1-Apr-2011 9:21 AM

Boeing and Airbus respond to WTO ruling

World Trade Organisation (WTO) published (31-Mar-2011) a final case ruling on government subsidies. Both sides may appeal the ruling. As part of the ruling, the WTO stated Boeing received at least USD5.3 billion in in illegal subsidies from the federal government over the past several decades. In Jun-2010, the WTO found Airbus had received more than USD20 billion in illegal government subsidies. Airbus and Boeing responded as follows: [more - WTO] [more - European Commission]

  • Boeing: Stated the report confirms "the massive market advantage Airbus has enjoyed from billions in illegal government subsidies provided to fund the company's commercial airplane product line since its inception more than 40 years ago". Boeing stated illegal government subsidies to Airbus included:
    • USD1.5 billion in R&D subsidies;
    • USD1.7 billion in infrastructure subsidies;
    • USD2.2 billion in equity infusions;
    • USD15 billion in launch aid (including USD4 billion for the A380). [more - Boeing]
  • Airbus: Stated the report "publicly condemned the United States for giving Boeing massive illegal subsidies that caused Airbus to lose USD45 billion in sales". Airbus outlined the following from the report: 
    • Boeing would not have been able to launch the B787 without illegal subsidies;
    • Boeing has received “at least USD5.3 billion” of US taxpayer dollars which has been determined illegal;
    • An additional more than USD2 billion in state and local subsidies that Boeing will receive in the future are illegal;
    • The effect of the subsidies is significantly larger than the face value of the subsidies in light of their particularly pervasive nature;
    • The pervasive subsidies have thoroughly distorted competition within the aviation industry, directly resulting in significant harm to the European aerospace industry. [more - Airbus]

The European Commission welcomed (31-Mar-2011) the report, which it stated "found that billions of dollars in US federal and state subsidies granted to Boeing are illegal under WTO rules". [more - European Commission]

Separately, the Aerospace Industries Association welcomed (31-Mar-2011) the ruling, which it stated "rejected all but a fraction of Europe’s claims against the United States of illegal subsidisation of its large commercial aircraft industry". [more - Aerospace Industries Association

European Commission: "This WTO Panel report clearly shows that Boeing has received huge subsidies in the past and continues to receive significant subsidies today. The US began this dispute in 2004 and now finds itself with a crystal clear ruling that exposes its long-running multi-billion-dollar subsidisation of Boeing through federal and state programmes as illegal. These subsidies have resulted in substantial harm to EU interests, causing Airbus to lose sales, depress its aircraft prices and unfairly lose market share to Boeing. The detrimental costs to EU industry from this lengthy and onerous subsidisation run into billions of euro. We therefore welcome the WTO Panel's report and call on the US Government to take the appropriate steps that may assist to achieve a mutually agreed solution to this dispute," Karel De Gucht, Trade Commissioner Karel De Gucht. Source: Company Statement, 31-Mar-2011.

Airbus:Finally the truth emerges: Boeing has received and continues to receive subsidies which have a significantly greater distortive effect than the reimbursable loans to Airbus. Taking the cases together, the WTO has now specifically green-lighted the continued use of government loans in Europe and ordered Boeing to end its illegal cash support from US taxpayers. It’s time for Boeing to stop denying or minimising the massive illegal subsidies it gets. Boeing has shot themselves in the foot with the WTO proceedings,. The company has achieved a massive condemnation of its US funding mechanisms – provided the US is willing to implement the ruling - while the European mechanism has been approved as a legal instrument. The only result of this anachronistic battle is that it limits America’s and Europe’s ability to compete with emerging competitors that have access to unlimited government funding,” Rainer Ohler, Head of Public Affairs and Communications. Source: Company Statement, 31-Mar-2011.

Boeing: "This WTO ruling shatters the convenient myth that European governments must illegally subsidise Airbus to counter US government assistance to Boeing. The ruling rejects 80% of the EU's claims against the US, finding no more than USD2.7 billion of impermissible subsidies to Boeing not previously remedied. That amount includes USD2.6 billion in NASA R&D funding, which is but a small fraction of the total amount challenged. Comparing today's decision with the decision last June reveals a market distorted by Airbus' practices, with illegal launch aid being the key discriminator. The WTO ruling on launch aid goes to the heart of the Airbus business model, which now must change. In contrast, there are no comparable findings or consequences to the US or Boeing from today's decision, as the WTO has now fully and finally rejected most of the EU's claims," J Michael Luttig, executive vice president and general counsel. Source: Company Statement, 31-Mar-2011.

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