to the EU commission “Airbus has paid significant amounts of royalties to the Member States which exceed by far the Member States’ investments since 1992.”
Also, your claim that “you can write it in such terms that that even a moderately successful program does not have to” is incorrect.
When the repayable launch investment is made, a sales target is also laid down in the contract. Repayment of RLI is based on that sales target, and scheduled/structured accordingly. Note it’s a sales target, not a profit per frame target or anything like that.
That means that you can’t simply rewrite the A330 into an unsuccessful programme by some accounting tricks. Airbus simply have to calculate launch aid repayments and royalties into their pricing structure from the start. It’s a cost factor for a programme in the same way that paying back private sector creditors would be.
http://trade.ec.europa.eu/doclib/docs/2010/september/tradoc_146503.pdf
…That means that you can’t simply rewrite the A330 into an unsuccessful programme by some accounting tricks. ..
NOT QUITE
Under GATT92-WTO rules, the so called research aid and production aide funds are different. The production aide funds ( eg loans ) at preferable rates are allowed- but with a target number of planes delivered by a target DATE. In the even the Target date- quantity is not met, the ‘ loans ‘ can be forgiven.
So the game is to set a high target number of planes ( to reach or exceed the ‘ breakeven ‘ $$, by a ‘ reasonable ‘ date. IF both gates are not met, then the ” remainder ” of the ‘production’ loans can be forgiven and or reduced significantly.
Under GATT92-WTO rules, the so called research aid and production aide funds are different. The production aide funds ( eg loans ) at preferable rates are allowed- but with a target number of planes delivered by a target DATE. In the even the Target date- quantity is not met, the ‘ loans ‘ can be forgiven.
Yes – the target sales are spread out over typically ~17 years from the date of the RLI being given (i.e. usually ~11 years after EIS), as stated in the document I linked to.
Are you seriously suggesting that any aircraft maker would have any interest in artificially throttling their sales efforts for the first ~17 years after programme launch, just to pay back less money to their creditors, at the cost of, well – selling fewer frames, i.e. making significantly less money?
(And good luck trying to suddenly pick up the artificially lost sales once you’re past those first 17 years.)
Seriously, no plane maker in the world has any interest in that.
Nope- I’m not suggesting that anyone ( EADS/Airbus ) deliberately depress sales. BUT if one carefully picks a high enough target number with a low probability of ‘ success’ in meeting said target unless sales and demand average xx percent increase each and every year- and plays that against the estimated costs and learning curve and cost of materials and inflation and world events and ( ad naseaum ) it becomes a near certainty that ‘ target’ will not be met.
Not much different in playing the stock market. years ago, in a book called ” Made in america ” by MIT press, there was a discussion/chapter on Commercial Aircraft Industry- and one comment still stands out and IMO is still true. ” economic failure is the norm in the civil aircraft business’ and one group estimated that jet transports lost their manufacturers some 40 billion $$ thru 1984. at that time even BA had not broken even ( Page 203 in 1989 hardcover copy ) . Both BA and Airbus still fit in that mold. Suggest you look at my old numbers/analyis on my linked site for further details.
https://sites.google.com/site/oldcvd2001/
You may not agree- fine-
“Add a third in that Europe has hugely benefited from the US (NASA in its good form) of aeronautics research that they got free from the US (paid for by US taxpayers)”
Sure. Just like the jet engine or swept wings were invented in the US, Wernher von Braun was a native American from tribe of the Nasi.
Wanna really start that discussion, MHalblaub? I don’t think so….
Advising a cortical pause isn’t really “starting” anything.
Though I see a strong trend from select individuals to misstake a prolific PR department with effective research. It is already rather enlightening to compare the different language versions of select topics on Wikipedia.
“Sure. Just like the jet engine or swept wings were invented in the US, Wernher von Braun was a native American from tribe of the Nasi.”
Diverting the discussion to other aspects does not address the fact that Europe aerospace (and the rest) has benefited hugely from the US taxpayer.
I know Scott will knock me for this, but those subsidies are directly related to Airbus and its predecessors and the following is true.
And while I know the Europeans tend to disagree, post WWII Europe got the benefit of US protection (at the time we and the Brits and French were the only operational military that would stop the Soviets and I had no issue with that) England and France were in not a lot better shape than most of the European countries. It fell on the US.
As the European economies revered, they spent their resources in the civilian sector and severely under resourced the military and then competed with the US.
That in turn became a US supplied subsidy to their economies as like most welfare recipient they had no incentive to change. Compare US investment in the military to the European ones (other than Sweden)
It would be nice to have European acknowledge that it was the US taxpayer that has allowed them to have the economy which including the Aerospace industries (and freedom) they do.
Uwe:
actually we got the jet engine from the Brits, not Germans (by the time we got to that engine we had years of the original British engines under production, research and tech upgrades) .
Also swept wing was a known design, the Germans used it first but they did not invent the concept, I think it was a Brit who first did, maybe Italian (no aircraft at the time that could take advantage of it) 30s I believe.
Afaik there is a direct path from research data scooped up in Göttingen to Boeing.
This resulted in a major turn in offered designs leading to a successfull range of swept wing bombers and an airliner/tanker airframe the.
We could create a game from this. You select some US indigenious invention or design an other posters tell you about the real source ( if there is one ).
“Add a third in that Europe has hugely benefited from the US (NASA in its good form) of aeronautics research that they got free from the US (paid for by US taxpayers) ”
An interesting concept.
Everything is from the US. Everybody else can only copy.
Quite the hoot, actually.
It seems some of us are trying to divert the topic away, across the Ocean to avoid the subject of the opening posts. Successfully it seems.
This discussion will never end neither side is willing to accept its homecountry / -industry is leaning on public subsidies. Denial and “the others are worse” will always be the outcome.
Anyway Leahy was expected to announce a first A321 NeoLR order this year, few days left. I wonder how much different it will be from an A321NEO with additional fuel tanks. The longer the spec freeze takes, the more suspicious Boeing should be. Before you know Toulouse & Filton geeks become enthousiast and wing concepts start their own life.
http://i191.photobucket.com/albums/z160/keesje_pics/AirbusA322NEOconcept_zps13d00dcd.jpg
Okay I’ll bite. If the A321 NEO can approximately handle between 85-90% of the 757s missions, the LR by default would only be gaining a marginal share of the whole 757 market. If Boeing is worried about this then Airbus should be worried about the 777x program since the LR and the 777x would both be taking advantage of niche market space in each respective wb and nb segments. Back to topic….
Only the 777-8X will have a very small niche. The figures somewho remind me on the 747-8i.
The 777X will be to late and always look outdated against an A350 or A380 with same generation of engines.
Boeing should have started a complete new aircraft but the stock market prohibited any such thougts because the CEO is paid according to share “value”.
It doesn’t matter how many percent of the 757 market the A321 can cover as long as Boeing can not offer something equivalent.
Personally I don’t think Airbus cares much about the number of 757s still in service. As long as they can sell another 2000 A320 series in the 180-250 seat/2000-4000NM segment, gaining new customers. Replacing 757s, 767s, A300s, A310s, A330s, 788s doing those flights. Leisure, connecting big cities in Intra Asia, Transcon, Carabien and also a few secondairy TransAtlantic flights, e.g.
http://i191.photobucket.com/albums/z160/keesje_pics/jfk_europe_zpscd4b6870.jpg
Everybody:
We recognize that subsidies are an emotional issue. However, we remind all of you that allegations of “lying,” name-calling and personal attacks violate Reader Comment rules. Dial it back or we’ll close comments.
Hamilton
And to make it clear, with the now Billions in subsidies that Boeing is allowed to get away with , it matches or even exceed the European launch aid.
I disagree with it as much as I disagree that Airbus should no longer get that kind of aid for any aircraft. Both have the resources and ability to do it on their own or get real loans to do so.
In the long term they will both pay hugely for that as they will loose their competitive edge (and in my view Boeing is well down that road)
Airbus does not have the resources to survive on its own………as every thing it does is a failure without constant Government handouts. Its workforce/production facilities in the EU is bloated and inefficient. Boeing lost a lot of money(barely broke even) on all the 707 programs (including the KC135 program).
Did it go begging the Congress for more money? No, it scrounged up whatever private credit/cash it had on hand and finished the 737 and 747 programs. What paid for those bills then? 727 sales. How long will Airbus ever be able to front the A380 program as successfully profitable even with a revamped version? Never………it’s white elephant program as the sale of every A340 was.
With the A350 program languishing without never ending Government handouts,it’s a failure to. But the difference between Boeing and Airbus………..Boeing can/could fail as did Lockheed,Douglas, many others too numerous to mention. Our US Government would eventually let Boeing Commercial Aircraft Division fail after more than 1 bailout if that were to happen. Airbus can’t fail, as there are too many sociopolitical/Marxist attachments to EADS/Airbus.
Euro Fighter is a complete piece of junk(recipients extremely dissatisfied with its performance)………..and yet it (the Program) survives from handouts from EU Governments, Airbus’s always response, we”ll try to deliver on a next promise
““RLI is repayable no matter how well the program succeeds. Period.”
That is wrong.”
Sorry, *that* is wrong!
Repaid within 17 years regardless of programme success. With interest. Plus a bonus for every aircraft sold above the projected target.
RLI is just a loan with unusual repayment arrangements. If the programme tanks; the government gets *everything back plus interest*. If the programme’s successful the government gets everything back, plus interest, plus a nice bonus.
RLI is legal according to the WTO.
(The only thing that was considered anticompetitive was the low rate of interest – and let it also be known that the difference between the original rates and the WTO-mandated rates has already been settled by Airbus… so unlike some other aircraft manufacturers Airbus *is* WTO compliant.)
..” RLI is just a loan with unusual repayment arrangements. If the programme tanks; the government gets *everything back plus interest*…
And where is that spelled out please. And if the program fails, where does the xxx million or billion come from ? shareholders ?
I believe you will find the government gets ( if the program fails to meet targets of numbers and dates ) ‘back’ only those deferred payments made to date.
try here ?/
http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/08/19/000160016_20040819140633/Rendered/PDF/297990018213149971x.pdf
Sigh…
“SomeoneInToulouse
October 15, 2013
“Direct support to be repaid within 17 years at a rate of return at least marginally above the cost of Government borrowing”
From http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/aerospace/launch-investment.htm
Astuteman on Airliners.net has tried to explain it multiple times, and backed it up with sources, so if you want to trawl the archives there you should find details.”
From the last time this had to be corrected here:
https://leehamnews.com/2013/10/11/odds-and-ends-ana-airbus-and-boeing-era-of-the-jumbo-jet-repo-wars/#comments
UHH..” “Direct support to be repaid within 17 years at a rate of return at least marginally above the cost of Government borrowing”
SURE- But what if targets/agreements are NOT met. ?
Where does ‘ payback ” $$ come from ?
same as a mortage on your house – you will pay xxx plus yy interest for 30 years to pay off your loan/house.
If you fail- you lose your house
But if the money has been spent- and the company does NOT make enough ” earnings” – do they repo the aircraft – the factory- the exec bonus / I dont think so !!
… from wiki
Boeing has continually protested over “launch aid” and other forms of government aid to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.[117]
In July 2004 former Boeing CEO Harry Stonecipher accused Airbus of abusing a 1992 bilateral EU-US agreement providing for disciplines for large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI), called “launch aid” by the US, from European governments with the money being paid back with interest plus indefinite royalties, but only if the aircraft is a commercial success.[118] Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support.[119] Airbus claims that since the signature of the EU-US agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.
+++
So your Wiki quote says the same as me (except for mentioning that the interest rate shortfalls were paid up last year).
As for what happens if they can’t pay back, well I don’t understand why you dismiss it so offhand. If that ever was to happen (unlikely when the maximum permitted RLI loan is 33% of programme cost anyway) then of course it would be exactly the same legal situation as any other business heading for bankruptcy – debts will be paid off through liquidation, selling assets etc. and the Receiver will have to go as far as possible… no recourse to US-style “chapter 11”.
AFIK- from many years ago coached by one who was at GATT and worked the issue in various venues, if target is not met- ‘ loan’ remaining is forgiven. The game then became setting the target and cost such that a high probability of a significant portion of RLI would be forgiven. Otherwise as I’ve tried to explain, it is unlikely and near impossible to sell off airbus (or Boeing ) for that matter to pay whom ? the gubbermint ? the taxpayers ?
Europe would no more break up Airbus than the US would Boeing (or as we have seen the US, let the auto makers go into receivership.
I don’t consider that a negative though it certainly is not pure capitalism (which is usually touted when they want regs removed but is not part of the discussion when they blow it and are about to take the whole rickety mess down).
The reality is there really are no penalties. Boeing was not held to the fire to keep current jobs in Washington State (and proceeded to remove engineers and some wing work)
I don’t have the links but my understanding is that the A320 is paying back. I don’t know about the A330, so the question is, can you pay back RLI from one wildly successful program for the others that were not (A300/A380 and open on the A330) ?
Frankly what it all should be is we will loan you 15 billion, interest rate is 3% and you make monthly payments on what you drew out of the 15 billion.
Now you have a real world loan and incentive and see who really wants to build what!
well it took a while but I found a credible source re what I initially said re payback – A release by the U.S traqde representative in 2004. I’m sure Airbus disagrees – fine.. but here is the link and some excerpts to put in context and so anyone can find the frest of the details. I’ve **** the significant sentences…
+++
Over its 35 year history, Airbus has benefited from massive amounts of EU member state and EU subsidies that have enabled the company to create a full product line of aircraft and gain a 50 percent share of large commercial aircraft (“LCA”) sales and a 60 percent share of the global order book. Every major Airbus aircraft model was financed, in whole or in part, with EU government subsidies taking the form of “launch aid” – financing with no or low rates of interest, and repayment tied to sales of the aircraft. If the sales of a particular model are less than expected, Airbus does not have to repay the remainder of the financing. EU governments have forgiven Airbus debt; provided equity infusions; provided dedicated infrastructure support; and provided substantial amounts of research and development funds for civil aircraft projects.
+++ end +++
Arggh here is the link that got dropped from my previous
http://www.defense-aerospace.com/article-view/verbatim/46622/eu,-us-make-their-wto-cases-on-subsidies.html
++++ Ive added the **** re the issue of payback as described by the U.S trade representative and in context ++++
U.S. Files WTO Case Against EU Over Unfair Airbus Subsidies: Background

(Source: Office of the United States Trade Representative; issued Oct. 6, 2004)
…–Subsidies to Airbus
All well and good… except the WTO rejected those very claims.
…” All well and good… except the WTO rejected those very claims.”
AFIK WTO rejected the EFFECTS of such actions and NOT that it happened or was part of the agreements.
As usual – both sides were able to claim victory based on very narrow issues of effects, not the agreement per se .
resolution of the above is somewhat above my ‘ pay grade ‘ 🙂
No, they rejected the claims!
“government subsidies” – they’re not subsidies
“financing with no or low rates of interest” – there was never “no interest”
“If the sales of a particular model are less than expected, Airbus does not have to repay the remainder of the financing” – completely UNTRUE
“EU governments have forgiven Airbus debt” – I may be wrong but I don’t believe this has ever happened for Airbus(*)
(*) Airbus, of course, is not the same as Aerospatiale, BAE, DASA etc. which national governments propped up to some extent – but that was decades ago.
RLI is completely within the WTO framework agreed between the US and Europe and the WTO firmly denied the US claims against it.
The low interest rates were the only WTO finding which needed to be addressed – and so it was.
Arrgh ….
http://www.airbus.com/company/history/the-narrative/early-days-1967-1969/
‘ But the birth of Airbus had come nearly two years earlier. At a meeting in July, 1967, ministers from France, Germany and Britain agreed “for the purpose of strengthening European co-operation in the field of aviation technology and thereby promoting economic and technological progress in Europe, to take appropriate measures for the joint development and production of an airbus.”
RE the launch aid low interest loans, etc they were generally formalized in GATT 92
+++
However it is a fact that neither BA-MDC- Lockheed thru the 1980’s really made a profit on LCA – source ” Made in America “- MIT press – and collectively ” lost’ several Billion $$. ” Airbus” by whatever name/ combination was no better.
Suggest quit picking nits . . .
Here is/was my analysis years ago ( made with help from a GATT92 participant ( since deceased ) and a few other people. IMO- Nothing has really changed.. except $$ values and models. Its more liker a food fight or Johnny pulling Sallys pigtails in the sandbox . . .
https://sites.google.com/site/oldcvd2001/
Don
Okay, truce… 🙂
This doesn’t introduce facts and findings.
It is a partisan brief.
Which is OK. The US never stood for neutral research when a polarized statement would be much more useful.
This was taken to extremes in the Bush43++ times and later.