Airbus to seek loan for airplane

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European aircraft-maker Airbus plans to ask for government-subsidized loans worth up to $1.24 billion for a new airplane, a request that "confirms the necessity" of a World Trade Organization case filed this month by the Bush administration, a U.S. trade official said yesterday.

"We warned that this would happen. This puts the truth to it," said Neena Moorjani, spokeswoman for the U.S. Trade Representative's Office.

The United States and the European Union swapped suits at the WTO Oct. 6, each accusing the other of illegally subsidizing domestic aircraft manufacturers.

European consortium Airbus and Chicago-based Boeing had operated under a 1992 agreement that allowed a set level of subsidies. But the Bush administration said the agreement had outlived its usefulness because Airbus had progressed from an infant company to a mature business, last year passing Boeing as the world's top supplier of commercial aircraft.

Airbus, though, still wants its subsidies.

Airbus Chief Executive Noel Forgeard this week told the London-based Financial Times his company would ask for government loans to cover development costs of its A350 aircraft, which would compete with Boeing's new 7E7 "Dreamliner."

"We shall obviously apply for refundable launch funds," Mr. Forgeard told the daily.

Airbus would be able to finance development without the government loan, he added.

The statement drew an immediate response from the Bush administration.

"He flaunted the fact that Airbus will ask taxpayers to foot the bill, even though Airbus can afford to fund the plane itself," Miss Moorjani said. The admission proves that Airbus is "grown up" and no longer needs subsidies, she added.

The United States and 25-nation European Union trade more than $400 billion in goods and services annually, the biggest such partnership in the world, but relations have been marred by a series of trade disputes. The aircraft fight further strained relations.

The Airbus-Boeing battle followed calls from Boeing President and Chief Executive Officer Harry Stonecipher to confront the European conglomerate and a campaign-trail pledge from President Bush to do just that.

The administration said European governments have subsidized Airbus, a consortium of French, German, Spanish and British companies, to the tune of $15 billion in low-cost, no-risk loans for new projects since 1992.

Europe's WTO case responded with a claim of $23 billion in subsidies for Boeing since 1992, including local tax breaks, infrastructure support, defense contracts and NASA research.

The stakes are especially high as the companies engineer new, competing aircraft.

Airbus has developed the massive, 555-passenger A380 and has plans for a technologically advanced A350, which would vie with Boeing's 7E7 for a share of the global market.