WTO issues ruling on EU appeal in Airbus-Boeing complaint

May 15, 2018, © Leeham News: The World Trade Organization today issued its ruling on the European Union appeal of WTO findings that Airbus received illegal subsidies for its commercial airplane programs.

The WTO appeal decision affirmed that the A380 and A350 received improper subsidies. However, all previous Airbus aircraft have repaid subsidies or cured improperly low interest rates, according to a lawyer who has seen the decision.

A summary of the WTO decision is here.

A Seattle Times report is here.

“The A350 got included on an acceleration factor based on low interest rates,” the lawyer told LNC.

Airbus could have proceeded with the A350 without launch aid, he said the WTO concluded.

Airbus claimed 94% of the Boeing complaints were rejected on appeal or through the process, said the lawyer. Six percent of the claims were upheld, involving the A350 and A380. LNC has not done an independent calculation on these figures.

“Boeing is left with a real thin victory,” the lawyer said.

A380 subsidies

Ironically, the poor-selling A380 doesn’t leave Boeing with much of a victory even there. There have been only 331 sales since the program launch in 2000. (There were 265 orders for Boeing 747-400s, 747-8Is and 747-8Fs in the same period.)

Boeing’s prime target, launch aid, was not illegal, the WTO found. How it was implemented was improper. Airbus received artificially low interest rates and fees, which had to be reset to market rates.

Any effort by the US to impose tariffs must go through a three member WTO arbitration panel to set the amount of tariffs. This process may take up to 18 months., Furthermore, the tariffs don’t have to be imposed on Airbus products. More likely, they’d be levied on other industries.

The EU is prepared to retaliate if the US levies tariffs on Airbus airplanes. On the assumption the US appeal over Washington State subsidies for the 787, created in 2003, is denied, the EU would levy tariffs on Boeing aircraft imported into EU countries.

The EU is also prepared to refile its complaint of Washington tax breaks provided the Boeing 777X. These are an extension of the 787 tax breaks. A previous case was tossed out by the WTO on what the EU side claims were technicalities.

Airbus wants multi-lateral negotiations to reset all subsidy launch aid policies, including the US, Europe, China, Russia, Japan, Canada and Brazil. Boeing and the USTR have consistently rejected this call.

Airbus, as expected, claimed victory, saying the WTO dismissed 94% of Boeing’s claims and any remaining violations are minor and will be corrected.

Boeing, as expected, claimed a major victory and aid said billions of dollars in tariffs can now be imposed.

Airbus counter-attacked, claiming that the US appeal of WTO findings of illegal subsidies to Boeing amount to more than $20bn, costing Airbus $16bn in lost sales and $100bn in damage to world trade (witnhout specifying how).

Airbus says any effort by Boeing to have the US impose tariffs on Airbus aircraft will be counter-productive since Boeing’s violations are more egregious and subject to retaliatory tariffs when the Boeing decision comes down by the end of the year.

The Airbus and Boeing press releases are below.

WTO confirmed: no prohibited subsidies at Airbus, minor elements of actionable subsidies to be addressed

  • “Repayable launch investment” confirmed as legal financing mechanism for aircraft development
  • WTO confirms compliance fully achieved on A320 and A330, remaining tweaks on A380 and A350 only minor
  • 94% of all US/Boeing’s original claims now dismissed by WTO
  • Any potential US sanctions, now likely to be minor compared to what we expect on the European case against Boeing, would be counter-productive, ill-timed and ultimately harmful to the airlines and passengers
  • Report is only “half the story.”  Much more interesting part – on Boeing’s more egregious and competition-damaging subsidies – to come later this year
  • Only real solution to 15-year-long dispute remains a negotiated deal

Amsterdam, 15th May 2018 – The WTO Appellate Body has published on the first of two rulings expected this year on subsidies in the large commercial aircraft dispute between the US and the EU. The first ruling is the Appellate Body’s final report on the EU’s compliance with previous World Trade Organisation’s (WTO) findings in the case against Airbus (DS316). The second ruling – dealing with Boeing’s case – is expected later this year.

In its report, the Appellate Body confirms the legality of the loan partnership approach between Airbus and European governments. The WTO Panel agrees further with earlier findings that the European repayable launch investment (RLI) loans for civil aerospace development projects do not constitute a prohibited subsidy and only few modifications are needed to achieve full compliance. The WTO has now dismissed in their entirety 94 percent of Boeing’s original claims.

The WTO confirmed that all aspects of the A320 and A330 programs are now in full compliance, and that only minor action remains on the A380.

On A350, minor elements of the RLI remain to be addressed. Airbus is currently implementing changes to respond to these findings. This means that any potential US sanctions, now likely to be minor compared to what we expect on the case against Boeing’s subsidies, could result to be counter-productive and ill-timed.

While Airbus is preparing to make adjustments to fully implement the WTO recommendations, Boeing continues to make its own subsidy matters worse with abusive Washington State tax breaks, bad for taxpayers and global trade harmony alike.

The Washington state corporate welfare scheme has provided record breaking state-level subsidies to Boeing for the launch of the 787 aircraft (US$5bn). A further State incentive package for the 777X valued at an additional US$8.7bn in 2013 made this the largest state-level subsidy package in the history of the United States. Boeing reportedly is also actively seeking further illegal tax breaks for the planned construction of the mid-sized B797 aircraft.

The second Appellate Body report later this year is expected to include the following:

  • $5bn-$6bn in inconsistent subsidies between 1989 and 2006 – confirmed by the WTO Appellate Body report
  • Washington State Tax breaks for 2006-2024 – $3bn
  • Extension of these tax breaks for the 777X for a further $8.7bn
  • Wichita Kansas tax abatements
  • Continued Foreign Sales corporation export subsidies (despite WTO rulings that these are prohibited subsidies)
  • Continued NASA funded federal research programmes (confirmed by the AB as illegal subsidies)
  • Continued DOD subsidies (again confirmed illegal by the WTO AB)

 Altogether, well in excess of US$20bn of non-repaid, illegal subsidies causing over $100bn in damage to global trade.

Such non-withdrawn subsidies continue to cause massive adverse effects in the form of lost sales for Airbus. The 787 Washington State tax breaks alone have been confirmed by the WTO to have caused Airbus to lose at least US$16bn in sales. The total amount of adverse effects, or lost sales to Airbus since the beginning of these disputes is estimated to be over US$100bn.  Within the WTO’s Panel Report, published in 2017, the organization found issue with various Boeing practices, the most damaging of which continue.

Airbus CEO Tom Enders comments: “Today’s significant legal success for the European aviation industry confirms our strategy which we have followed over all those years of the dispute. Of course, today’s report is really only half the story – the other half coming out later this year will rule strongly on Boeing’s subsidies and we’ll see then where the balance lies.”

Enders continues, “The result is simple: Airbus pays back its loans, Boeing pays back nothing and continues to exploit the generosity of the U.S. taxpayer. Despite Boeing’s rhetoric, it is clear that their position today is straightforward healthy: they have half the market and a full order book, they have clearly not been damaged by Airbus repayable loans.”

Airbus General Counsel John Harrison added: “Airbus recognizes the importance of the WTO and the Appellate Body’s findings and will do what is necessary to correct any errors and this report confirms the efforts we are making.  We likewise expect Boeing to take note when it comes to its compliance obligations. Boeing has in the past shown complete disregard by ignoring the recommendations and continuing with their illegal behavior.

And he further explained: “Boeing is now at more than 90% failed claims. This is proof of Boeing’s cynical PR motives in bringing this case about in the first place. It shatters Boeing’s claim it perpetuated for years that their WTO case undermines European industrial-government partnership.”

Airbus thanks the European Commission and the governments of France, Germany, the United Kingdom and Spain for their continuous support throughout the dispute process.  “Airbus is grateful for the time and effort that has been invested in defending the interests of the aviation industry,” Enders stated.

Airbus calls for all parties to accept the global nature of trade and to put an end to the long-running, disruptive dispute. An amicable negotiation with no preconditions is the only viable solution, either between the EU and the U.S. or ideally a global agreement.

Commenting more broadly, Enders concludes: “The current geopolitical climate for trade is worrying, and industry players should not fuel it with unproductive disputes that undermine fair competition world-wide and impact the workers in this industry as well as our customers and operators. The consequences of such disputes extend beyond the aerospace industry and affect economic growth on a global scale.”

WTO determines EU has refused to honor rulings on massive European subsidies to Airbus

U.S. authorized to seek billions in retaliatory tariffs on imports from Europe

CHICAGO, May 15, 2018 /PRNewswire/ — The World Trade Organization (WTO) today in its final decision found that the European Union (EU) has failed to honor multiple previous rulings and has provided more than $22 billion of illegal subsidies to European aircraft maker Airbus. After examining this case for more than a decade, the WTO has determined the EU must end its unfair business practices and remedy the ongoing harm caused by the illegal subsidies.

This landmark ruling by the WTO Appellate Body is the final decision in this case, which was initiated in 2006. Today’s decision ends the dispute and clears the way for the United States Trade Representative (USTR) to seek remedies in the form of tariffs against European imports to the United States.

The authorized tariffs are likely to total billions in duties per year, unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes. It is anticipated that U.S. tariffs will be authorized up to the amount of annual harm this market-distorting tactic is causing. Tariffs could be scheduled as early as 2019. This is expected to be the largest-ever WTO authorization of retaliatory tariffs.

“Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated. The commercial success of products and services should be driven by their merits and not by market-distorting actions,” said Dennis Muilenburg, Boeing chairman, president and CEO. “Now that the WTO has issued its final ruling, it is incumbent upon all parties to fully comply as such actions will ultimately produce the best outcomes for our customers and the mutual health of our industry. We appreciate the tireless efforts of the U.S. Trade Representative over the 14 years of this investigation to strengthen the global aerospace industry by ending illegal subsidies.”

The U.S. government, with Boeing’s full support, has complied with WTO rulings stemming from the two cases the EU brought against the United States. One case has already ended in favor of the United States, and in the other, the vast majority of the allegations the EU made against the United States and Boeing were dismissed. Where there were narrow rulings against U.S. practices, they have been fully addressed to the WTO’s satisfaction.

Just one finding against the United States now remains before the WTO, which concerns a Washington state tax measure. It is under appeal and should be decided later this year or in early 2019. Boeing believes that ruling will be reversed, but if not, Boeing has pledged to do whatever necessary to come into full compliance in the interest of upholding rules-based trade, which is essential to fairness and the future prosperity of the global aerospace industry.



63 Comments on “WTO issues ruling on EU appeal in Airbus-Boeing complaint

  1. So, if I understand, only the difference between the market interest rates and Airbus launch aid interest rate is an illegal subsidies ?

    • All to do with risk adjusting the discount rate, in simple terms the loans were too soft.

  2. A pretty weak victory for Boeing, and the riposte is still to come. I get the feeling a couple of champagne corks will be eased at Toulouse this evening.

    It will be interesting to see if the Airbus claims will be in any way substantiated, and given that likelihood what will happen next. Judging from the rather woeful recent sales by Airbus in the US perhaps they are wanting sanctions from the EU

  3. Granted I think is all a lot of balderdash that this bit of subsidy is legal and that bit of subsidy is not.

    But the WTO rules that Boeing can impose tariffs and then the EU retaliates for what is a legal action?

    Isn’t that the same as not having a WTO, if they agree with you we honor them, if they don’t we won’t?

    If Boeing tries (those US A380 sales will be targeted of course) to impose Tariffs on other industries?

    The torches and pitchforks will come out.

    Harley when they won their case was purely motorcycle sales. Of course that was US law not the far more pure WTO.

    All in all its just a lifetime job for a bunch of lawyers and bureaucrats.

    • read harder again:

      The EU is prepared to retaliate if the US levies tariffs on Airbus airplanes. “On the assumption the US appeal over Washington State subsidies for the 787, created in 2003, is denied, the EU would levy tariffs on Boeing aircraft imported into EU countries.”

      meaning EU only retaliate if WTO “still” uphold the decision that 787 is illegally subsidized

    • Isn’t a certain country currently deciding to go it alone and impose tariffs on a whole bunch of other countries without even consulting with the WTO?!

      Yes, we are referring to aluminum and steel.

      • No disagreement.

        And given I am not a Petulant One supporter, WTO has proven to work so well hasn’t it?

        Relief if any comes 20 years latter?

  4. Scott:

    Would it be possible to have a weekly open members pontificate or slot for other news discussions?

    We have had a lot of news on the Q400, Single Aisles stuff that I think would be worth discussing.

    Some are missed and some get locked out on being behind the firewall which I fully understand.

        • Idea would be once a week (Monday) , not daily and see how its handled.

          Filtered with none if there is a Leeham Pontification Subject.

  5. Surely, the U.S. Trade Representative don’t seem to mind resorting to false hype:

    “President Trump has been clear that we will use every available tool to ensure free and fair trade benefits American workers. This report confirms once and for all that the EU has long ignored WTO rules,” USTR Ambassador Robert Lighthizer said. “Unless the EU finally takes action to stop breaking the rules and harming U.S. interests, the United States will have to move forward with countermeasures on EU products.”

    — and Trump’s chum, Boeing CEO Dennis Muilenburg seems to have ignored taking a real hard look in the mirror:

    Today’s final ruling sends a clear message: disregard for the rules and illegal subsidies is not tolerated.

  6. Regarding:“Boeing is left with a real thin victory,” the lawyer said.

    For those who are interested in how a lawyer affiliated with Boeing might view today’s WTO decision differently than a lawyer affiliated with Airbus, see the excerpts below from the Seattle Times story at the link after the excerpt.

    “In a final decision released Tuesday in Geneva, the World Trade Organization (WTO) ruled that Airbus has failed to fix the harm done to Boeing from the illegal government subsidies used to launch its A380 and A350 jets.

    Following this final appeal of an almost 14-year-long case, the U.S. Trade Representative (USTR) immediately warned that if the European Union (EU) fails to quickly address the ruling, it will seek authority to impose billions of dollars in punitive tariffs on European goods.”

    “A lawyer close to the case on the U.S. side discussed the details of the ruling in advance on condition of anonymity and provided an analysis of the outcome favorable to Boeing.

    He said the ruling “is truly the final decision in the litigation,” and the threat of tariffs could force European governments to rein in their financial support for Airbus.

    “The difference now is that there are actual economic consequences,” he said. “That usually focuses the mind.”

    The implication is that the U.S. will use the decision and the threat of tariffs in any settlement negotiations.

    However, a person close to the case on the European side who also provided details of the ruling in advance on condition of anonymity — and provided a counter-analysis favorable to Airbus — dismissed the idea that the long-running case is nearly over.

    He predicted the legal maneuvering “will continue for years to come” and in the end bring no significant change.

    “This is the latest part of the saga. It’s for sure not the last one,” he said.”

    “One part of Monday’s appellate panel decision was favorable for Airbus, in that it reversed a 2016 ruling that required the European jetmaker to fix the harm from subsidies for its popular single-aisle A320 jet family and the medium-size widebody A330. The passage of time was ruled to have left those older subsidies moot.

    That left it on the hook only for the loans that launched the A380 superjumbo jet and the newest A350 jet.

    The European expert declared that “a very thin victory for Boeing.”

    However, the U.S. can now initiate action.

    The U.S. lawyer said that in prior submissions to the WTO, the U.S. estimated the harm to Boeing from those two jet programs at “between $7 billion and $10 billion annually,” so it s expected to ask for authority to impose tariffs in that range.

    Getting that authorization entails a discussion with the WTO, during which the EU will be allowed to challenge the U.S. proposed damages. At the end of the process, as in the penalty phase of a trial, the WTO will weigh Boeing’s lost sales and lost market share against the EU counter arguments and decide on the monetary amount.

    Boeing said Tuesday this process should be fast enough to allow the U.S. to impose tariffs “as early as 2019.”

    The European expert suggested it will take much longer — “at least 18 months” — implying that the final decision in the case against Boeing would figure in any settlement.

    If tariffs are imposed, they are unlikely to be applied to airplanes. The U.S. can choose whatever products it believes will put the biggest economic squeeze on the European countries. That could be agricultural goods, autos or anything else that will hurt jobs in Europe.”


    • Already linked to by Scott Hamilton.

      What appears to be the case, though, is that the U.S. Trade Representative has the same type of mindset as the witch hunters of the past — looking for evidence to support a foregone conclusion.

      Of course, that’s not a new way of thinking in the U.S. Government, where a severe lack of “critical thinking” seem to have been perfected long before the invasion of Iraq — an invasion that was launched under the premise as a pre-emptive strike against a madman ready to deploy weapons of mass destruction (WMDs).

      • Here’s another “contribution” by long time Boeing-paid shill, “Dr” Loren Thompson. He thinks that “Airbus offers nothing as advanced as the all-composite Boeing 787 Dreamliner”, and that “the U.S. Trade Representative may now proceed to impose tariffs on European exports matching the damage caused by $22 billion in illegal subsidies”.


        Here’s how Robert Block, Vice President of Communications for SpaceX responded to the good doctor back in 2011:

        One of the oldest tactics in Washington is repeating a falsehood in a voice of deep conviction often enough that it eventually becomes the conventional wisdom. Loren Thompson, who masquerades as an independent, disinterested party, apparently believes in this approach.

        Repeating the distortions, innuendo and outright lies from his first blog post, Thompson — a paid consultant for big aerospace companies — is trying to sow doubt about SpaceX’s Falcon 9 launch vehicle and Dragon spacecraft to make it seem that NASA is somehow betting the farm on an unproven company. However, while SpaceX is currently the provider furthest along in the NASA effort to develop cargo and crew capabilities to serve the International Space Station (ISS), there are many others. NASA has a diversified portfolio of players, including the Boeing Co. and Orbital Sciences Corp. And in fact, SpaceX supports competition, which we believe is good for the entire industry, the taxpayer and the country.

        Thompson seems to relish in going on about how SpaceX has missed its schedule, yet fails to acknowledge slips of major government developments like the now defunct Constellation moon program and the fact that it was costing NASA an order of magnitude more money for a program that was falling many years behind schedule before it was finally cancelled. Even the Space Shuttle, about to be retired after 30 years of service, was itself three years late to the launch pad, and that was after Shuttle main engines blew up on their test stands.

        Thompson has referred to past test flights as “catastrophic failures.” In spite of the fact that there was nothing catastrophic about them, test flights are designed to uncover problems, similar to Boeing’s first Delta IV-Heavy test in 2004 which lost its payload and failed to reach its intended orbit because sensors shut down its three main engines prematurely. Lessons learned from these flights are then applied to subsequent flights. It’s a practice that is considered part of sound rocket development. In fact, data from every Falcon 1 launch was used to make our two Falcon 9 flights a huge success, which is even more remarkable when you consider that 50% of new rocket designs fail in their first launches.

        Finally, Thompson claims SpaceX is busting its budget. This is completely untrue. Commercial providers only get paid a fixed sum of money when they meet performance-based milestones. By contrast, the Orion capsule, made by Thompson’s benefactors at Lockheed Martin, has already cost upwards of $5 billion, and is still many years and billions of dollars from completion. Compare that to the mere $300 million that NASA has spent to get the Dragon test flight on the Falcon 9 last December.

        Thompson’s most frequent editorial campaigns have been undertaken on behalf of industry stalwarts such as Boeing, Lockheed and Pratt and Whitney, against the Northrop Grumman/EADS tanker proposal and in opposition to GE and Rolls Royce’s alternative F-35 engine. Most recently, he’s decided to take on the “non-traditional” commercial space industry and has targeted SpaceX.

        Why? His expressed reason in his articles is that he is just a concerned citizen, worried that NASA should not be gambling away its future. Given his client list and intentional distortions, somehow this excuse rings hollow.

        Subterfuge is defined as the use of deceit in order to achieve one’s goal. So why does Thompson choose this tactic? As SpaceX continues to advance and even Boeing has a commercial spacecraft in development, it becomes more difficult to defend Lockheed Martin’s multi-billion dollar Orion capsule. One day Orion might be able to take astronauts to space, but at the moment no one can even say how much it will cost, when it will fly, where it will fly or even on which launch vehicle.

        Loren Thompson is entitled to his opinions, but distinguished publications such as Forbes and its readers should not confuse subterfuge with news commentary.


  7. Interesting that the A380 has only outsold the 747 by less than a hundred frames since launch.

    • Good marketing study guarantees good results like that.

  8. “Following this final appeal of an almost 14-year-long case, the U.S. Trade Representative (USTR) immediately warned that if the European Union (EU) fails to quickly address the ruling, it will seek authority to impose billions of dollars in punitive tariffs on European goods.”

    Let’s say the EU and Airbus have around a year to fix/remedy the few (6%) parts where it was at fault. Airbus repays the loan and/or pays an extra interest.
    Boeing and US are left without a case.

    Since Airbus repays launch aid (they are loans) anyway, it’s not much of a hit.

    A few questions
    What were/are Boeing and USA thinking?
    A: It knows it’s vulnerable regarding WTO action on the massive subsidies and tax breaks regarding the B787 and B777X and figured out striking first was the best defense.
    B: It’s completely oblivious regarding it’s own actions and sees itself as a victim.

    Who’s in the driver’s seat on the USA side of this conflict. Boeing, or US government?

    How do Boeing and the US government expect European countries to keep buying American for their defense forces? Lockheed, Boeing etc make a lot of money on that, vice versa EU defense companies make very little money in the USA.
    The CSeries “dumping” case proved Canada, which has an economy extremely connected and integrated to the USA and a marginal defense industry, was putting up a stiffer resistence than Boeing expected. Imagine what happens if the EU goes in to “French mode” when it comes to defense procurement.

    • First you are attempting to interject logic into this.

      Second, when this was started, Boeing had not started on the road to being a public trough pig itself (yes I know there are endless argument about their military benefit, all EU countries could have done the same and elected not to)

      I don’t deny that Boeing is now worse than Airbus.

      But, the so called Launch Aid is a fallacy in and of itself.

      Like Boeing’s tax cuts, if its sliced and diced right and you look at it sideways through a prism and the moon is full its legal.

      In reality, when you have to sell a certain number of aircraft before it starts to get repaid, then it depends 100% on an assumption.

      Also said number of aircraft are not public.

      So it behooves the receiver (Airbus) to overstate the number so they don’t have to repay it.

      If the A380 never hits that secret number, it never has to be repaid.

      So is it legal until it does not get repaid?

      And don’t tell me about the A320, they messed up as it was early days and they vastly underestimated the numbers. Probably still kicking themselves for having to pay on each one.

      So that turns it from a commercial loan to an investment no one else would make.

      It does not pass the smell test any more than Boeing tax cuts do (and Airbus had their own in Alabama)

      • It says this proces started 14 years ago? Wasn’t that around the time when Boeing was negotiating and implementing tax cuts/subsidies for the B787 program?

        It’s not my personal opinion launch aid is alright. If it was up to me neither Airbus nor Boeing would receive tax cuts, subsidies etc. They are mature companies in mature markets, it’s about time they start acting like that.

        • Julian:

          Agreed and all countries should do the same.

          What is right about any of it? Even started stuff.

          All it does is disrupts trade patterns and wind su getting bad actors like the Petulant One elected (he is a total hypocrisy but he did figure out what was a burning issue)

      • “In reality, when you have to sell a certain number of aircraft before it starts to get repaid, then it depends 100% on an assumption.”

        Obviously. What is the point you are trying to make?

        “So it behooves the receiver (Airbus) to overstate the number so they don’t have to repay it.”

        I completely disagree with this. As a civil development there aren’t the labyrinthine changing requirements and specs in which the developer may choose to hide excess and as a repeat ‘customer’ of the relevant governments it is definitely not in the interest of Airbus to try to screw them over with each launch aid provided.

        “And don’t tell me about the A320, they messed up as it was early days and they vastly underestimated the numbers. Probably still kicking themselves for having to pay on each one. ”

        If you go back to aviation reporting of the late 70s, early 80s, I doubt very much that you’d find any but a far outlier forecast (if even that) suggesting a) that aircraft of the A32x size would be selling in such numbers today and b) that the A32x line would still be the current model today. So ‘vastly underestimated’ yes but ‘messed up’ no.

        • Woody: YOu clearly try to shift the logic and the point.

          Simply put, these are secret agreements!

          How many A380s did Airbus tell France, UK , German and Spain they would sell? We know they predicted 1500 sales of LCA.

          How many A330?

          How many A350?

          And as this is a job creation program and maintaining of technical prowess (instead of putting money into defense) of course they all are in kahoots.

          And the bottom line is, if you never have to pay it back (A380) then its Free Lunch Aid.

          Its all predicated on hitting the numbers and that is not guaranteed is it?

          • I believe the technical prowess was already there. What was lacking was critical mass in terms of resource and market. I don’t quite understand why you are so desperate to spend money on defence. Surely investing it in commercial aviation is just as valid.

            You are correct, the aid was predicated on hitting the numbers, the A320 has hit them five times over and still keeps on contributing to the chancellors coffers. How unfair is that!!

      • “yes I know there are endless argument about their military benefit, all EU countries could have done the same and elected not to.”

        Those governments could not afford to spend money on that way.

        Another option is that the US government grants Boeing and other American OEMs loans, not grants or tax breaks, whereupon the American will say, “That is not our way”!

        • Really? EU can’t afford it?

          Lets see, Rafale at huge costs and they can’t afford it.

          A400 with massive cost overruns and they can’t afford it?

          Each entity building ships to small runs and they can’t afford it.

          A welfare system to die for?

          EU (the big 3) is as well off or better than the US, its not they can’t afford it, they have become co-dependent and put the money elsewhere.

          Ariana Rocket

          Galileo having their own nav system

          Brits thinking of having their own nav system.

      • @TW

        You seem to contradict yourself in your critique of RLI. You criticise it for being opaque ie delays in payments but then you complain when Airbus are on the hook for repayments after the point of payback.

        RLI is effectively the sovereign governments taking an element of equity in Airbus. They take on more risk than traditional debt but they stand to gain from the upside.

        Where are they at present?

        A320 big win
        A330 big win
        A345/6 small loss (was this subject to RLI?)
        A380 big loss
        A350 big outstanding investment but likely a win

        So the governments took a punt and it has worked out for them. This is slightly different to the state of Washington who appear to have to grant massive tax concessions solely to retain Boeing in situ.

        I am not familiar with the intricacies of ‘pork barrel’ politics in the US but on the face of it Boeing stands to be in considerable breach of WTO rules in a manner that will make Airbus infractions look minimal.

        • I fully agree on the Boeing tax breaks. Its a gross travesty.

          You miss the point.

          If you don’t have to pal back FLA, and you don’t, then its not an investment or a risk, its as subsidy.

          I don’t argue the jobs creation or the tech maintenance of industry in the EU area.

          Its like the US and the so called Patriot Act.

          It allows the Government to spy on its own citizens and was grossly abused.

          What you call it is not what it is.

          • Read the post please, the RLI is a risk position for the governments so it acts in a manner more akin to equity. Where they back a winner they earn handsome rewards eg A320, A330. So it is not free.

            Every single A320 and A330 delivered prompt payments. There was something in the FT a few years back about the ‘excessive payments’ on mature programmes. I would think that we are broadly even on the overall initial risk capital vs payback. And the one thing I will agree with you is whether such RLI should be necessary.

            So what it is called ie erm what it is……

          • Can it be said that the launch aid provided to Airbus was not specific to “one company, or to a special group of companies” and that it provided no benefit to Airbus?

            “How does the Agreement define subsidies?

            Definition of a Subsidy

            A subsidy has a very particular meaning under the Subsidies Agreement and U.S. law (Title VII of the Tariff Act of 1930). A subsidy is defined as a “financial contribution” by a government which provides a benefit. The forms that a subsidy can take include:

            -a direct transfer of funds (e.g., a grant, loan, or infusion of equity);

            -a potential transfer of funds or liabilities (e.g., a loan guarantee);

            -foregone government revenue (e.g., a tax credit); or

            -the purchase of goods, or the provision of goods or services (other than general infrastructure).

            Under the Agreement, actions can only be taken against subsidies that are “specific.” A specific subsidy is one that is only given to one company, or to a special group of companies.”


          • @APR

            It is certainly not restricted to Airbus but is widely offered in the aerospace industry in the UK

          • Well we can look to Boeings complaint which was considered by the WTO
            The measures that are the subject of the US complaint may be grouped into five general categories:
            (i) “Launch Aid” or “member State Financing (LA/MSF);
            (ii) loans from the European Investment Bank;
            (iii) infrastructure and infrastructure-related grants; (iv) corporate restructuring measures;
            (v) research and technological development funding.

            From the EUs perspective they see it like this

            The US/EU had an agreement in 1992 over what sort of launch aid was allowed, which from memory the US abrogated the agreement in 2004 or so and went on to use ‘lawfare’ against something they once agreed to. 2004 was about the time the new A350 development was announced.
            (1992 EU-US Agreement on Trade in Large Civil Aircraft)
            US doesnt like to stick to agreements when they feel it ‘hurts them’

            Japan has far exceeded the usual launch aid levels for the development of the 787 – which is 35% of the program , same goes for Italys 15% share.

            “It is also noteworthy that Boeing itself sought royalty-based launch investment from the US government in the 1970’s. However, Boeing is significantly better off under the current system since the company benefits from subsidies (e.g. $3.2 billion tax subsidies by the State of Washington for the B787 alone) which do not have to be
            “Since 1992, Airbus has repaid to the Member States concerned around €6 billion, or €9 billion ($12 billion) in real present value. This means that since 1992, Airbus has repaid over 40 percent more than it has received from EU governments.
            Airbus currently repays €300-400 million per year. Principal and interest of RLI launch investment to Airbus have been and continue to be re-paid on the delivery of each aircraft, along with royalty payments thereafter.”

            I think we can see there wont be any ‘royalities’ for the A380 over and above the RLI

            Boeing uses state government incentives for its new programs, which include those state and local governments issuing bonds which pay for infrastucture so that Boeing doesnt have to.
            No mention of repaying those monies or any future royalties.
            Charleston County in South Carolina even changed its local tax rate from 10.5% down to 4.5%…but theres more as of the local taxes paid , over the first 15 years , 50% is returned to Boeing.

            How about that for launch aid

  9. > However, all previous Airbus aircraft have repaid subsidies or cured improperly low interest rates, according to a lawyer who has seen the decision.

    Can AirBus repay the subsidies and make the ruling moot?

    • So, you run someone over and kill them.

      Oh, sorry, I am sober now and will stay sober for the rest of my life.

      Said victim is still dead arn’t they.

      Said programs still got a foothold they would not have as no one would lend them the money.

      And pox on Boeing and their tax cuts as well.

      • Said ‘dash 80’ programme was funded out of cash that Boeing would have had to pay on ‘supertax’ it was being levied so was effectively free to Boeing. This arose because of the massive profits generated on govt contracts . You could argue that by overcharging the US govt they gained an implicit subsidy.

        Without this subsidy Douglas would still rule the roost. What is your point TW? There is no natural right for a company to dominate an industry. Over time things change.

          • I think though not absolutely certain that it is a quote from the book ‘widebody’ which I am sure you will have perused at some stage.

      • Right, so that puts a ceiling on all this. Worst case, in x years time when the dust settles, AB will be compelled repay illegal subsides.

        • Hello jbeeko,

          Re: “Worst case, in x years time when the dust settles, AB will be compelled repay illegal subsides.”

          Here is what happens next according to some excerpts from a WTO webpage at the link after the excepts. Given that the case is 14 years old, it seems to me doubtful that Airbus will be able to evade US retaliatory actions for much longer unless it promptly remedies their disallowed subsidies to the satisfaction of the WTO.

          “6.10 Countermeasures by the prevailing Member (suspension of obligations)

          Prerequisites and objectives

          If, within 20 days after the expiry of the reasonable period of time, the parties have not agreed on satisfactory compensation, the complainant may ask the DSB for permission to impose trade sanctions against the respondent that has failed to implement. Technically, this is called “suspending concessions or other obligations under the covered agreements” (Article 22.2 of the DSU).”

          “Retaliation is the final and most serious consequence a non-implementing Member faces in the WTO dispute settlement system (Article 3.7 of the DSU). Although retaliation requires prior approval by the DSB 1, the countermeasures are applied selectively by one Member against another.”

          “Accordingly, the suspension can have the effect of inducing the respondent to achieve implementation. The DSU also makes clear that the suspension of obligations is temporary and that the DSB is to keep the situation under surveillance as long as there is no implementation. The issue remains on the agenda of the DSB at the request of the complaining party until it is resolved. The suspension must be revoked once the Member concerned has fully complied with the DSB’s recommendations and rulings.”


        • According to the European side they have up to 18 months to fix it.
          I doubt they have that long. But I think they will want to wait for the the final ruling on the Boeing case, and decide wether it’s better to fix it (leaving the Americans without a case and exposed on their own Boeing subsidies), or the American side will magically turn 180 and want a negotiated settlement (which is what EU wanted from day one).

          The American side has been a step ahead in the proces because they started procedures first, however the scale of the American subsidies will make it much harder to near impossible for Boeing to fix it in case of a negative ruling.

          • That was a fast response. AB must have know or expected the outcome for some time.

            “We are confident that we have now achieved full compliance in the [large civil aircraft financing] case as a clear demonstration of the will to ensure a fair trade environment respecting international trade agreements,” says Airbus general counsel John Harrison.

            “Airbus is looking forward to seeing the same constructive attitude and actions of the [USA] and Boeing in the upcoming [counter-claim] case.”


  10. Both sides are cheating, both are trying to cover it up, both are trying to blame the others.

    I think Boeing and their tax breaks may be in a bit of trouble though. Wonder what the stock price will do if they have to lose those tax breaks?

    • Boeing doesn’t need to worry. Washington State and South Carolina will continue handing out billions in tax-breaks like cotton candy at a carnival.

      • As did Alabama to Airbus! (who happily took it didn’t they?)

        • Hello TransWorld,

          Re: “As did Alabama to Airbus! (who happily took it didn’t they?”

          I don’t understand what your point is in regards to a discussion about subsidies disallowed by the WTO. The WTO does not forbid tax breaks or subsidies. Any large country will have many taxes and subsidy programs which are constantly being modified. What the WTO does prohibit are tax breaks or subsidies that favor one country over another, the penalty for which is that the country that has implemented tax breaks or subsidies favoring its companies loses free access to the markets of the country that has been hurt by them

          Does not the fact that Airbus, a European company, was able to benefit from Alabama’s tax breaks demonstrate that they were not available only to US companies?

          Similarly, the fact that foreign aerospace companies with operations in Washington state have benefitted from the same tax laws that Boeing has benefited from helps the US case regarding these tax laws at the WTO. See the list below from the 6-7-16 Everett Herald article at the link after the list. Toray and Mitsubishi are Japanese companies. There is nothing in Washington’s aerospace tax laws that would prevent Airbus from benefitting from them if they decided to place a factory in Washington state. Has Airbus provided launch aid to any US or Japanese companies for their faculties in Europe under the programs Boeing was disputing at the WTO?

          “Here are some of the larger tax-incentive savings of aerospace employers other than Boeing for the past two years. This list could change as the state collects additional data from recipients of aerospace tax incentives. A final report from the state Department of Revenue is due out in December.

          ElectroImpact Inc.: $2,406,661

          Toray Composites America Inc.: $1,729,596*

          Exotic Metals Forming Co. LLC: $1,777,254

          Senior Aerospace Operations LLC: $1,519,002

          Astronics Advanced Electronic Systems: $1,412,423

          Kaiser Aluminum Washington LLC: $1,209,587*

          Hexcel Corp.: $1,160,787

          Primus Intl Inc.: $1,023,229

          Alcoa: $1,004,382

          Triumph Composite Systems: $790,097

          Goodrich Corp.: $748,240

          Aviation Technical Services Inc.: $545,810

          Mitsubishi: $328,854

          *2015 only


          • Senior Aerospace, #4 on the above list of companies benefiting from Washington states aerospace tax incentives, is based in the UK.

            “Senior plc is the holding company for a global group of firms in the manufacturing and engineering industries, headquartered in Rickmansworth, Hertfordshire. The Company is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.”


          • Regarding my statement: “What the WTO does prohibit are tax breaks or subsidies that favor one country over another, ..”

            This is my one phrase summary of a far more complicated reality, but I believe that it is a correct way to see the “big picture” of a complicated agreement that has lots of qualifications and except-ifs.

            Here are some more details according to a US Department of Commerce Enforcement and Compliance Division webpage (see link below). References to “the Agreement” are references to the WTO agreement.

            “How does the Agreement define subsidies?

            Definition of a Subsidy

            A subsidy has a very particular meaning under the Subsidies Agreement and U.S. law (Title VII of the Tariff Act of 1930). A subsidy is defined as a “financial contribution” by a government which provides a benefit. The forms that a subsidy can take include:

            -a direct transfer of funds (e.g., a grant, loan, or infusion of equity);

            -a potential transfer of funds or liabilities (e.g., a loan guarantee);

            -foregone government revenue (e.g., a tax credit); or

            -the purchase of goods, or the provision of goods or services (other than general infrastructure).

            Under the Agreement, actions can only be taken against subsidies that are “specific.” A specific subsidy is one that is only given to one company, or to a special group of companies.”


            If the above link wasn’t detailed enough for you, then see the link below for an even more detailed WTO summary.


  11. What baffles me is that while the Trump administration is supposedly accepting that the WTO is an useful mechanism for settling trade disputes – it is at the same time deliberately trying to emasculate the entire organisation by refusing to accept the appointment of judges and arbitrators to its tribunals and panels. Clearly some in the White House are opposed to any ‘outside’ definers of trade rights etc.

  12. I’d rather they settle balance of payments to whoever needs it & start afresh on mutually agreed financial grounds. That’ll show Boeing that a majority of worldwide airlines & leasing companies prefer Airbus over Boeing not only because of their more modern & passenger friendly planes, but also because of long term cost of operations being evened out & comparable to slightly cheaper Boeing planes at cost price in any segment. That’s what Boeing operators worldwide say… Boeings are cheaper to maintain. They are cheaper yes, because they’re out dated. I don’t mean the avionics or yolk, i mean the airframe & wing design (save for the 787 which is facing several engine issues at the moment). The 777x has it’s plumbing reduced to liberate some more inches & the rest is the same product developed in the 80’s & launched in the 90’s compared to Airbus 350 developed in 2000’s & launched 2010 onwards. Airbus as standard has wider seats (yeah yeah it depends on how airlines configure their cabins rule too applied) & are definitely better and concurrent than comparable Boeing planes. Having bleedless engines on a 787 isn’t earth shattering as no Airbus passengers complain of foul air like the Boeing fans say about the 787 having completely clean engineless driven air. No biggie really. Pneumatic systems still do a good job for clean air. Pilots love it too. I do agree Boeing is better for BMW style driver final authority kinda pilots, but as the juice & youth & hours accumulated go by, a side stick & full auto trim (without trimming for direction changes as in Boeing’s Auto Trims, AB all done automatically) with a spacious cockpit is what matters to even Boeing Pilots who love Airbus aircraft when they transition to them & swear they won’t go back to Boeings. I don’t blame Airbus for providing a better product & paying back interest payments. I blame Boeing for crying like a wuss & enjoying subsidies without paying back interest.

    • So the old tech is cheaper and that is bad?

      You are talking to a guy who loves his pneumatics.

      But then Boeing didn’t do that with the 787 did they?

      And the 787 engine issues are vastly in the majority of RR.

      From the UK which is still part of the EU.

      From what I see Air Lease firms buy evenly, would like to see some data otherwise.

      Pilots preferring Airbus? Hmmmm. Pilots are not keen on non moving throttles.

      Having driven bump and steer trucks, I prefer the center ball stearing thank you.

      • Sorry you saw erroneous data. Airline lease & outright buy is always higher on Airbus side. Just google indigo partners for the last deal & you’ll get 10 other leasing firms orders in the same search results for Airbus & accordingly you’ll also find out the order book disparity in each segment AB vs BA, lease vs outright buy. It’s not rocket science really. Go to any pilot forums & see for yourself the love ex boeing pilots have for Airbus. Till date i’ve never seen a Boeing returnee forced to be on Boeing from Airbus saying ” hell yeah i’m back on Boeing, i sorely missed moving AT “. Coming back to the point at hand… a better product developed bereft of subsidies is anyday a better product than something outdated despite massive subsidies just to keep making money. For example the 1960’s 707 derived 737 Max which forms bulk of sales.

  13. So despite what some people want to believe, repayable launch aid is legal and tax breaks are not.

    I would like to really know more about the repayable launch aid mechanics. Many people claim that the interest rates are too low, that that it does not have to paid at all if the number of estimated aircraft sold, determined by Airbus, is not reached and so forth and so on. I have never seen any document spelling this out.

    Has anybody out there seen a document like this?

    I will admit, I have other things I would rather do than sit around for hours reading all of these WTO claims, reports and judgments. If it is all in there, then fine.

    • Member State governments advance money to Airbus up to the limit agreed with the US, namely 33% of the total development costs of a new aircraft model.

      This advance is then repaid by means of a levy on the sale of each aircraft.

      The levy is set so that, once an agreed sales target is reached, the whole amount should be repaid with a rate of return, i.e. with interest, over a repayment period of 17 years (i.e. 11 – 12 years from the first delivery).

      The sales target is based on a conservative forecast of future sales, which is established when the investment is made.

      The interest rate reflects the investing government’s objective to earn a good return on its money. It is always in excess of the government’s borrowing rate (i.e. typically 6-8% nominal) and may be considerably higher, depending, for instance, on the anticipated commercial success of the project and on the Member State (Some Member States insist on a higher return).

      Once the actual sales exceed the target, as has happened, investing governments continue to collect “royalties” or “upside” on the additional sales, which will further increase their rate of Return.


      • Yep, all done in secret and no numbers ever published or put out.

        Trust us, we are the Government and Airbus, we would no lie would we?

        We estimate sales of 3000 x A380

        A conservative number then is 1500.

        Unless its an open process subject to public review, its bogus as a 3 dollar bill.

        • Hmm, you keep peddling the same old nonsense about the sales estimate for the A380.

          Back in the real world ; “sales target” for the A380 = original projected point of break even; or about 250 units — i.e. not 1500, or 3000 aircraft.

          As for sales estimate, Airbus have always said that they targeted at least 50 percent of the projected market of some 1200 passenger VLAs over 20 years (i.e. some 300 VLA freighters not included).

          Now, is all this so difficult to comprehend?

          By Airbus Industrie’s estimates, the project will break even after the sale of about 250 aircraft. “Assuming this includes repayment of government aid and amortization of other capitalized costs, each of the first 250 jets would have to carry in its price structure more than $60 million of amortized costs,” Nisbet said.


  14. I guess we will see who is spouting a lot of fumes when the amount of the authorized tariffs in each case is finally decided and made public, assuming it comes out that clean and easy!

    I do find it spurious and silly to claim billions of dollars per year in lost revenue when the production lines are running at full tilt, limited only by the messes made by the OEM or its suppliers.

    • The case was brought when the lines were not full and two US aircraft makers were driven out of the business (Lockheed and MD)

      The arguable point is Boeing would now have 10,000 737s in backlog, not 5,000.

      Or MD would have the 5,000 not Airbus.

      Create an industry that does not exists, don’t hijack ones that do and disrupt entire economies .

      I understand the US resentment. I also agree Boeing has taken up to feeding at the public trough as well.

      I also believe you accept where you are and work to adjust it, you don’t in turn disrupt the whole world system with a tantrum.

      None of it is good.

      • That U.S. resentment is IMO based on nothing but entitlement — that the U.S. has a right to dominate the global aerospace market for large civilian airliners.

        BTW, why should the rest of the world be held hostage to the whims of U.S. policymakers?

        As demonstrated by the latest egotistical self-serving U.S. policy that’s ripping up the 2015 nuclear deal and reimposing sanctions on Iran — when even the secretary of state and the UN agency that monitors nuclear compliance agree that Iran, so far, has lived up to its side of the deal — the U.S. is actually demanding that non-U.S. companies comply with U.S. domestic law.

        What this will lead to IMJ is that Airbus and other non-U.S. OEMs will start to severely limit U.S. content in future LCA programmes — the sooner, the better.

        I’d also be quite worried on behalf of Boeing if a significant number of airlines around the world would start to become more hesitant to buy Boeing aircraft, due to the fact that U.S trade policies are becoming ever more economically muddled and politically toxic.

        For the past year, German officials have been urging their U.S. counterparts to send a new ambassador to Berlin. But after finally receiving one, many may be having second thoughts.

        Within hours of assuming his new post Tuesday, Richard Grenell triggered harsh criticism in this Trump-weary country after appearing to threaten one of the U.S. president’s frequent targets: German businesses.

        In a tweet after President Trump’s announcement to leave the Iran nuclear deal, Grenell wrote that “German companies doing business in Iran should wind down operations immediately.” Germany, alongside France and Britain, wants to stick to the deal Trump is seeking to scrap. And while Grenell’s post may not deviate from the official White House stance on future European business dealings with Iran, the timing and tone struck some German politicians, journalists and business executives as offensive and inappropriate.

        As @realDonaldTrump said, US sanctions will target critical sectors of Iran’s economy. German companies doing business in Iran should wind down operations immediately.
        — Richard Grenell (@RichardGrenell) May 8, 2018

  15. All along above comments every one forget Who thé shareolder is
    When it is a state as china brazil Russie EU. .. shareolder invest what it wants
    Then get dividends thé ways it wants or even sells its shares like EU at market value
    Boeing as a private company plays thé very same game

  16. ok so if you accept the rate was a massive 5% below commercial(probably much less then that as interest rates were super low at the time) then we are talking about 450m/year. Its probably less then that as the money was accessed more slowly. How about the dumping of 787’s into the European market? How much did that cost airbus in A330 sales and margins?

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