Business World

Tuesday 19 June 2018

Airbus says it will obey WTO ruling on aircraft subsidies

Stock photo: AFP/Getty Images
Stock photo: AFP/Getty Images

Tim Hepher

Airbus plans to set out measures that will bring it into line with a World Trade Organization ruling on subsidies for its A350 and A380 jets, a senior lawyer said on Tuesday.

The move comes after the United States won the right to seek sanctions against European Union goods following a partial victory in its 14-year legal battle against European government support for Airbus at the World Trade Organization.

The EU says it expects to strike a similar legal blow in a parallel case on US support for Boeing later this year.

"We will be announcing this morning a complete package of measures to fully comply with last week's ruling, putting us basically at a point where we have nothing left to answer and no sanctions possible," Karl Hennessee, senior vice president and head of litigation at Airbus, told BBC radio's Today programme.

The subsidies row coincides with transatlantic tensions over US aluminium and steel tariffs, and the impact on European firms from Washington's decision to exit an Iran nuclear pact.

It is also part of a two-way battle between the EU and the United States over aircraft subsidies that could spark tit-for-tat reprisals between the two trade superpowers.

In a rare public face-off between senior strategists in the dispute, Boeing's chief external lawyer in the case told the same BBC programme that the US would be free to target any European products, not just aerospace.

"The WTO will decide what the proper number is and ... give the US that authority," Robert Novick, co-managing partner at US law firm WilmerHale, told the BBC Today programme.

"In parallel, the US will develop a list of products on which it might consider imposing countermeasures," he added.

The transatlantic dispute stems from mutual claims that the world's two largest planemakers benefited from illegal subsidies in the form of subsidised government loans to Airbus and research grants or tax breaks to Boeing.

Underscoring the cost and complexity of the case, the two sides have been arguing since 2011 about whether they complied with earlier rulings.

Airbus did not say how it would comply with the final ruling on European aid but a European Commission document said it would repay an A350 loan to the UK government this year and reduce the drawdown of other loans.

It also said the bankruptcy of Russian carrier Transaero, resulting in fewer A380 deliveries, had helped it to comply, while other aid been blunted by the passage of time - an argument that has previously been rejected by the US.

Hennessee also called for a settlement similar to one between Canada and Brazil that set the tone for global plane financing.

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