Europe will have to trim its support for the Airbus conglomerate after a World Trade Organization panel upheld U.S. allegations that the company benefitted from improper government subsidies.
The ruling by a WTO appeals board marks a final step in a protracted battle between the U.S. and Europe over government support for Boeing and Airbus, which make the bulk of the world’s passenger jets and are fierce competitors.
A separate WTO panel ruled this year that Boeing had benefitted from about $5 billion in improper government help between 1989 and 2006, a finding that is on appeal.
Although Wednesday’s ruling rejected some U.S. claims, it left a core finding intact: that Europe’s practice of providing “launch aid” loans to develop new aircraft models provided Airbus with below-market-rate financing that gave the company an unfair advantage.
Loans from France, Germany, the United Kingdom and Spain aided development of half a dozen Airbus models and “caused serious prejudice to the interests of the United States,” the WTO found. “The effect of the subsidies was to displace exports of Boeing” airplanes from key markets such as China, South Korea, Australia and Europe.
U.S. officials called the decision a “definitive victory” that will require Europe to recast its launch aid program. Although U.S. officials said little can be done to recapture sales of planes lost over decades of subsidies, they said the ruling could force Airbus to pay higher interest on government loans used to develop its A380 aircraft, a next-generation jet that is competing with Boeing’s 787 Dreamliner.
Launch aid “significantly distorted the launch decisions Airbus has made for more than 40 years,” Tim Reif, general counsel for the U.S. Trade Representative, said in a statement. “This definitive victory will benefit American workers who have had to compete with a heavily subsidized Airbus.”
European officials will have six months to propose changes to the launch aid program.
The European side also claimed the ruling as a victory since it rejected many U.S. claims, including allegations that European research and development support, the development of airport infrastructure and some other programs amounted to Airbus subsidies.
“We see no significant consequences for Airbus or the European support system from today’s decision, as the WTO has now fully and finally rejected most of the US claims,” Airbus said in a release.