European Governments' Aid to Airbus Ruled Illegal by WTO

By Peter Whoriskey
Washington Post Staff Writer
Saturday, September 5, 2009

The World Trade Organization has ruled that billions of dollars in aid that European governments gave to aerospace giant Airbus constitutes illegal subsidies, sources familiar with the decision said, rendering a long-awaited legal victory for U.S. rival Boeing.

The two aerospace companies have been warring for years over what kind of government support should be legal and what kind should be deemed an unfair advantage in their global competition.

Although the ruling is preliminary and a full resolution of the issues is months away, Boeing's supporters in Congress called it a critical vindication. Lawmakers briefed by U.S. trade officials applauded the WTO decision.

The "unfair" subsidies "allowed Airbus to increase its market share in the large civil aircraft market and to steal U.S. aircraft manufacturing jobs," Rep. Norm Dicks (D-Wash.). "The ruling is encouraging."

Representatives of Airbus and Boeing declined to comment on the roughly 1,000-page decision.

One of the key elements in the case involved "launch aid," or at least $15 billion in loans the European governments have issued for Airbus. In addition to having favorable terms, the loans had to be repaid only if the projects they supported were successful. Some of the loans went to support the Airbus effort to build its A380 superjumbo jet.

The WTO ruling found that all of the launch aid was illegal, according to sources familiar with the decision, which was not made public. The sources discussed the ruling on the condition of anonymity because the decision is not yet final.

The ruling on launch aid is considered crucial to the companies' ongoing competition because Airbus has received similar commitments for more than $4 billion in government loans to help it produce a plane called the A350, a rival to Boeing's 787 Dreamliner.

U.S. and Boeing officials have urged that if the launch aid in the pending case is declared illegal, then similar subsidies for the A350 should be suspended.

The decision also found that other types of government aid to Airbus, including some for research and development, and some for building plants in Toulouse, France, and Hamburg, were illegal, the sources said.

"This ruling is much more than a confirmation that Airbus has been breaking the rules," Sen. Patty Murray (D-Wash.) said in a statement. "It is a victory for American workers who produce the world's best planes but who have been forced to fight an uphill battle."

But European officials briefed on the ruling said the decision was not so clear-cut.

"The findings are much more nuanced than that," according to an unnamed European source quoted by Reuters.

The Europeans are still waiting for a WTO ruling on their counter claim regarding U.S. help for Boeing. It charges that military contracts, NASA grants and state tax breaks are illegal.

A preliminary WTO report on that issue is expected in six months or more.

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