EU subsidies for Airbus 'illegal'

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By Donna Borak ASSOCIATED PRESS

The World Trade Organization has ruled that the European Union provided illegal subsidies to Airbus for its aircraft, a House Democrat said Friday.

Washington state's Rep. Norm Dicks, who was briefed by U.S. trade officials on the confidential decision, said the WTO ruling confirms a complaint by the U.S. in 2004 that shows "all Airbus aircraft have received illegal subsidies and that these have caused material harm to Boeing."

The WTO handed its interim ruling to the U.S. and European Union, but didn't reveal the results, partly because of the sensitive company information contained in it. Both Washington and Brussels confirmed they received the ruling.

Lutz Guellner, spokesman for the European trade commissioner, said, "It is a long document of more than 1,000 pages, which we will study carefully."

In its suit, the U.S. claimed government subsidies for Airbus created unfair competition in a market worth $3 trillion over the next two decades. The ruling could set important precedents on how far governments can go to support the aviation industry.

The EU is likely to appeal, and the companies must wait for a decision next year in an Airbus challenge to what it sees as unfair U.S. government support for Chicago-based Boeing Co. Some observers said the complexity of the two cases makes it more likely the issue will be resolved by negotiations between the parties than by the WTO.

Wall Street analysts seemed neither surprised nor disappointed by the WTO ruling. Wayne Plucker, manager of Frost & Sullivan's North American aerospace research firm, said well-developed areas like the U.S. and the EU "don't really need subsidies."

Still, Mr. Plucker said Airbus enjoys a clear advantage over Boeing because of the European subsidies, and while many other countries are using government support for fledgling aviation businesses "because it's a great source of good jobs and high-tech ventures ... eventually Airbus and Boeing need to compete on an even playing field."

The so-called launch aid included loans to Airbus that helped it develop new airplanes as it overtook Boeing as the world's top producer of commercial airplanes.

The secretary treasurer of the International Federation of Professional and Technical Engineers, Paul Shearon, called on the U.S. government to require Airbus to divest itself of any illegal subsidies used to finance bids for government contracts, including its offer for a $35 billion aerial refueling tanker for the Air Force.

Airbus, whose parent company, European Aeronautic Defense and Space Company N.V., is partnered with Northrop Grumman Corp., is competing against Boeing on the tanker deal.

Both Boeing and Los Angeles-based Northrop have been competing for years over the tanker contract, which could surpass $100 billion over two decades.

Mr. Dicks and other Washington state lawmakers who represent areas with Boeing jobs at stake contend that the Pentagon should account for the WTO's decision as it picks a contractor for the deal.