Leeham News and Analysis
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Leeham News and Analysis
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- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
- Bjorn’s Corner: New engine development. Part 3. Propulsive efficiency April 12, 2024
- A350-1000 or 777-9? Part 2 April 11, 2024
- Pontifications: Boeing “transparency”–not so much. April 9, 2024
WTO slams EU, Airbus
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Sept. 22, 2016: The World Trade Organization (WTO) today found that the European Union not only did not cure its previous finding that Airbus received illegal financing aid in launching the A300 through A380, it further violated rules by obtaining launch aid for the A350 XWB.
Stories are here and here. The Seattle Times has some specific detail here.
The WTO has yet to issue a ruling on an appeal that Boeing failed to comply with the EU’s finding that the US provided illegal subsidies to Boeing. The Wall Street Journal reported yesterday that the WTO is expected to do so.
The EU can appeal the latest finding, which allows the US to impose up to $10bn in sanctions. The US doesn’t have to do so but if it does, it doesn’t even have to be against Airbus–it can be against entirely unrelated industries.
Boeing issued a press statement that was predictable in its tone. It is reproduced below the jump.
Airbus, predictably, has a different spin. Its press release follows Boeing’s.
The WTO’s synopsis is here. The full report is here. The excerpt of the Conclusions and Findings are here. Summaries of key findings are here.
Boeing statement:
WTO Confirms EU Failed to Comply with Historic Rulings Against European Subsidies to Airbus, Condemns Additional Launch Aid to A350
– Sept. 22 WTO ruling confirms the EU failed to comply with its obligation to remedy $17 billion in illegal launch aid and other subsidies
– WTO also finds that Airbus received new illegal subsidies for the A350, which are reported to be almost $5 billion
– Ruling sets the stage for the United States to seek up to $10 billion in annual retaliatory tariffs on EU imports
CHICAGO, Sept. 22, 2016 /PRNewswire/ — A World Trade Organization compliance panel today ruled that the European Union has failed to comply with its obligation to remedy the massive subsidies European governments have provided to create and sustain Airbus for more than 40 years.
Rather than comply with their WTO obligations to remedy the $17 billion in past subsidies provided to Airbus, the WTO found that EU Member States provided Airbus with new illegal launch aid – reportedly almost $5 billion – so they could launch the new A350. The WTO was explicit: “[I]t is apparent that the A350 XWB could not have been launched and brought to market in the absence of LA/MSF [Launch Aid].” The WTO previously found that essentially no model of the entire Airbus fleet would exist today – including the A300, A310, A320, A330, A340 and A380 – were it not for the illegal subsidies provided by the European governments.
“Today’s historic ruling finally holds the EU and Airbus to account for their flouting of global trade rules,” said Dennis A. Muilenburg, Boeing chairman, president and CEO. “This long-awaited decision is a victory for fair trade worldwide and for U.S. aerospace workers, in particular. We commend the administration, specifically the Office of the U.S. Trade Representative, and the U.S. Congress for their unwavering commitment to this matter and to enforcing global trade rules,” he said.
“The World Trade Organization has now found that Airbus is and always has been a creature of government and of illegal government subsidy,” said Boeing Executive Vice President and General Counsel J. Michael Luttig. “The day of reckoning for launch aid has finally arrived. Prior WTO rulings found that Airbus itself likely would not even exist without illegal launch aid, equity infusions, and infrastructure support. Today the WTO went further and found that Airbus’ existence continues to depend upon illegal, trade-distorting government subsidies in the form of launch aid, most recently for the A350 XWB – which reportedly totals almost $5 billion,” he said.
Luttig explained that under prior WTO rulings the EU had an obligation to remedy the subsidies for its past airplanes, including the A380. “Instead, the EU compounded the illegal practice by giving Airbus additional launch aid for the A350 XWB. After any appeal of today’s compliance ruling, the next step for the U.S. government is to obtain WTO authorization to impose billions in retaliatory duties. The U.S. government has previously calculated those to be up to $10 billion annually.”
Today’s ruling confirms that Airbus both failed to withdraw old subsidies and instead put in place new subsidies for a grand total of almost $22 billion (principal amounts only). That includes $15 billion in launch aid for each Airbus commercial aircraft program from the A300 through the A380, and $2 billion in non-launch aid subsidies. The WTO also ruled for the first time that Airbus received illegal launch aid for the A350 XWB. News reports put the total for that program at almost $5 billion. Echoing prior rulings, the WTO panel also found that Airbus and its current product line likely would not even exist without launch aid.
“No form of government support compares to launch aid – in terms of amount, nature, or effects,” Luttig said. “Launch aid created entire aircraft programs – indeed, an entire aircraft company – as the WTO found today. This is a type of government support that the WTO has found, over and over again, to be unequaled both in nature and amount, unfair to Boeing and United States workers, and flatly illegal under global trade rules. Today’s ruling confirms that these illegal subsidies will now end.”
Luttig stressed that the final stages of the case against Airbus subsidies are independent of the European cases against the United States and that the EU needs to act now. “The cases are separate and distinct,” he said. “The EU lost this compliance case for the simple reason that it did nothing to remedy its massive subsidies which have had profound effects on the commercial airplane market. Whatever happens in the European cases against the United States, launch aid and other illegal government support for Airbus will now come to an end.”
Airbus statement:
WTO reconfirms European reimbursable loan system is legal and European compliance close to finalisation
“Once again the WTO has confirmed that Europe’s chosen method of partnering with its large civil aircraft industry is acceptable under international trade law. The public-private partnership model is a winner: a win for state investors who reap rewards in addition to full repayment of loans, and a winner on compliance at the WTO. The US started this dispute claiming Airbus was receiving illegal subsidies, but the WTO decided otherwise. Airbus Reimbursable Launch Investment (RLI) is a legal instrument. The US grants and tax breaks are not.”
“We only needed to make limited changes in European policies and practices to comply with the Appellate Body’s report. We did what we needed to do and did it in the agreed timeframe. We will address the few still remaining points indicated by the report in our appeal. As a point of fact Airbus and its European partners met their obligations to withdraw any subsidy elements or eliminate adverse effects. The only open point is final ruling on the interest rate benchmark for the government loans. We are confident that we will win that point on appeal.”
“The Panel recognises that, not only is the Airbus instrument totally legal, but terms of the A350 agreements are very close to perfect – only tiny tweaks required. What a contrast to Boeing which has laid the biggest egg in subsidy history with what is expected to be the very first finding in any of our cases of a prohibited subsidy for 777x.”
“We congratulate the European Commission on these excellent results and their continued and unwavering support to our industry during this long dispute”.
“This case should not be seen in isolation. There are already decisions condemning Boeing’s abusive and illegal subsidies. So it appears that Boeing and the US continue to litigate mainly to try to justify their own grab for state cash. Even after the ruling in the 787 subsidy case which clearly stated that state grants are illegal, Boeing doubled-down on the same practice with record sums of subsidies, showing a complete disrespect for international trade law. This is not new, the export support received under the Foreign Sales Cooperation (FSC) has been ruled illegal three times by the WTO and the practice continues. So much for the US track record on compliance…”
“And watch this space… before year-end the record subsidies for the 777X will almost certainly be condemned as illegal, in the same way they were already for the 787. But this time around we expect it to be condemned as “prohibited subsidies” where the only option available for Washington State will be to withdraw the measures. Obviously, the US will continue to cynically ignore the WTO.”
“Airbus wants common sense to prevail: these disputes can only end in a balanced, mutual agreement as we have said from the start. It is vital to create a level playing field for all players in this industry with an agreed global set of rules for government support. Whatever Boeing will say, nobody will have to go to the bank. There have never been any repayments and there never will be, it is not in the spirit of WTO.”
After reading the Boeing press release, I was somewhat surprised when I got to the summary of the WTO ruling:
Overall conclusion
In summary, the Panel found that:
The United States failed to demonstrate that the French, German, Spanish and UK A80 and A350XWB LA/MSF measures constituted prohibited export subsidies within the meaning of Article 3.1(a) and footnote 4 of the SCM Agreement;
The United States failed to demonstrate that the French, German, Spanish and UK A350XWB LA/MSF measures constituted prohibited import substitution subsidies within the meaning of Article 3.1(b) of the SCM Agreement; and
The United States demonstrated that the European Union and certain member States failed to comply with the adopted DSB recommendations and rulings and, in particular, the obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or … withdraw the subsidy”, to the extent that the effects of the challenged LA/MSF subsidies and the non-LA/MSF subsidies continue to be, respectively, a “genuine and substantial” and “genuine”, cause of serious prejudice to the United States’ interests in the post-implementation period, within the meaning of Articles 5(c) and 6.3(a), (b) and (c) of the SCM Agreement.
The Panel therefore concluded that the European Union and certain member States failed to implement the recommendations and rulings of the DSB to bring its measures into conformity with its obligations under the SCM Agreement, and to this extent, that the adopted recommendations and rulings remained operative.
@thysi
You beat me to it. 🙂
But then the WTO need to address the $7billion tax breaks for the 777X. Loans are not the only means of taking adantage. I’m sure the WTO will do tgat. It is te pot calling the kettle black
Well one is blacker than the other though.
You appear to be agreeing with OV-099…….
@Sowerbob
It may appear as if you’ve completely misunderstood what I’ve been saying.
I’m not saying that one party is “better than the other” with respect to receiving subsidies.
What I am saying, though, is that one party is blatantly more hypocritical than the other.
I’m also saying that what makes this worse, IMO, is that Boeing is pointing the finger directly at Airbus – steeped in self-righteousness, while probably being more subsidised than Airbus – all the while condescendingly implying that Airbus has no right to exist.
Is Airbus responding to Boeing with the same low blows as what we’re hearing, frankly, right now out of Chicago/Seattle?
I don’t think so.
Also castigating Boeing for illegal while Airbus FLA is ok.
So while fine under the rules but they are violate those same rules aren’t they?
And they did not correct it for the A350.
When this started Boeing was not received any of those.
Let me tell you a story.
We had an aircraft being worked on and the mechanics botched the job and damaged the aircraft
We then got a safety work order that the area was rife with carbon monoxide and the mechanics while they were suffering under egregious conditions valiantly proceeded with repairs an nausea.
However, they did not see me and I happened to be working in the area at the same level as they were and in an enclosed space and conditions were fine. You have to have an engine running for carbon monoxide, none were so I was able to call BS on them.
Its called mis-direction. Woe is us, lets point the finger at someone else.
That is what Airbus did initially with its mickey mouse claims against Boeing on the original. The various entities were also getting those same micky mouse bennies form their respective countries on top of FLA.
Boeing is now doing what Airbus has always done, using the local culture (tax breaks) vs the Europe culture (FLA).
So I say a POX on both houses.
And yes there is some disdain in the US that Airbus could not do without help what Boeing, Lockheed and various others have done without it.
Apologies OV-099 I was being facetious. I do take heed of what you say but I work on the basis that the war of words is just hot air. As I am not an American citizen I don’t care too much about the Boeing subsidy. As a British citizen it irks me that we are cajoled into supporting massively a perfectly healthy business. To be frank I will owe interest in that as I have elected to transfer to warmer climes for the next few years and won’t be paying for Airbus any more.
My view on the degree of subsidy I believe that Airbus did for the first 12-15 years rely on handouts to a substantial degree but now far less so. The A320/330/340 have royally repaid and more the initial investment made. The structure now means that the more recent programmes will also repay. The interest rate thing is peanuts in the wider scheme.
I don’t buy the equivalence with military programmes drawn on Boeing as Europe had similar programmes and subsidy. In recent times Boeing has played a canny game at every level from state to federal funds in many ways and gained massively from Japanese state funding. On balance Boeing are in a more advantageous state funding position as we stand
“What I am saying, though, is that one party is blatantly more hypocritical than the other.”
No its not. The Boeing illegal subsidies case is still being decided
“A separate dispute brought by the European Union against the United States for subsidies allegedly provided to Boeing is currently before the Appellate Body.”
Sowerbob:
Agreed in many ways and of note the Japanese end.
However, Airbus did not take them to the WTO.
What I call selective.
Yep, Boeing drove a truck through that one and dared Airbus to say or do anything. they of course did not.
I am just a technician, I keep thing running, so I don’t get all the this and that’s.
Bottom line seems to be, that Airbus continues to collect illegal Free Lunch Aid.
the logic (if any, drivel maybe better word) is that yes killing someone is illegal, but all we have do is change how we go about it to make it legal and its fine, even though have not done that yet. If we plant a weapon on the body its ok.
Boeing continues to collect illegal State Corporate Welfare while pointing fingers at others, do as I say and not as I do.
I continue to be disgusted that an organizations like Boeing and Airbus have to collect welfare.
Its not like its a startup industry is it?
The basic issue with the loans that Airbus gets is that the interest rates are too low (lower than market rates). I don’t understand why they didn’t switch to market rates for the A350 given the prior rulings (although EU is arguing that the rates are high enough).
But, yes, both Airbus and Boeing are highly profitable corporations that should not need government handouts. (I can accept launch financing but only if it’s at market rates.)
My visceral takes is, they are profitable, both are buying stock back crating nothing, both can finance launches.
While the rates are an issue, at more issue is the government deciding that they should put money up.
If they need the money and can’t borrow it, then governments’ should not be lending it.
They are just both going about doing it different ways now (originally ay Boeing did not other than nickel and dime, now they a can buy stock back but can’t make money without it, so much for capitalism!
Wealth transfer from state residents to corporation(s).
We used to call that stealing.
“Whey are profitable, both are buying stock back creating nothing, both can finance launches.”
Good point!
I guess you can argue about what constitute the correct interest rate. In Germany that could even be negative, so maybe Airbus should repay less than they got, LOL.
Boeing and Airbus, EU and US, need to quit this. China and Russia are big time subsidisers and the West is just killing their own case against governments which are willing to spend endless money on this.
That includes $8.7 B tax breaks, which is about 25 million per airframe so far.
“That includes $8.7 B tax breaks, which is about 25 million per airframe so far.”
Is that 8.7 per year? It cannot possibly be 25 per aircraft is the tax is supposed to be over a period of time (ten years is it?).
I mean $8.7 billion in tax breaks from Washington state for the 777-X which comes to about 25 million for each of the 777-Xs on order. Sorry if I was unclear. I don’t know how much tax discount Boeing gets per year in Washington and SC.
“With unusual speed, the Legislature on Saturday boosted aerospace-training programs and approved $8.7 billion in tax breaks to try to secure Boeing’s 777X jet.
But that meets only HALF of Boeing’s requirements to keep production of the aircraft in Washington state. Seattle Times
“The tax-incentives measure extends commercial-airplane tax breaks — due to expire in 2024 — until 2040 and expands a sales-and-use tax exemption for construction of buildings used to manufacture airplanes, among other things.”
But thats not all theres more Boeings list
“One item on Boeing’s Olympia shopping list remains — passing a multibillion-dollar tax package to pay for transportation improvements
“Once again the WTO has confirmed that Europe’s chosen method of partnering with its large civil aircraft industry is acceptable under international trade law. The public-private partnership model is a winner: a win for state investors who reap rewards in addition to full repayment of loans, and a winner on compliance at the WTO. The US started this dispute claiming Airbus was receiving illegal subsidies, but the WTO decided otherwise. Airbus Reimbursable Launch Investment (RLI) is a legal instrument. The US grants and tax breaks are not.”
Well that is spin right out of the old EU playbook.
Makes an old 45 rpm record look slow.
What a bizarre “Baghdad Bob” kind of spin…
“Airbus Reimbursable Launch Investment (RLI) is a legal instrument. The US grants and tax breaks are not.”
It is bizarre, isn’t it? We didn’t know this until Boeing filed a complaint. It seems to have backfired on them. If Boeing had kept its mouth shut we wouldn’t know, even today, that the EU governments get their Airbus money back while the US citizens get screwed by Boeing.
Really?
We do know they are getting money back on the A320.
That is used to subsidize the money they are not getting back on the A300/330/340/350/380
Or post me a link that is not a blog that has credibility to it that says otherwise.
@TW
I think it is well known that the A320 has paid back and substantially more,the A330 has paid back and covered the A340 costs (or will do within existing orders). A300/310 no way, A380 not yet and unlikely to. A350 not yet but in my view looking likely, conservative production volumes are assumed. Strip out the early subsidy (pre 1988) and the various European governments will be on the positive side of the curve. Regarding the appropriate risk premium to charge for the use of the cash….. This could be argued back and forth and appears to be the only issue at stake
That’s certainly a massive amount of hyperbole from the Obama administration, Boeing and their stooges in US Congress and most of the (US-based) press – typically repeating the USTR/Boeing talking points. What happened to independent thinking?
It would seem as if the WTO panel compliance report on US challenge to EU aircraft subsidies has not gotten many downloads from the US…. 😉
Here it is:
https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds316_e.htm#bkmk316abrw
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In short, nothing new.
In order to better understand the issues involved, I can recommend a rather more insightful analysis (link below) – to say the least- than what one’s getting from the shallow “analyses” of LCA subsidies that’s coming from most of the US mass media and the other culprits mentioned above.
http://bit.ly/2dmB9Wb
Addendum
**NB: leehamnews.com not included.
So other than a mere technicality its all good?
Yup, 18 billion technicalities and counting…
Its the exact same sniping that can be seen between Embraer and Bombardier.
Embraer are like Boeing in that case – lobbing rocks from their glass house.
But it isnt fair competition and that model needs to change.
As for this “The US doesn’t have to [impose sanctions] do so but if it does, it doesn’t even have to be against Airbus–it can be against entirely unrelated industries.”
Is that true? If so, its pretty messed up.
No, it’s not messed up. We need to understand that it’s the government that is suing another government in the name of a third party (Boeing or Airbus). So whichever government wins can impose sanctions on the other government. It all starts with one company, say Boeing or Embraer, that complains to its own government, and if the latter judges that there is indeed a case then the government brings the case to court (WTO).
Yes it us messed up, hopefully if the US takes action it will be against Airbus.
No more A330s or A350s for the US!
Airbus then reincorporates in the US, Boeing moves to the Philippines
Well there is the A321 coming out of Alabama. Good place to build the next Toulouse (well hurricanes aside and Zeka)
The A380 should be built in Alaska, big airplane, bit state I say.
Gets hard to penalize the culprits. Penalize Boeing and Safran suffers, penalise Airbus and Alabama suffers. Alabama is bigger than Safran though.
What good do these press releases do beyond to pander to the jingoistic supporters of both sides. I am shocked by the ridiculous hyperbole of both parties. I think we are all aware that Boeing will be found in breach shortly and there we have it. The losers, you and I as taxpayers, the winners, Boeing and Airbus. It is almost as though they both doth protest too much, are they colluding to the benefit of each other?
Perhaps Boeing should have reined in their Executive Vice President and General Counsel – J. Michael Luttig.
His decision to resort to such a disdainful language demonstrates an incredible contempt directed towards Airbus, on the part of Boeing, and a sense of entitlement indicating that Boeing considers Airbus guilty of having robbed them of their monopoly. I’m sad to say that what we now have been hearing from Luttig and Boeing sounds more like what you’d expect hearing from a wounded predator.
Of course Boeing is going to say that. And since its a complaint by Boeing with the US government acting as their proxy will be heavily slanted to their specific complaint.
It wasnt a ‘trial’ where both sides have presented their arguments and rebuttals and an independent decision is arrived at.
“A separate dispute brought by the European Union against the United States for subsidies allegedly provided to Boeing is currently before the Appellate Body. ”
So they are yet to rule on Boeings ‘illegal subsidies’. I can guess that will be much the same result.
Now yes.
Originally no.
Let’s wait for the Airbus response to the following statement relating to Boeing. It seems to me that these comments are pure posturing and nothing but. Both parties know they are playing a game that is nothing to do with the other but more to protect their unacceptable demand on all governments affected to either give soft loans in Europe or to give state tax concessions. It is a game of all companies and I have seen it in action at close level. The government officials run scared and never understand the angles. In a different industry I am aware of $150m/pa to a company of of govt funding each year solely down to the lack of govt lack of the logic in the way in which life works.
In the aero industry Airbus has the national card, in the US they play the state card. This is pure abuse of corporate power and has to be curbed. It is disgraceful by all parties. I love the engineering aspects relating to B or A but am dismayed by the politics as they have developed to a game that is obnoxious.
It is a subsidy that solely benefits corporate profits for OEMs and airlines at the expense of you and I. It is a game and to think that the WTO works to stop it is in my view a total joke.
Rant over
Spot on
@Sowerbob
Here’s an interesting article:
https://www.washingtonpost.com/opinions/katrina-vanden-heuvel-the-distorting-reality-of-false-balance-in-the-media/2014/07/14/6def5706-0b81-11e4-b8e5-d0de80767fc2_story.html?utm_term=.7e014a9682f0
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As Katrina vanden Heuvel pointed out above, there are many sides to almost every story, but that doesn’t mean they are automatically equal.
Now, let’s re-examine the fundamentals.
First, the USTR*/Boeing started this dispute – the EC**/Airbus did not.
*United States Trade Representative
**European Commision
2nd, it’s abundantly clear that the WTO has ruled that European type Reimbursable Launch Investment (RLI) loans are legal under the WTO trading system.
3rd, the EC/Airbus has never denied that Airbus has received subsidies. In contrast, the USTR/Boeing vehemently denies that US Federal/State government(s) policies of granting “tax incentives”*** constitute a subsidy.
4th, now that Boeing’s public mask has fallen off, thanks to their Executive Vice President and General Counsel, it’s pretty clear that Boeing doesn’t believe Airbus has a right to exist. In fact, Boeing and their cohorts seem to believe that the entire Airbus product portfolio would have been inferior and uncompetitive to that of the superior Boeing product portfolio – developed under the umbrella of the superior and unparalleled US free enterprise system – had it not been for the (according to Boeing) “massive subsidies European governments have provided to create and sustain Airbus for more than 40 years.”
–
I would therefore suggest that we skip the BS and stop creating a “false balance” between the Airbus and Boeing cases at the WTO. For sure, there are many sides to this story, but that doesn’t mean that both parties are equally “bad”.
–
http://www.fao.org/docrep/006/y4647e/y4647e05.htm
Hi OV-099
I have some sympathy for your view but not much. The repayable launch investment/aid is a significant benefit to Airbus on a number of levels. Whether it is legal or not is not the issue. Why should this be required for a mature organisation? Importantly it introduces the ‘pork barrel politics’ from the States where it pits one country against another to effectively ‘gain workshare’. If you are not aware there are certainly other EU and national subsidies arising in the form of training and infrastructure.
The fact that it has gone to another level in recent years in the States does not exactly make me feel better about it. Why should I personally be supporting a behemoth like Airbus? Why can it not operate in a subsidy free environment?
“Whether it is legal or not is not the issue. Why should this be required for a mature organisation?”
Like TransWorld has pointed out, why should Boing and Airbus require state aid when they spend billions of dollars on stupid share buy-back programmes? THAT is where the scandal is.
@Sowerbob
There seems to be two all-together different issues here.
The first issue is about how the USTR/Boeing has responded to the WTO panel compliance report on US challenge to EU aircraft subsidies. This response is IMO not grounded in reality and it’s blatantly hypocritical. Of course, hypocrisy is typically the last resort of scoundrels, and the first port of call for politicians. However, what makes this worse, IMO, is that Boeing is pointing the finger directly at Airbus – steeped in self-righteousness, while probably being more subsidised than Airbus – all the while condescendingly implying that Airbus has no right to exist.
As if it’s Airbus’ fault – and not a crisis of their own making – that Boeing is spiraling towards a single aisle market share of less than 40 percent; and that the 787 development and production imbroglio has led to a catastrophic $30 billion nightmare of deferred costs from the production of the first 450-plus 787s.
If you don’t agree, please do point out were,, exactly, the EC/Airbus have been as hypocritical as the USTR/Boeing, and where Airbus is responding to Boeing with the same low blows as what we’re hearing, frankly, right now out of Chicago/Seattle.
–
Now, the second issue – brought up by you (N.B: I just pointed out that RLI is legal) – is why Airbus should receive RLI in the first place?
In order to answer that question, perhaps it would help if one would understand that Airbus has more of a stakeholder approach to how it’s running its business, whereas Boeing’s raison d’être seems to be to maximise stockholder wealth.
May I recommend this paper from T.Piepenbrock:
The Evolution of Inter-Species Competition between Extended Enterprise Architectures
Piepenbrock points out (on page 9) that Boeing has a “modular enterprise architecture” with a high quantity of participants in a stakeholder class, but a low quality of stakeholder relationships. In contrast, Airbus has, according to Piepenbrock, an “integral architecture” with a low quantity of participants in a stakeholder class, but a high quality of stakeholder relationships.
https://esd.mit.edu/symp09/presentations/day3.session1b.piepenbrock.pdf
Quote on page 11:
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Alrhough Airbus today doesn’t really need RLI – as major stakeholders in Airbus, the governments of France, Germany, Spain and the UK obviously want some influence on how the company is run. One way of doing it is by granting RLI loans by taking on a risk sharing part of an all new programme.
http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtrdind/151/151.pdf
Mitsubishi got govt aid to develop manufacturing technology for the B787, didn’t they? I think EU/Airbus might have considered a case against them but decided against it, didn’t want to antagonize a potential customer?
OV99
Did Airbus or did not Airbus have a chance to correct the FLA?
So, how they go about it is illegal and is still illegal and they did not correct it.
What does that tell you?
Mis direction again, they choose to be illegal even more deliberately
Boeing will et ruled against again as well.
@OV-099
Thank you, Very interesting stuff, I have spent most of the past 10 years focusing on corporate governance, stakeholder relations and ethics so this is my sort of baby 🙂
Just one thing, I understand about the relevant statutes but I am always wary of legislation designed for one specific purpose.
There is ethics in any of this? You have got to be kidding!
” there are many sides to almost every story, but that doesn’t mean they are automatically equal.”
True and a good place to start would be the 2011-12 rulings against Boeing and Airbus in which the WTO found that Boeing had received 5.3 billion in illegal aid while Airbus had received 18 billion.
Oh, perhaps not…..
Sadly Boeing has stooped to the same level using the US equivalent of FLA (though on a state basis as they can’t do that nationally.
They have stooped but whether it’s to the same level has yet been determined, they certainly did not 5 years ago.
Geo:
At this time I can only call ball park.
8 billion in current, forget what the last was that was illegal and has not been corrected, worse.
I would say its about the same as A350 FLA but could be a bit more.
Is there a dummies version of all this somewhere? It does seem that Boeing has shot it’s shareholders in the foot as it is obvious who is next. Is it simply a matter of disguising it better? Are Boeing going to go after China and Russia as well?
Nope, same reason Airbus won’t go after anyone else.
Governments control the buys, you can’t shoot yourself in the foot.
@grubbie
“Are Boeing going to go after China and Russia as well?”
Boeing cannot go after anyone at the the moment because it has received too much tax abatements of its own in recent years, and continues to benefit from military welfare. The hypocrisy has now been unmasked and this is likely the last time Boeing will attempt this kind of idiotic ‘I will sue you” over what it does itself, but in a different disguise. Just wait until the WTO respond to Airbus’s own counter-claim. But we have already been through this before.
At least the various European governments get to see their money back, and then some, because the so-called launch aid is actually only a loan that has to be fully reimbursed over a period of 17 years. I like to view it as a low-interest mortgage. And that’s where the problem is. Airbus should pay the market rate for a loan, but instead it gets a discount from the government and actually pays the equivalent of a mortgage rate. And that is illegal under WTO rules. That’s all there is to it.
On the other hand, the government of the United-States, as well as local governments, never see their money back when they subsidize Boeing. That is the main difference between the US and the EU. Airbus’s accounting system records any loss in real time while Boeing likes to defer its losses, no matter how big they are. But when it comes to subsidies in the US it is the various governments that register their losses in real time while Boeing has no obligation to pay them back, regardless of the amount.
What Boeing did not realize when it initiated this ordeal is that the protracted operation would backfire on the company over an extended period of time, perhaps permanently. All this because of the power of Internet, which was only nascent at the time Boeing filed its first complaint. Now the masquerade has been fully exposed for all to see. Until then my only complaint towards Boeing was that in its entire history (now 100 years) it has extensively benefited from military welfare. But because of this stupid lawsuit I have since realized, to my complete amazement, that Boeing is also heavily subsidized by local governments and saves billions of dollars in tax abatements, and for many years in advance. Before the lawsuit no one realized that, except perhaps for Airbus.
On the other hand I always thought Airbus was heavily benefiting from government subsidies. But what the Boeing initiated lawsuit has revealed is that in fact there are no subsidies at all, only repayable loans, just like any other businesses around the world have been doing for ages: go to the bank, borrow money for a project and pay it back after a number of years. If that were a scandal there would hardly be any business activities anywhere.
All that to say that Boeing should have kept its mouth shut. Now it has a boomerang stuck between its mighty jaws.
I could say wait and see Normand but I think you will be proven right on all counts. Shall we wait and see? 🙂
Normand:
Would you please either stop with the military welfare or list a program that was not an open bid that advanced the civilian side vs the military?
And would you also at least acknowledge that Canada and Europe have been sheltered under the US umbrella that has allowed them to spend trillions in other area when they won’t defend themselves?
“Would you please… stop with the military welfare.”
Yes I will stop, I promise you TransWorld. But not until you or your fellow citizens of the United States will have stopped wining and complaining about Airbus.
‘fellow citizens of the United States will have stopped wining and complaining about Airbus.”
Hmmm, Freudian slip?
Sheltering under US umbrella ? The US has worldwide security interests: Middle east, Asia etc. Why should Europe ramp up its spending just because they want to protect Taiwan on top of their commitment to Europe.
Why should the US keep defending Europe when so many European countries aren’t pulling their weight and haven’t been for decades?
The US works for their own interests only.
“protecting” others is part of the dominance racket.
It is the MOB on a global scale.
( and it has done more damage globally than any “you are my foe” activities around the globe.)
Yeah , sure, whatever. The US certainly spent a lot rebuilding the economy of West Germany/
Really, should we just let the Russian waltz in on you again?
Frankly if you don’t want to defend yourselves I am good with that, unfortunately it turns into ultimately affecting us for your irresponsibility. Remember the Balkans, Libya?. Couldn’t handle either one of those piss ant affairs.
Americans are accused of ignorance, you don’t seem to have a clue what China wants, give it Taiwan, then is the Philippines, Vietnam etc. And yes they are pushing there right now, you might look at the World Court ruling on what they are doing and destroying in the South China sea.
What does Europe do, gets depends on Russian gas.
Your oil comes out of the gulf that we protect (bless the UK for standing with us there, but then they Brexited didn’t they)
Seems we got sucked into that the last two wars.
We took a different tack on the last one and rebuild world economics because we thought it was the better way.
thank for standing up for us. Etu Brutai
@TransWorld
Just curious, but have read this article?
–
http://www.informationclearinghouse.info/article29383.htm
OV99:
I would hope by now you would have determined I am not typical America. I see us warts and all.
There are some ugly truths in our creation myth, racism (against all people of all colors), destruction of an indigenous people.
We have had our colonialist period (granted not as extensive as Germany, Britain, France and Belgium)
But we do have an ideal, one that we will never achieve, but its there and its that shining hill of decency, equality, aka the Life, Liberty and Pursuit of Happiness that all are entitled to.
We have our NEO cons that think they can impose that (and we have seen it fail).
Europe looks down at Americans as yokel, upstarts unsophisticated.
We have been impacted by two World Wars we had nothing to do in creating. That same group of yokels took their economy in both cases to war and through an incredible effort succeeded in stopping the spread of the Nazi and followed by the stopping of the Communists.
Of all the people in the World, Europe should get that far better than the US (the ones that do though are former Iron Curtain countries that know what subjugation means)
It was the US leadership that looked at what the European powers did in Post WWI and how that became the catastrophe of WWII and vowed not to let it happen again (and we had the horsepower to back it up because we did not in WWI, useful cannon fodder and arms and food but not respected)
So yes we have our warts, we have flaws, we continue to struggle with Racism but we also do make progress.
Where would Europe be without us?
Where would we be without Europe?
To answer Ewe, you don’t even have the defense capability to deal with the Balkans and we had to bail you out, you can’t defend yourself against the Russians.
Quit bring up Taiwan, that is nothing more than snobby European sophism trying to excuse the lack of responsibility for your own countries)
Your peace troops laid down their arms and let 8000 Bosnians get slaughtered.
You can’t even attack a no nothing country like Library without massive US support.
And you might want to think about this, one of the so called US characterizes is that we will pick someone up and help them, but we expect them to do their best to help themselves. We do not see Europe doing that (as a whole, Poland yes, Baltic States yes, Britain yes, the rest, nah)
We get tired of being kicked and others hiding behind us (bless Great Britain who has stood with us wrong and right as well as Australia who has seen the future and works very hard to defend their area)
We have a presidential election coming up, there is a loose cannon mouth con man who stands a good chance of being elected and part of his appeal stems from him calls BS on NATO and the NATO country responsibilities . Europe can claim some credit for his being in that postion.
He swoons at Putins name. I can think of the Start of WWII where two con men had at it and where that went.
You could be left to face that Bear in the East alone.
Of course all that could would flee to the US, funny how that works, everyone hates us but the vast majority want to be here.
We are not that shining city on the hill, but that is our ideal, an ideal that we know will never be fully achieved, but we hold that out to what we would like to be.
We can’t do it for you, we can’t do it by ourselves and we are not and never will be perfect, but we can be better.
We have had our
@TransWorld
Perhaps, I should have quoted using bold lettering — in order to underline the relevance to this thread on what IMJ is essentially a one-sided level of hypocrisy on the part of the US Trade Representative and Boeing. Hence, there was really no need on your part to be ranting about your worldview — just address the issue.
.
–
So, do you believe that;
A), both parties are equally guilty of hypocrisy,
and
B), that Airbus is questioning Boeing’s right to exist?
–
NB: Again , this is what Boeing Executive Vice President and General Counsel J. Michael Luttig said on behalf of Boeing:
Luttig’s decision to resort to such a disdainful language demonstrates IMJ an incredible contempt directed towards Airbus, on the part of Boeing, and a sense of entitlement indicating that Boeing considers Airbus guilty of having robbed them of their monopoly. Luttig and Boeing are not only saying that Airbus has been a “creature” of government subsidies — which is correct — but they are saying that Airbus is still and has always been such a “creature” — in short, they’re questioning Airbus’ right to exist.
Thus, whereas the USTR/Boeing seemingly are vehemently denying that Boeing is on the receiving end of subsidies — in fact, they don’t seem to acknowledge that Boeing has ever been subsidised — the European Commission and Airbus don’t seem to have any problems acknowledging that Airbus has benefited from government support that caused the US’ de facto monopoly in the LCA business to lose aircraft sales.
Hmm, what does one really expect happening once your monopoly position is lost? Furthermore, did the US LCA industry really believe that they were entitled to a perpetual global monopoly in the LCA business — that other countries’ LCA OEMs should not have a right to a share of the global (OECD) LCA market unless they were fully in “compliance” with the American system of capitalism?
Now, there’s no question that when the the French and German governments first created the Airbus consortium, they poured billions into the consortium in the early years — in straightforward production subsidies and debt write-offs — as a fledgling Airbus tried to get aloft and win credibility with the world’s airlines. They did this for several reasons; they wanted to preserve their tiny aircraft industries and thought the only way to do this was by combining forces to create a single European OEM (the British and Spanish joined later). The civil aircraft industry is seen by governments as strategic; it helps sustain a military aerospace capability by giving the aircraft producers more volume; it creates large numbers of high-technology, well-paid jobs; and it produces high returns.
The European Community (now EU) and the US started bilateral negotiations for the limitation of government subsidies to the LCA sector in the late 1980s. Negotiations were concluded in 1992 with the signature of the EC-US Agreement on Trade in Large Civil Aircraft** which imposed disciplines on government support on both sides of the Atlantic which AFAIK were significantly stricter than the relevant WTO rules. The Agreement regulated in detail the forms and limits of government support, prescribed transparency obligations and committed the parties to avoiding trade disputes.
Now, thanks to the USTR and Boeing deciding to go to the WTO in 2005, the US and the EU went head to head over the commercial rivalry of two companies, both of which should be left to compete in a global market place big enough to accommodate them both. It’s a fact that it was the US that chose this confrontation with the EU. That decision sparked, AFAIK, the biggest, most difficult and costly legal dispute in the WTO’s history.
–
**
http://trade.ec.europa.eu/doclib/docs/2010/september/tradoc_146503.pdf
–
FWIW, as for Boeing and R&D subsidies, it’s worth mentioning that the Japanese industrial share set at the outset of the 787 program accounted for around 35 percent of the total 787 R&D costs — i.e before the economic impact of the delays were starting to take hold. Those 35 percent apparently included non-repayable grants and other low-interest repayable loans. Same thing with the Italian (i.e. minus non-repayable grants).
For strategic reasons, apparently, the EC/EU (on behalf of Airbus) never involved the Japanese in their case against the US (Boeing) at the WTO. It may look as if that strategy payed off when Japan Air Lines ordered a significant number of A350s.
–
Finally, in response to your rant — we may find a few relevant quotes from this JFK speech:
–
–
https://www.youtube.com/watch?v=O_hBj8qlp_k
Addendum
The quoting with bold letters didn’t work out too well.
My apologies
“On the other hand I always thought Airbus was heavily benefiting from government subsidies. But what the Boeing initiated lawsuit has revealed is that in fact there are no subsidies at all, only repayable loans, just like any other businesses around the world have been doing for ages: go to the bank, borrow money for a project and pay it back after a number of years. If that were a scandal there would hardly be any business activities anywhere.”
The WTO disagrees…
“After constructing the relevant market interest rate benchmarks, the Panel compared the results with the internal rates of return determined for each of the relevant LA/MSF contracts and found that, in each case, the rates of return were, to differing degrees, below the market interest rate benchmark. Thus, the Panel found that the A350XWB LA/MSF measures were provided at below-market interest rates. Accordingly, the Panel concluded that the terms of the A350XWB LA/MSF measures conferred a “benefit” upon Airbus, making them subsidies, within the meaning of Article 1 of the SCM Agreement.”
—————————————————————–
“All that to say that Boeing should have kept its mouth shut. Now it has a boomerang stuck between its mighty jaws.”
Wow angry much? Seriously though it’s hard to take comments like this seriously when they are so fanboyish.
@leeham news,
Scott, Can we get an opinion piece from you on this? the Airbus and Boeing text make it look like they com from Venus and Mars respectively… and the WTO text is rather stuffy.
What is the impact of the ruling (i.e., how much money is Airbus in for to the EU govt’s), Can the US only levy 10BUSD IF the EU appeals – or only when the EU doesn’t take serieus steps to remedy the imbalance.
with profits of around 2.5 BUSD and revenue of ~65 BUSD, a 10BUSD doesn’t seem prohibitively large. if spread over a few years – it’s a lot less than Apple is said to owe the Ireland govt in back taxes…
@Ikkeman: Pontifications and the paywall Monday will both be on this topic.
Can you please try and keep it simple, it seems to be like the quran, open to radically different interpretations.I value you impartial view, though I fully expect you to be accused of being an “Airbus Fanboy”. Is anyone going to take Loren Thompson seriously ever again?
@Geo @Grubbie: The tease: the whole effort is an exercise in hypocrisy (freewall) and nothing will come of it (paywall).
Scott, you tease. Always making us wait until Monday! 🙂
As Scott notes “tease” is for free 🙂
What the WTO missed in their assessment is the
swap out of interest against royalties.
RLI is not a credit. Much more similarity to forex A380 financing as channeled by Doric.
Great picture, Fokker G.1? How did you upload it?
Sounds like a man just diagnosed with terminal lung cancer releasing the following statement..
“I am happy to report that my doctor has confirmed that my kidneys , heart and liver all continue to function flawlessly. He also stated that he is almost 100% sure that I will not die of heart, liver or kidney disease.Furthermore I asked him should I buy glasses and he responded “what’s the point?”. My eyes continue to be a great strength of mine.
I congratulate my doctor on these excellent results!”
Interesting tidbit…
“The Seattle Times reports that the WTO found that the illegal aid to Airbus cost Boeing 50 lost orders on the 787 and 777 aircraft, 54 orders for the 747 jumbo jet and 71 orders for the 737.”
I would like to know how they came up with such specific numbers.
Transworld, something you might find interesting,,,
“Alaska Has America’s Worst Roads”
http://247wallst.com/infrastructure/2016/09/23/alaska-has-americas-worst-roads/
Also Americans will spend 2.5 billion on Halloween candy this year. Maybe Boeing should get in on that racket!
Geo,
Don’t believe what you read, Alaska has NO roads (grin)
Think of it like this, Alaska is 3 times the size of Texas and had a population under 750,000. We could not afford road to everyone if we had them!
Having driven the US freeways, ours are really not too bad, we do have a lot of dirt and gravel roads that would make others cringe. However we just slow down.
A agree, Boeing should sell out the business to someone that wants to make airplanes instead of shareholders suck up and the company that it turns into can get back to do what they do best.
Yeah they can’t possibly be worse than Detroit, Chicago, Cleveland etc…!
I know Scott will not like these comments about roads .. I must add that South Dakota is a small rural state 800 000 inhabitants and half the size of France !!!
From the initial Boeing complaint?
WTO seems to not have made such a statement.
Actually I can’t find any basis for those over the top statements from US news “outlets” in the WTO report.
WTO reported that from a range of US complaints over alleged lack of remedial compliance one item seems to have stuck . in a way.
Then A350 financing was never included in any US complaint. WTO did produce no finding on that topic.
so this appears to be another invented from thin cloth on the US side. ( while Kerry had to finger a UN convoy strike to destract from bombing Syrian soldiers and being unable or unwilling to separate their henchmen into the islamic terrorists and the cannibal faction. Dire straits all over the place.)
“After reading the Boeing press release, I was somewhat surprised when I got to the summary of the WTO ruling”
People only need headlines that confirm opinion. Details are most dissapointing & to be avoided. Boeing understands.
Keesje:
that fact that Airbus did not adhere to the previous ruling and so called legal or not (convenient as that is their vehicle le for FLA) they did not comply?
So we make a huge deal that its legal even though they are doing it illegally?
that’s a victory for who?
I can respect it if not like it for either one if its acknowledge, but saying airbus is pristine and snow white while they continue to do the same illegal thing in a different manner than Boeing illegal thing does not cut it with me.
Shareholders own companies, management are obliged to get the most money out of the company they can, anything else would be a sort of robbery, using share holders money to not make money? So US accuses EU/Airbus to help Boeing make money and EU accusing US/Boeing to help Airbus make money is honest as it is the management of the various companies. This is called capitalism, so we have a problem with unbridled capitalism here.
Sorry, but there it is.
No apologies necessary.
I think ours is worse as it completely leaves out the country and workers benefit and Airbus does have that factored in far more so.
@ MartinA
What you explain is the fiduciary duty or duty of care to shareholders. In the UK we have slightly revised matters to reflect the ‘private profit, public bailout’ problem witnessed in the 2008 financial crisis. Now there is a wider duty to key stakeholders such as the govt, general public etc. This area of governance and stakeholder concern is in its infancy but will develop to hopefully counter some of the worst excesses of capitalism (not sure if I actually believe what I have just written…)
Point taken anyway. What I really wanted to say is only valid if we postulate a pure capitalist society, which doesn’t exist but is growing closer in most countries. A bit of your I am not sure if I actually believe it here.
I think it would be fair to say that Boeing represents a Pristine Capiltalist position where they view only their shareholders as worthy of attention whereas Airbus is in more of a Social Contractarian position where it understands a need to give something back to wider stakeholders. A legacy of the manner in which they were formed and the countries from which they take their predominant culture.
At any rate I would agree that both parties are out for what they can get. I am surprised that Airbus laid itself open to this charge unless the benefits are very significant. Why lay yourself open to such a charge and all the adverse publicity it generates. They do seem to have the attitude of smug indifference.
well said
And I also believe that companies do not have an obligation to return to shareholders over the best interest of the company or the country the operate in.
There is a balance there but its not a fine one or hard to call.
@TransWorld
“And yes there is some disdain in the US that Airbus could not do without help what Boeing, Lockheed and various others have done without it.”
In case you forgot, Lockheed has been saved from bankruptcy by the US government and Boeing has been on military welfare for 100 years. As for your “various others”, where do you want me to start, Chrysler? GM? Big Banks? And since you mentioned Lockheed would you like to discuss the F-35 financing?
“Castigating Boeing for illegal while Airbus FLA is ok.”
Please keep in mind that EU governments get their money back within 17 years while the various governments in the US will never see again the money they gave to Boeing, or the money they will give them in the future, for the fallacy continues on your side of the Atlantic.
Yes, get their money back at below market rates…
With the potential for later royalties.
RLI is “Reimbursable Launch Investment”. not a credit nor a gift. It is probably a good thing (TM) that you can’t see posters wince when they expound on their misinformation.
Misinformation? Just reporting what the WTO found. Are they wincing?
so you never read the WTO publication and sail solely on the heap of hypocrisy printed in US media?
Bah!
Well after we cut through all the flare and chaff, it still says Airbus has not complied with the old ruling and continues to violate it with A350.
I actually read the agreement but it’s obvious you didn’t…
The various governments in the US never see again the money they GIVE to Boeing, but the various EU governments do see the money they LEND to Airbus, because it all comes back over a period of 17 years, below market rates or not. And the latter are largely compensated by royalties, a measure that does not exist in the United-States. So in the end the European citizens benefit from those loans while the American citizens loose a great deal of money on all those donations to Boeing, which are a form of corporate welfare. That is something you would expect from a communist country.
Normand:
List one military program that exclusively benefited Boeing that was not bid out and was actually only to benefit the civilian s side.
Or list one that Boeing bid on just to benefit the civie side.
The 747 is a good start. The US government gave money to Boeing and a number of other manufacturers to come up with a proposal for a large military cargo plane. Lockheed won the contract and that gave us the beautiful C-5A Galaxy. Boeing recycled its own proposal and turned it into the wonderful 747. If Boeing had not received a “little incentive” from the government there would never have been a 747. Same with the 707. After the war Boeing produced the B-47 and B-52 in large numbers for the USAF. These two very lucrative contracts gave Boeing the expertise to develop the Dash-80; for they knew, with a high degree of certainty, that the USAF would need a fast tanker to keep up with the B-47 and B-52, because the KC-97 (Boeing 377) was a piston aircraft and obviously too slow. This situation was a no-brainer for Boeing. Of course there were some risks involved in developing the Dash-80, but those risks were not that big, for the reasons I have just explained. The key factor here is that Bill Allen had been at Farnborough in 1950 and had been extremely impressed by the Comet. He returned to the United-Sates with the firm intention to produce a passenger jet aircraft. His engineers put the two together and came back with the Dash-80, the precursor of the KC-135. What also helped Boeing’s decision is the fact that Allen had flown onboard a B-47 immediately before crossing the Atlantic to go to Farnborough, and this was for him an amazing experience. Nevertheless, like for the 747 discussed above, it took a lot of guts and some vision, and most importantly leadership. All that is lacking today at Boeing.
Ok, Boeing did bid on that and lost.
So they then took what they put into it and shifted to the 747.
They took what they learned form the B-52 and B-47 (keeping those pesky Russian out of Europe) and applied it to the 707/720
That is not a program directed to Boeing nor was it for the benefit of Boeing.
What you keep saying is this was and is all directed at and for Boeing benefit that the C5 came out? Really?
Lockheed got the contract.
So, we just throw the C5 on the heap once Boeing got its 747?
Really. Its been re-winged, re-engine and solders on.
Normand that is spurious and nonsense and you should be ashamed of yourself.
Its no more than Europe or any other country has done and its not been to Boeing directed benefit.
As for the rest, Boeing took more from the B-52 than anything for the 707.
Boeing no more needed to look at the Comet than the bottom of the sea (they don’t do submarines) They already had that on the planning boards.
they could have lost the tanker contract to Douglas.
Pure conjecture and without foundation.
And we never have said that Europe can’t nor shouldn’t cross use technology either way.
Down in flames.
@Geo
“The WTO disagrees…”
The WTO only disagrees with the below-market rates, and rightly so. All the rest is baloney manufactured on this side of the Atlantic.
Geo, you have to understand that I do not belong to any camp. But I do spend a great deal of my time defending the truth, wherever I may find it. Unfortunately the latter is much harder to find in the Boeing camp, whose members remain in denial after forty years. I do not belong to the Airbus camp but I often take their side. There is a reason for this. When you are neutral your vision is clearer. But I can understand how difficult it is for any member of the Boeing camp to remain neutral. Much more so than for any member of the Airbus camp. Why would that be? Please let me explain my position.
Most of us who have been on this planet long enough will remember Boeing as one of the greatest company anywhere. They came of age at a time when the United-Sates were widely recognized as a Superpower. In 1969 when the A300 was still in its conceptual phase the Boeing 747 made its first flight and Niel Armstrong set foot on the Moon. In this context it is absolutely impossible to take any aerospace newcomer seriously, especially if it is a European company based in France. So, naturally, the Americans in general, and Boeing in particular, were in denial when the A300B2 made its first flight in 1972. Of course Boeing is no longer in denial today, but its most ardent supporters still are. And they are very easy to spot on this blog.
When a Boeing supporter in full denial displays condescendance towards Airbus, the latter’s supporters naturally retaliate and quickly produce a long list of arguments that show that the Boeing we see today is no longer the dominant force it was in the 60’s and 70’s. In fact it can be argued that Boeing reached its climax with the 747 and has been in a slow decline ever since. And this decline accelerated in 1997 when MD brought its culture to Boeing. It was a poison pill that eventually destroyed the marvellous Boeing spirit.
In a world of wars and conflicts John Lennon created a song called Give Peace a Chance. Incidentally, it was released in the United-States less than two weeks before the first moon landing. All I want to say to the Boeing supporters out there is this: Give Airbus a Chance.
https://www.youtube.com/watch?v=0yU0JuE1jTk
Normand: We don’t have a choice. Its there, its established.
But why should we give it a chance?.
WTO did, they did the same thing again (See following)k
So they got caught doing 150 twice now. hmmm
And you are not impartial, you keep throwing out the same old song about Boeing and the military.
Did Airbus or did they not spin stuff off the A400, Typhoon etc?
Some does, some does not and its a totally spurious agruemtnj and mis direction.
Generally the US does not feel that the government should be involved funding private enterprises.
Sadly, there have been cases where it was get into it or the ramifications would have severely damaged. 250 million for Lockheed and maintain a defense company competitor is that big a deal? They do not make civie aircraft do they?
And for the record, Beoing should not get welfare either, period.
“Generally the US does not feel that the government should be involved funding private enterprises.”
That is a myth and I only need to give you one example: SpaceX. But I can’t resist and I have to give you another striking example: All the Legacy airlines in the United-Sattes were heavily subsidized by the government at one point in their history.
Oh lord, we are bringing that up are we.
All the Airlines in Europe were OWNED by the government at one time. Lets keep it at least past the 70s or so for crying out loud. Aren’t we past that? Aren’t airlines viable on their own (Emirate and Qatar and MA aside). Even China just buys for them.
Rockets are not aircraft nor are they airlines.
US has NO access to space. Rather than re-build it, they gave an incentive. We have to depend on the Russians (and so do you!)
Space X: NO ONE is going to jump into space on their own.
NASA can’t get its head out of the Sand, Legacy rockets are grossly expensive (i.e. the heavily subsided Arianne)
So, yes, Space X was given startup funds. It also is generating its own funds.
We got the worlds best low cost launcher out of the deal.
Space X has met its obligations and in the future the US will buy a launch from them at a very good price (far less than re-doing the legacy launchers).
And I will note that done right, Space X is doing things never dreamed of by Europe.
and its done by an Immigrant to boot.
And its still not an aircraft mfg or an airline is it?
“The WTO only disagrees with the below-market rates, and rightly so.”
Which is the crux of the argument. All this posteruring that “loans” in theory are legal is just straw man deflection.
“Geo, you have to understand that I do not belong to any camp. But I do spend a great deal of my time defending the truth, wherever I may find it. Unfortunately the latter is much harder to find in the Boeing camp,”
Who does John Keahy work for again? Seriously if you think one side is more honest you are just using selective vision.
“When a Boeing supporter in full denial displays condescendance towards Airbus, the latter’s supporters naturally retaliate”
Yet when an Airbus supporter in full denial displays condescension towards Boeing we hear deflection or stony silence. Talk about hypocrisy.
One more point, is the WTO a “Boeing Supporter in full denial”?
You definitely can not judge from tertiary massively embellished retelling.
The immediate WTO source reads rather sane.
my issue in this spat is that everywhere else nobody would think of asking the inmates if they are sane or not.
The fantastic postulations found int he US press imho are indicative of a kind of madness.
So for Airbus what we have is they got caught speeding.
Airbus: I was only doing 150 mph.
Officer: Yea, that’s 110 mph over the speed limit.
Airbus: Well then I was only doing 110 illegally.
Officer: You in a heap of trouble.
Well they were caught doing 150 twice now.
I suppose it will happen again. Over here we take their license away
The amounts of subsidies given to Boeing and Airbus are enormous. Now, does it really matter those for Airbus are loans? Opinions might differ on this. I think it’s ballony to ignore.
Yep
Think again.
The State participating directly in investments ( and subsidies obviously are an investment instruments )
is much more a working capitalist solution than outright taxgifts.
.. and balances the “deficit spending model” which elsewhere seems to have been reduced to continuous “deficit spending” accommpanied by zero tax draw from the subsidized industries while they appear to have enough profits available to buy back shares.
@Uwe
“The State participating directly in investments is much more a working capitalist solution than outright tax gifts.”
Québec went even further than this when they acquired a 49% participation directly in the C Series. Today the Québec government effectively owns almost half of the C Series programme. And this financial operation took place AFTER Bombardier took a one-time charge of 5 billion dollars on the programme, which is now essentially debt-free. This was a pretty good deal for the tax payers. And obviously would have been a pretty good deal for anyone else. Do the math: for 1 billion dollar you own 49% of a 7 billion dollar programme. It doesn’t comme any better than this.
Normand:
When you take a “one time charge” on a program who pays for it?
I sure could use a one time write off on my house!
“I sure could use a one time write off on my house!”
he! you would not want to.
You would effectively take value away from an asset but not change the amount you owe the bank.
The bank might not like this and reduce your credit line ( with potentially unpleasant results like expulsion from your house which is not yet your property and having to live in the back of your car. 🙂
A one time charge is a fix to adjust overvalued assets.
Right off the tax roles. You don’t think I would like to get out of my taxes? Right.
I pay, they get write offs (I don’t get to right off 10k to fix the roof, I don’t get to write off $2500 to get the house painted, I didn’t get a write off to fix the rotten bathroom)
I do get to pay more for my shed I built (back when I could do that stuff)
Not sure on Airbus, Boeing pays little if any taxes from year to year, GE the same, people move off short.
I do bless the EU for smacking Apple, maybe force them back over here!
Ahh I finally remembered the final lie (key lie)
Free Launch Aid (FLA) is repaid after 17 years regardless.
That is false : No target his, no repay. Even past that no repay if production does not go on long enough to repay it.
Only if the so called ( and secret) production targets are met and even then not for sure.
Only list a reliable source or site, not a blog or opinion (everyone knew it)
We know the A320 went over and is returning: What was its target?
What was the A300 Production Target: How much was repaid if any.
What was the A330 Production Target, how much was repaid if any
What was the A340 Target? How much was repaid if any?
What is the A350 Target, how much is repaid if any
How much was the A380 Target (fact not opinion) how much will re repaid if any ever?
Hmmmm, the silence is deafening.
I found this interesting. So in 1999 BAE returned the last of the money.
I keep hearing its still paying but????
http://www.independent.co.uk/news/business/bae-battles-treasury-for-pounds-450m-airbus-aid-1130691.html
Long read but certainly exhitibts the beyond murky nature of FLA
Among all Launch Aided airframe projects, type-specific receipts are available only for the A320. Gross
levy receipts for the A320 are presented in Table 5. It is not immediately obvious whether these gross receipts
include the fixed-sum repayments summing to £50 million specified in the A320 Launch Aid contract. Here it
is assumed that these gross receipts do include fixed repayments of £10 million in HMG’s financial year
1989/90, £20 million in 1990/91 and a further £20 million in 1991/92. Receipts net of these fixed repayments
are presented in column three. This assumption was deemed necessary because gross receipts alone and
calendar year based repayments resulted in improbable levy schedule estimates – specifically, nonmonotonicity
in the levy estimates. Of course the validity of this reasoning is further contingent on the use of ‘first flight’
and ‘delivery’ dates as indicators of the time at which levies are payable to HMG. Public domain data allows us
to consider the ‘first flight’ and ‘delivery’ dates, but ideally other alternatives should also be considered, such
as the date on which BAe completes delivery to Airbus Industrie at Toulouse, or perhaps the date on which
BAe receives payment if this differs significantly from the date of delivery to the final customer. The procedure
applied to progress payments remains an open issue. More broadly speaking the question of the timing of levy
payments to HMG is an area that remains totally unaddressed in the public domain not only with respect to the
A320, but also with respect to other recent and historic Launch Aid contracts. In the absence of additional
clarity and information it is not possible to proceed to a confident estimate of the actual levy schedule. Hence
the last two columns of Table 5 should not be interpreted as representing an estimate of the levy schedule
specified in the A320 Launch Aid contract.
Nevertheless the exercise is valuable, if for no other reason than its contribution to the process of
elimination. Alternative and more complex combinations of assumptions are certainly possible and arguably
equally plausible, but given present assumptions it is apparent that there is something interesting going on in
1993/94 and 1994/95. Receipts in 1994/95 are 35% lower than in the previous year. Neither indicator of sales
drops sufficiently to explain this change. This finding is robust under various alternative specifications. In
cumulative terms BAe had only repaid £119.4 million out of £200 million by the end of 1993/94, so it is
unlikely that the levy would be reduced at this stage in light of repayment progress. It can also be seen that
HMG’s receipts return to their 1993/94 level in 1995/96. We may recall that in certain cases Launch Aid
repayments have been linked to overall corporate profits. In BAe’s case there is no obvious combination of
corporate accounts that would produce such a large drop: its defence profits were growing while its commercial
aerospace profits were negative but consistently improving. Even making the (extreme) assumption of
page 19
formulating the Government levy as a share of the realised margin does not explain the 35% drop: between
January 1994 and January 1995 the fair market value (new) of the A320-100 went from US$21.4 million to
US$20.5 million while that of the A320-200 went from US$36.1 million to US$37.5 million (Avmark, 1996).
To sum up, one may simply accept Table 5 ‘as is’ and concede that there are some complexities in the A320
Launch Aid contract or its administration that elude simple reconstruction and give rise to nonmonotonicity of
the levy schedule as estimated by our two indicator series (first flight and delivery date). A more complete
explanation awaits additional data.
3.4 Consistency found: aggregate Launch Aid
In contrast, total aggregate Launch Aid expenditures and receipts are obtained easily, and are presented in
Table 6. Here we see that in nominal terms HMG has allocated £1,683.4 million in Launch Aid to the UK civil
aerospace industry since 1945. This figure excludes the Concorde and its Olympus 593 engines, and represents
the best estimate given possibilities offered by publicly available data for cross-validation. Accounting for
inflation and opportunity cost (interest) would increase this figure significantly. The former adjustment has
been performed e.g. in Office of Science and Technology (1995).
18
But as noted above, the primary source of
this data has some shortcomings, and Table 6 compensates for these. Adjusting for inflation, total Launch Aid
disbursements mount to £7,164.2 when expressed in March 1997 prices. In turn, Table 6 presents three
alternative repayment series. Each of these alternative series sums to approximately £640 million (current).
Thus the reason for retaining all three is not obvious; differences are relatively small (in nominal terms £6.6
million at most), and average out nicely. Yet in real terms as opposed to current, i.e. nominal, terms, the
relatively small differences are magnified. As table 6 shows, the further back in time a given deviation occurs,
the greater its distorting effect on real receipts becomes. As economic and financial analysis is concerned with
real quantities as opposed to nominal ones, each of the three repayment series actually presents a unique
picture of Launch Aid receipts. At present there is little to suggest that one of these is more accurate or
otherwise more preferable than the remaining two.
––––––––––––––––––––––––––––––––––––––––
Insert Table 6 about here
(Total Launch Aid disbursements and receipts in nominal and real terms)
––––––––––––––––––––––––––––––––––––––––
I know this is US Propoganda but also worth reading for view from the other side.
http://lexingtoninstitute.org/wp-content/uploads/2010/03/EuropeanSubsidiesBrochureFinal.pdf
Not US propoganda, stinking, crude paid lobbyist for Boeing. I am not going take any thing with the word “institute” seriously from now on, or for that matter Forbes,who saw fit to publish this rubbish.
Obvious facts left out include the fact that the overall market expanded massively and the huge benefits to Airbus US suppliers
I’m waiting for Scott’s pronouncement on all of this,but for now I believe that Boeing and Airbus probably receive a fairly similar level of support. There is a vast range of military and diplomatic and other support as well. Should we also compare and regulate how much money nations invest educating their populations?
Another explanation for the Lexington graph of dread showing Europes increasing share of the Airliner market could be previous incompetence.
@grubbie
As I indicated upthread — in a response to <i<TransWorld — Boeing and the good doctor seem to believe that they are entitled to a perpetual global monopoly in the LCA business — something they accuse Airbus of having robbed them of — and that LCA OEMs in other countries should not have a right to a share of the global LCA market unless they are fully in “compliance” with the American system of capitalism.
This “permanent right to profits” and the closed arbitration process envisioned are a core reason to kill TTIP and similar future treaties.
Lexington Institute is partly funded by Boeing.
Are you implying (gasp) they could be influenced by that?
We know our legislatures certainly are not,
Some good points and propaganda so it makes sense.
I did not know that, you da man!
@TransWorld
The good doctor is a paid shill for the biggest players in the military, industrial and congressional complex.
–
http://aviationweek.com/defense/opinion-lrs-b-protest-rhetoric-masks-fragile-case
–
http://nationalinterest.org/blog/the-buzz/endangered-the-campaign-kill-americas-new-strike-bomber-15280
Afair after posting a guest article from Mr. Thomson some years ago ( and posters ripping into it ) it was established that the Lexington Institute is a “lobbyist mouthpiece” cloaking their work in “analysis”.
An intellectually tainted but widely established technique in that domain. Still expanding its influencing.
I see comments on US a powerfull house citing WWI and WW2 but forget to adress Irak/Afganistan and Middle East catastrophies ..+ US came into play in WW2 after Pearl Harbour … thank to … Japan !!! + the only country in the world who ever used atomic bombs !!!
I see comments on Boeing defending its near monopoly … the trick lies in product acceptance by the market who love 777 and 320 but not MD11 nore 717
These are among many other reasons why the rest of the world has a different opinion than americans