March 5, 2015: A350 Launch Aid: Boeing and the US Trade Representative got in a big twist around 2006 when Airbus said it would accept more than $1bn in launch aid from Germany for the A350. At that time, the US and European Union had recently launched the international trade complaints before the World Trade Organization (WTO), but the A350 came after the complaint was filed and the WTO refused the US request to add it to the proceedings.
Germany, in a political snit, later said it would withhold part of the launch aid because Airbus hadn’t promised the number of jobs in connection with the program to Germany that politicians wanted.
This has now been resolved and Germany agreed to release the funds.
Long-time readers of this column know that I don’t like corporate welfare of any form, but I also recognize that as long as “Peter” does it, “Paul” must, too. Now that Airbus is more and more a true commercial company and not a predominately government-supported entity, I really, really don’t like launch aid.
But Washington State, where I live, ponied up $8.7bn in tax breaks (aka “subsidies”) to persuade Boeing to locate the 777X assembly and wing production here. The EU asked the WTO to look into these subsidies, the roots of which were found to be illegal in the earlier complaint case, and the WTO is doing a preliminary examination.
The entire topic of launch aid and tax breaks still gives me heartburn.
Emirates and the A380neo: First it was 100. Now it’s up to 200. Emirates Airline president Tim Clark has long said he’d buy 100 A380neos if Airbus builds them. Now he’s saying he’ll take up to 200.
No doubt critics Richard Aboulafia and George Hamlin will still say this is a dumb idea, especially since “only one” airline wants the airplanes. (We all have a good natured poking among us on this topic.) For Airbus, a sale is a sale and it now has a near monopoly on the Very Large Aircraft sector with the Boeing 747-8I all-but-dead. Our Market Intelligence indicates Rolls-Royce as yet is the likely the engine supplier. RR will pay for the vast majority of the research-and-development of the re-engining, meaning little investment by Airbus. For RR, the basic core architecture of the new engine will be applied to future, smaller engines so the R&D costs get spread around.
If RR is the supplier, the A380neo concept should be viewed in a much broader picture than skeptics have done so far.
On the other hand, if Engine Alliance finds a way to step up–a tall task, I think–then the business case of re-enginging the A380 becomes more problematic for the engine OEM.
In the meantime: Emirates is also ready to compete the A350 against the Boeing 787 for 50-70 aircraft.
Readers will recall that Emirates last June cancelled its order for 70 A350s, much to the glee of Boeing and embarrassment of Airbus. The cancellation, along with Emirates and other Middle Eastern airlines firming up more than 200 777X orders, gave Boeing a lopsided win in 2014 for widebody orders. With these anomalies in the past, this year will be interesting in the number of widebody sales. Year-to-date, Boeing has six and Airbus five widebody orders, so this Emirates competition is going to be hard-fought. While Tim Clark has previously said there will be no nexus between this and the A380neo order, Airbus will be in a position to offer a deal that has cross-connections, as will RR. Boeing said it’s not offering 100 747-8s to Emirates, but GE made the pitch. LNC considers it highly unlikely that Emirates will buy any 747-8s—EK will prefer the 777-9—so Boeing will essentially be going it alone with the 787.
I’ll place my money on Airbus winning the A350-787 bake-off.
Qatar and CS300: Akbar Al-Baker, CEO of Qatar Airways, says he’s no longer interested in the Bombardier CSeries because of the delays in the program. His on-off-on-off interest in the airplane makes his latest statement suspect, but Bombardier is better off without this mercurial CEO as a customer.
MAS MH370: It’s been one year since Malaysia Airlines System flight MH370 disappeared on a flight from Indonesia to China. I said then and I still believe now: this was a criminal act, not a hypoxia, not a mechanical failure, not a fire.
ISTAT: The huge conference in the US organized by the International Society of Transport Aircraft Traders is Monday and Tuesday in Phoenix. I’ll be there, reporting throughout the event.
Pontifications: From the Urban Dictionary: