Airbus's parent company has offered to give up controversial aircraft loans from European governments -- with certain conditions -- as a way to revive negotiations between the United States and the European Union over disputed subsidies to commercial planemakers.
The offer by European Aeronautic Defense & Space Co., spelled out in a confidential letter to E.U. Trade Commissioner Peter Mandelson on May 30, isn't likely to sway Boeing Co. in the transatlantic trade dispute. But top managers at EADS regard their offer as a potential way of restarting talks on the issue, according to a person familiar with the discussions. EADS owns 80 percent of Airbus, and Britain's BAE Systems PLC owns 20 percent.
Separately, Northrop Grumman Corp. and EADS have agreed in principle to jointly battle Boeing for a multibillion-dollar contract to supply U.S. Air Force aerial refueling planes, people familiar with the situation said.
The United States filed a suit with the World Trade Organization on May 31 charging that European financial support to Airbus violates global trade rules. The E.U. responded by countersuing, saying U.S. government support to Chicago-based Boeing is unfair.
On May 30, hours before the office of the U.S. trade representative announced its intention to file with the WTO, senior EADS managers sent a letter to Mandelson titled "Foundation for a negotiated solution to commercial aircraft trade issues." The document, which was reviewed by the Wall Street Journal, says that in return for several conditions, "Airbus is prepared to terminate the current practice of government supported launch," referring to financial aid for the development and launch of new aircraft.
Among the conditions spelled out to the trade negotiator is the implementation of "a balanced regime for equitable indirect support to commercial transport aircraft development," in other words, a level playing field in terms of government support. Both sides have said they want some kind of balanced development-support system but have failed to agree on what it would look like, and each wants it on its own terms.
The EADS document also called for greater "openness to competition" on both sides of the Atlantic for government procurement of military aircraft derived from commercial jetliners -- a reference to surveillance and refueling aircraft. EADS has been trying to break into the giant and lucrative U.S. defense market with military derivatives of its civilian jetliners, but with only minor success. Boeing, meanwhile, has objected to EADS efforts to gain entry into that market because there's far less for Boeing to gain in Europe's much smaller defense market.
An EADS spokesman declined to comment on a possible joint bid with Northrop for U.S. refueling aircraft. Randy Belote, a Northrop spokesman, would say only that the Los Angeles company is "very interested in participating" if a "full, fair and open competition" is held.
Asked to comment on the conditions in the EADS letter, a spokeswoman for the E.U. trade commission said she didn't think there would be an opportunity for talks. "As long as we are in a litigation process as the U.S. decided to lead us, we can't focus on a general negotiation," said the spokeswoman, Claude Veron-Reville.
Despite the WTO filings by the United States and E.U., EADS officials stand by their position in the document and still want to negotiate a deal, according to the person familiar with the situation.
Executives at EADS say they still prefer a negotiated settlement with Boeing rather than a fight in the WTO. The two suits could become the most complex and costly litigation in the global trade body's 10-year history, and the Europeans have said both the United States and E.U. will lose out as a result of the fight.
At the heart of the U.S. suit is a European system of granting Airbus low-risk government loans, known as "launch aid." Boeing contends this has allowed Airbus to develop a family of jetliners far faster than it could have done with commercial financing alone. Europeans respond that Boeing has benefited from huge U.S. government contracts and research grants.
EADS and BAE officials say they haven't decided whether to use launch aid to help finance the proposed Airbus A350 jetliner, which is meant to compete with Boeing's 787 Dreamliner, now in development. EADS has said it would consider forgoing launch aid for the A350 if the United States and E.U. make progress on subsidy talks.
Boeing and U.S. government officials have demanded repeatedly that the E.U. and EADS abandon launch aid before negotiations begin. Mandelson offered this spring to gradually reduce launch aid in return for concessions from the United States, but Washington rejected the proposal.
When the United States announced its WTO case, though, it left the door open. In a statement on May 30, U.S. Trade Representative Rob Portman said: "We still believe that a bilateral negotiated solution is possible."