After an adverse WTO ruling last week, Airbus has made minor adjustments to the government loans for its A350 and A380 jet programs and claims it has now achieved full compliance with WTO rules. Its lawyers argue that U.S. sanctions against the EU should be minimal.
Responding to last week’s ruling by the World Trade Organization (WTO) that Airbus has failed to remedy the harm done to Boeing from illegal subsidies on its A350 and A380 jet programs, the European planemaker said Tuesday it has agreed on some confidential amendments to the government loans for those programs.
Airbus General Counsel John Harrison claimed Tuesday that with those moves the jet-maker has “now achieved full compliance” with the demands of the WTO.
The U.S. government is unlikely to accept that perspective.
It’s expected to begin formal WTO proceedings in the coming weeks to set up the next stage of arguments in the case: determining how much financial damage Airbus’ subsidized jets have done to Boeing and exactly how much the U.S. will be authorized to impose as tariffs designed to force the European Union (EU) to comply.
Karl Hennessee, Airbus’ head of litigation, said in an interview that Airbus will argue in those proceedings that the damage to Boeing from the A350 and A380 jet programs is so marginal that any U.S.-led sanctions against the European Union over illegal aid should be minimal.
He said slow sales of the double-decker A380 superjumbo jetliner, Airbus’ most ambitious program ever, mean it has had little impact on Boeing’s ability to sell its large 747 jumbo jet.
The European company will also contend that state support for the more popular A350 model was only slightly more of a benefit than could have been gained from commercial bank financing, given cheap alternative funding available at the time amid historically low interest rates, Hennessee said.
Determining the size of sanctions
Airbus is on the back foot after Boeing last week won the latest in a series of disputes over illegal subsidies for the A380 and A350 spanning more than a decade.
The WTO ruled that the Toulouse, France-based planemaker failed to adequately address what amounts to billions of dollars in funding from state backers, opening a route for President Donald Trump’s administration to levy tariffs against EU goods.
Hennessee said the process the U.S. must go through to impose sanctions could take years.
“The only thing that would allow sanctions to be levied is if Boeing is able to prove the A380 poses a direct and imminent and massive competitive cost to their business,” Hennessee said in an interview. The A350 subsidy was “so small that it was not capable of affecting the launch of the aircraft” and had a “tiny, tiny impact on pricing,” he said.
In contrast, Boeing contends that Airbus faces massive sanctions, and much more quickly than Hennessee suggests.
Boeing told Bloomberg that the final WTO ruling makes clear that $9 billion of illegal launch aid to the A380 and A350 caused it real and continuing harm that will “translate into billions of dollars in tariffs on European exports to the U.S. annually.”
Bob Novick, external lawyer for Boeing on the case, said last week that sanctions could be imposed as early as six or seven months from now.
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Keith Rockwell, a spokesman for the Geneva-based WTO, declined to comment.
The claim that the A380 presents little competition to Boeing acknowledges that the superjumbo jet is a financial disappointment.
The world’s largest commercial jetliner has secured barely 330 orders worldwide since its launch in 2000, and the manufacturer long ago acknowledged that it will never make a profit on a program that cost $18 billion to bring to market.
Airbus is also holding out for a ruling by the trade regulator on a counterclaim that Boeing has similarly benefited from illegal funding for its 777 and 787 widebodies that would expose the U.S. to tariffs from the EU, Hennessee said.
However, Boeing thinks its exposure could be as little as $377 million, based on previous rulings.
Ultimately, Airbus hopes to negotiate a settlement with Boeing, Hennessee said. “If we end up with sanctions on both sides, if those are imposed, what are we going to achieve?”