European Commission and the Office of the US Trade Representative announced they have received and are reviewing the World Trade Organisation’s preliminary ruling on the legality of subsidies provided to Airbus by EU governments (AP/Bloomberg/Reuters, 04-Sep-2009). The case was brought by the US in 2004, on behalf of Boeing, which claims the support has materially damaged US interests. The ruling is confidential, with both sides officially refraining from comment, although US politicians labelled the decision a "clear victory” that found EU subsidies of Airbus are illegal. EU officials countered, stating more than 70% of US claims had been dismissed in the ruling. A final ruling will be made public in several months, following a period of commentary from the US and EU, as well as from EADS, Airbus and Boeing.
WTO preliminary ruling on Airbus subsidies delivered
You may also be interested in the following articles...
Frontier and Spirit Airlines ramp up their fleets to support bullish views on passenger stimulation
ULCCs Frontier and Spirit hold orders for more than 150 Airbus narrowbodies to support the proliferation of the model across the US. Frontier’s fleet is projected to grow by 83% from YE2016 to 2021 – from 66 to 121 aircraft. Spirit’s current fleet forecast shows 46% growth from YE2017 to 2021 – from 108 aircraft to 158 aircraft.
Each airline is taking nuanced approaches to financial management of its fleet. Spirit has opted to purchase some aircraft off lease in order to enlarge its number of owned aircraft, while Frontier, which is just embarking on the process of accessing public markets, will use operating leases as its primary financing vehicle.
The planned growth by each airline reflects conclusions reached by Frontier and Spirit about the opportunities for the ULCC model in the US, despite changing market dynamics – namely a push by large US global network airlines to create pricing segments to compete more effectively with ULCCs. Despite the focus on price matching by larger airlines, Frontier and Spirit remain bullish on the opportunities for stimulation in the US market.
The US Big 3 airlines work to slash pensions while maintaining responsible balance sheet management
The three large US global network airlines – American, Delta and United – continue to tout the strength of their balance sheets; the results which they’ve achieved during the past few years by the use of various tools, including free cash flow generation and debt reduction.
Delta is using its newly minted investment grade status to tap markets for creative ways to fund its hefty pension obligations during the next two to three years. American is also working to ensure pension compensation coverage by lifting its liquidity targets as rules allowing favourable minimum funding contributions expire in 2017.
Each of those airlines is bracing for fairly substantial capital expenditures during 2017, largely driven by aircraft acquisitions, but American, Delta and United have no plans to compromise their balance sheet progress irrationally in order to support fleet revamps.