Airbus move to delay aid for new liner puts pressure on US, Boeing

Airbus SAS's decision to forgo for now $1.8 billon in government loans for its new A350 jetliner weakens U.S. complaints against European airplane subsidies, industry analysts said.

“The shoe is on the other foot,” said David Pritchard, a research associate at the State University of New York at Buffalo who specializes in the aircraft industry. “There is nothing to go after in Europe now.”

The announcement by the Toulouse, France-based company is likely to put pressure on rival Boeing Co. to lessen its dependence on U.S. government aid, the analysts said.

Airbus announced yesterday that it would start work on its new plane without the cheap, low-risk loans from European governments it has depended upon in the past to develop new models. Airbus has received $15 billion in such “launch aid” since 1972.

Launch aid provided up to a third of the cost of previous Airbus projects, according to the U.S. Critics say that effectively shielded Airbus from the risks of failure, and helped the company end the U.S. dominance of the commercial aircraft market. Claude Barfield, an analyst at the American Enterprise Institute in Washington, says that while both companies get government aid through defense contracts and tax breaks, launch aid has been a unique and contentious arrangement, reports Bloomberg.

In a reply to that statement, issued late on Thursday, a spokesman for European Trade Commission Peter Mandelson said the position of Airbus and the Commission was that European government funding of Airbus would be adapted to comply with any agreement reached on aid between the United States and the EU.

"In these circumstances, and given the continuing subsidies available to Boeing for the launch of the 787, the statement of the USTR is surprising," spokesman Peter Power said in the statement. "We will make contact in order to find out what exactly lies behind the USTR statement."

Mandelson is due to meet U.S. Trade Representative Rob Portman on Monday in Switzerland for talks, also involving trade officials from around the world, on progress towards a global trade deal at the WTO in December.

Airbus, owned by aerospace group EADS and BAE Systems, has applied for a third of the A350's 4.3 billion-euro (2.4 billion pound) development budget in government loans, in a move which it says accords with 1992 trans-atlantic agreement on aerospace industry aid.

But Washington says the loans would give it an unfair edge against Boeing which it denies is subsidised too.

Both sides made first moves this year in what could become the World Trade Organisation's biggest ever trade dispute, informs Reuters.

P.T.