Leeham News and Analysis
There's more to real news than a news release.
No immediate effect from WTO ruling
Update, Sept. 6: There is a report out of Germany that the WTO found state loans to Airbus to be acceptable. The conflicting information and enigma goes on.
Update, 2:00pm: The New York Times says 70% of the USTR/Boeing complaint against Airbus was rejected by the WTO. The link is contained in the NY Times reference below in the list of articles.
News Flash, 11:35 AM: Reuters is now quoting EU sources that the WTO didn’t hand the US and Boeing the victories that have been claimed:
BC-TRADE/AIRCRAFT-EU-WTO (URGENT)
WTO did not rule Airbus aid illegal – EU sources
BRUSSELS, Sept 4 (Reuters) – Comments that the World Trade Organisation on Friday backed a U.S. complaint against European Union aid to plane maker Airbus are wrong and misleading, EU sources with knowledge of the WTO ruling said.
“The ruling is not a black-and-white case. It simply is not a great victory for the United States,” one source told Reuters on condition of anonymity.
“The claim that the WTO ruled that subsidies given (by the EU) to Airbus for their A380 plane were illegal is wrong and misleading.”
Reuters reported earlier from Washington, citing a person familiar with the case, that the WTO had ruled that billions of dollars in European loans to help Airbus develop civilian aircraft were an illegal subsidy under world trade rules.
Another EU source said aid given by Brussels to the European plane maker for its A350 aircraft was “not mentioned in the (WTO) report and so would not have to be repaid”.
He was speaking after the WTO issued a pivotal, but highly confidential, ruling on subsidies given by the EU to Airbus that stands to impact the global aircraft sector.
The Hill, Aug. 31: This specialty web publication follows Congress and has this long analysis of the prospect of the WTO ruling on the tanker competition, published in advance of the Sept. 4 report.
Key articles on the WTO dispute:
Reuters, Sept. 3: This one is a good recap of implications, reported in advance of the WTO staff report.
Financial Times, Sept. 3: Another good story in advance of the ruling about the broader implications of the US/Boeing win.
AP via Business Week: This story presents a good analysis on how the WTO ruling could hurt both Airbus and Boeing.
Reuters, Sept. 4: This is a great Fact Box recapping all the issues involved.
Reuters, Sept. 4: Boeing’s Defense unit says the Pentagon will have to decide what, if any, affect the WTO action will have on the tanker competition, according to this Reuters report.
The Economist, Sept. 4: Here’s a European take on the WTO trade dispute.
SkyNews (Europe), Sept. 4: As expected, the UK said it will go forward with plans to loan Airbus more than $500m for the development of the A350.
Bloomberg News, Sept. 4: This report says the WTO did find illegal subsidies were provided on the A380, conflicting with the Reuters report above.
Bloomberg News, Sept. 4: It didn’t take long for a Boeing supporter to tie the WTO report to the KC-X tanker bid. Note on comment on this issue below the jump at the end of our assessment:
U.S. Air Force Tanker Bid Should Consider WTO, Rep. Dicks Says
2009-09-04 19:22:06.212 GMT
By Gopal Ratnam
Sept. 4 (Bloomberg) — The U.S. Air Force must tailor its new refueling tanker bid by considering today’s World Trade Organization’s ruling that Airbus SAS received some illegal subsidies, Representative Norm Dicks, a Democrat from Washington state, said in a statement.
“It would be inconceivable for the Defense Department to issue its request for proposals for the new Air Force refueling tanker without including a provision which recognizes the ruling issued today by the WTO panel,” Dicks said in the statement.
“The U.S. government cannot reward illegal market actions that have harmed U.S. manufacturers.”
The Hill, Sept. 4: This specialty web publication follows Congress and has this long analysis on the possible effect of the WTO report on the tanker competition.
Aviation Week, Sept. 4: Reporter Robert Wall, one of the most insightful aviation journalists, is based in Europe and has this very good report on the WTO conclusions.
New York Times, Sept. 4: The NYT says the WTO found some but not all Airbus aid was illegal and that “most” of the financial aid to Airbus was legal.
Financial Times, Sept. 4: This London-based story has some specificity on the illegal launch aid attributed to the A380.
Reuters, Sept. 4: This article focuses on the affect of the WTO ruling on the pending KC-X tanker competition.
Our Take:
There won’t be any immediate practical affect from the World Trade Organization staff report that Airbus benefited from improper subsidies in the development of its entire line of aircraft. The immediate affect will be political and public relations points.
Former defense official favors split tanker buy
George Talbot of The Mobile Press-Register has an article about John Lehman, a former defense official in the Reagan administration, favoring a split buy for the KC-X program. Read more
USAF Cadets work on tanker fuel burn reduction, and other things
US Air Force Cadets are designing wing refinements for the aging fleet of Boeing KC-135R tankers to improve fuel efficiency by 8%, reports CleanTechnica.com.
Why a bunch of cadets? Perhaps because the US Air Force Academy in Colorado Springs aerospace engineering programs ranks in the Top 5 in US News & World Report’s annual rankings (2009). (None of the universities or colleges in Washington State, where the KC-135 was built and where Boeing Commercial Airplanes is headquarter, ranks even in the Top 15 aerospace engineering schools.)
Airbus analysis
AirInsight’s Addison Schonland and Ernie Arvai have published a 54-page report about Airbus, A Market Analysis and Outlook. The report looks at each A3-Series program, including the forthcoming A350, and the A400M and KC-30.
A350/UK Funding
It’s a bit of old news this week, but as readers know the UK agreed to kick in GBP340m to fund the A350 development. Predictably, the US Trade Representative and Boeing objected. As long-time readers know, so do we. We don’t like government participation of any kind to corporations (it doesn’t matter what industry it is). Furthermore, at June 30, EADS had $9bn in cash vs. $5bn for Boeing.
EADS short sales
A while back we published the short stock sales for Boeing. We’ve been trying to find short sales for EADS and the best we could do is find, through one of the US aerospace analysts, the EADS short sales in the USA, where the stock is traded Over The Counter (OTC).
The problem is that there are only an average of 230 trades per day, a volume that is so small as to be almost meaningless. Our analyst friend could not find any data in France about EADS short sales, but neither he nor we know if this is a function that the US data base used doesn’t find it or if by regulation this doesn’t have to be disclosed. If there are any Europeans who can fund the EADS short sales in France, Germany or any other market in which EADS stock is heavily traded, please send us the data on an Excel spreadsheet.
Meanwhile, here is the short sales record on the OTC market. Because the average daily trade is so small, the short interest ratios are huge.
EADS announces earnings
We’ll provide analysis later today (PDT) but here is the 27 page earnings statement and accompanying presentation.
Update, 10:30 PDT: Here’s a synopsis of the EADS earnings call and our comments.
EADS Earnings Preview
EADS, parent of Airbus, announces its 2Q09-1H09 earnings July 28. Here are some topics that ought to be covered and questions analysts and reporters should ask:
WTO Countdown
It looks like the long-awaited, and long-overdue decisions on the complaints between the US and Europe over “illegal” subsidies to Airbus and Boeing may finally be about to be issued.
The London Times reports that a decision is due very soon from the World Trade Organization, which has been reviewing the complaints for two years now.
And now a word on the tanker
Let’s take a diversion from Boeing’s Soap Opera over the 787 Line 2 and will-they-stay-or-will-they-go.
CNBC has a long piece plus several video clips with Ralph Crosby, the CEO of EADS North America, on the KC-X tanker issue. It’s well worth reading.
Well, we’re almost diverting from the Soap Opera. The Mobile Press-Register has a piece on the irony of Boeing Commercial Airplanes maybe planning to build the 787 in Charleston on a business model that is pretty close to the one Northrop Grumman and EADS plan to use to build the KC-30 tanker.
Random Thoughts, July 6
Here is another in our occasional stream of random thoughts.
Bill Virgin and Manufacturing Alert
Bill Virgin, a former columnist with The Seattle PI, was zapped when the print edition shut down and it became a web-only publication. He’s launched his own newsletter, Manufacturing Alert, which covers a variety of industries and issues in Washington State. The modestly-priced subscription-only newsletter may be found here. His June 22 issue notes there are now at least five aerospace groups in Washington dedicated to keeping Boeing here and encouraging aerospace in the state. These are the following groups (with our additional comment describing the mission of each):
First report on AF447
This BBC story is a good one on the first French analysis of the crash of Air France 447. Most surprising is that the investigators believe the A330-200 was intact when it hit the water in what sounds like a more-or-less level position, on its belly. Earlier reports suggested the plane broke apart in the air.