Airbus Keeping Close Eye on Coming Subsidy Ruling

 - August 31, 2009, 9:01 AM
Copyright AIRBUS

The World Trade Organization (WTO) any day now plans to issue an interim ruling on U.S. allegations over unfair subsidies made by European governments to Airbus. It remains unclear whether or not it will officially make public the content of the ruling, but the long-awaited case approaches its climax just as the governments prepare a new package of some $5 billion in state-backed loans to fund the development of the European airframer’s new A350 airliner. The governments of France, Germany, the UK and Spain have made it abundantly clear that they will not halt their practice of backing Airbus programs with refundable cash advances and loans.

On August 15, Lord Mandelson, Britain’s Secretary of State for Business, provocatively announced a £340 million ($550 million) guarantee and took the opportunity to accuse the U.S. of hypocrisy over subsidy allegations. In his previous job as the European Union’s trade commissioner, Mandelson took a similarly belligerent line in supporting a counter-claim alleging U.S. subsidies for Boeing, and the WTO plans to rule on that case before the end of this year.

The governments of France, Germany and Spain all appear close to agreeing on the full extent and terms of their financial commitments to Airbus. Having already signaled their intent to provide funding for the A350, all that seems to be standing in the way is the traditional eleventh-hour horse trading over workshare for the various Airbus factories in those countries. That issue partly got resolved in mid-August when EADS agreed that the group’s Hamburg, Germany factory will host the final assembly line for the long-awaited replacement for the A320 family of narrow-body airliners.

The long-running row over allegedly anti-competitive subsidies began at a time when credit flowed much more readily on world money markets than it does today. The anticipated WTO rulings will also arrive in the middle of a chronic downturn in the fortunes of the air transport market, as governments worldwide face great political pressure to protect jobs. Mandelson and his European counterparts evidently feel they have more to fear from voters baying for government action to rescue industries torpedoed by the global banking crisis than they do from the collective might of U.S. government attorneys and WTO officials.