Airbus Reaches Deal to Deliver 24 Jets to Etihad Airways
By Sara Kehaulani Goo
Washington Post Staff Writer
Wednesday, July 21, 2004; Page E02
FARNBOROUGH, England, July 20 -- Airbus announced Tuesday a multibillion-dollar agreement with fledgling Middle Eastern carrier Etihad Airways to deliver 24 aircraft beginning in 2006, including four of the manufacturer's 555-passenger A380 super-jumbo jets.
Airbus said the deal was valued at $7 billion based on list prices, which are commonly discounted by a large amount.
The announcement at the biennial air show here came amid heated exchanges between Airbus and its rival, Boeing Co., of Chicago, over whether the two manufacturers are unfairly subsidized by their respective governments. Boeing, which is developing a new aircraft, the 7E7 "Dreamliner," has raised its contention with U.S. officials that Airbus may be receiving improper subsidies from European governments. For its part, Airbus asserts that Boeing receives unfair tax advantages.
European Commission and U.S. trade officials will hold an informal meeting Thursday in Brussels to discuss concerns about subsidies received by Boeing and Airbus. Sen. Patty Murray (D-Wash.) has urged U.S. officials to abandon a 1992 U.S.-European agreement that would limit government subsidies to the companies. The meeting is expected to be the precursor to formal talks, a European official said. A U.S. trade official said "the meeting is to discuss bilateral issues regarding large civil aircraft."
At the air show here, Airbus chief executive Noel Forgeard said his company receives government loans but repays them with interest at market rates. He charged that Boeing received $3.2 billion in tax relief from Washington state to encourage the company to maintain certain operations there.
Boeing said Airbus's subsidies and its own tax arrangements with the state were not comparable. Airbus receives government support for upfront investment costs whereas Boeing's tax relief, which begins in 2008, was unrelated to the company's decision to build its new plane, Boeing spokesman Tom Downey said.
U.S. Commerce Secretary Donald L. Evans recently said he thought Boeing had legitimate concerns about whether Airbus had violated the U.S.-European agreement on subsidies.
"On our side, we have got a number of concerns about the way things are done on the Boeing side," said an E.U. official who requested anonymity because of the sensitivity of the issue. "Both of them are involved in an industry where they require government support. It's the way you go about it and the limits you put on it. It's reasonable in any circumstance to review agreements that" are old.
The competition between the world's two largest commercial aircraft manufacturers has intensified as both companies have unveiled development plans for new aircraft. Although the new planes don't compete directly for the same market, Airbus's planned super-jumbo jet, scheduled for first deliveries in 2006, threatens to overtake Boeing's very profitable 747.
Airbus's A380 will have 35 percent more space than a typical Boeing 747. Many airlines that have ordered the Airbus plane say they will use it to replace aging 747s. Airbus has 133 orders for the A380, including the new Etihad Airways agreement.
Two weeks ago, Boeing announced 10 new 7E7 orders from two European charter airliners. The carrier has not announced any further orders for its new plane at the Farnborough International air show, a time when such announcements are typically made.
Etihad Airways, an eight-month-old carrier funded by the United Arab Emirates and based in Abu Dhabi, said it agreed to a memorandum of understanding with Airbus to purchase 12 A330-200 twin-engine wide-body aircraft, four long-range A340-500s, four A340-600s and four A380s. Final orders are scheduled to be signed in September and deliveries would begin in 2006, Airbus officials said.
Etihad Airways is one of several Middle Eastern carriers that have ordered the Airbus double-decker A380 with plans to create large hubs connecting passengers from India, Europe, Asia and North America. The airline plans to rapidly expand its fleet to 50 aircraft by 2010 from its current six planes. It does not fly to the United States.
Etihad's chairman, Ahmed bin Saif Nahyan said he considered ordering Boeing's new 7E7 plane, but the first deliveries of the plane would be too late in 2008. "This is only a start for Etihad," Nahyan said.
Staff writer Renae Merle contributed to this report.
© 2004 The Washington Post Company