Gigantic A-380 liner triggers strong competition between Airbus and Boeing

Global competition between Boeing and Airbus humiliates Russian aviation industry

It goes without saying that the USA and the EU are two major competitors in the world. The competition has become especially explicit recently, particularly in the aviation field, in which WTO was involved as a referee.

American and European aviation designers have been continuingly blaming each other for illegal support of the aviation industry. The dispute intensifies when either American or European aircraft makers develop a new aircraft.

Recent tests of the gigantic A-380 liner, which is capable of carrying up to 840 passengers, attracted global attention. Airbus's major competitor, Boeing, is incapable of giving an adequate response to the challenge of its European rival. The company plans to make elongated planes of 747 series, which would be able to take only 450 passengers on board. In addition, the US aviation giant plans to premier the supermodern Dreamliner-787, whose carrying capacity will be even smaller – 300 passengers. Boeing's top managers said that the corporation was not going to make anything grand like Airbus's A-380. American specialists believe that such a project would be extremely expensive, whereas the plane itself would have a very restricted usage.

A-380 will definitely be a great competition to Boeing. Airbus has already received orders for 150 A-380 planes from 15 airlines. The US Dreamliner enjoys high demand too (the stock of orders is estimated at 250 planes), but the European aircraft is a lot larger and much more expensive.

The appearance of the new European liner has obviously intensified the competition with USA. The struggle is based on grants, which the EU and the USA provide to their aircraft makers.

The competition became especially serious in the beginning of the 1990s, when the USA presented its Boeing 777, and Airbus developed A-330 and A-340 planes. To remove the issue, the two sides concluded a bilateral agreement, which allowed the funding of commercial airliners. Disputes connected with unfair competition appeared time and again, when administrations of the two giant companies threatened to sue each other through the WTO. Furthermore, American officials announced last year that they were going to take a legal action to cease EU's grants to Airbus. In return, the European Union promised to file a countersuit in connection with the US government's funding of Boeing.

The dispute did not culminate in a court process, but the affairs in the aviation industry made the USA and the EU take a different approach to the issue of state grants on the whole. Instead of court hearings in the WTO, Brussels and Washington decided to conduct lengthy talks to cancel the funding of the aviation industry. However, it became known in March of the current year that no one was going to cancel the grants. Furthermore, European officials had to increase the funding on account of the A-350 aircraft project.

Washington was infuriated. A recent statement from the US Trade Representative accused the European Union of violating previous agreements and filed a complaint at the WTO. Brussels promised to take similar measures in response.

Both the European Union and the United States acknowledge that their large-scale state funding of the aviation industry undermines the global aviation market. Fair competition becomes quite a doubtful issue, when the state-run participation in the financial side of a commercial project reaches 30 percent. On the other hand, American and European governments realize that aviation industries are highly important from the point of view of the economic driving force: high-technologies, hundreds of thousands of jobs, etc. Observers believe that the USA and the EU need to agree upon the amount of the state support to the aircraft-making industry.

It is noteworthy that Europe and the USA want Russia to cut its tariff protection of the aviation market in light of its WTO membership. The condition became a stumbling block at negotiation with the USA: it is obvious that the requirement has a goal to remove a competitor. Russia obviously does not have an opportunity to protect its declining aviation industry with generous grants as opposed to the USA. Consequently, Russia has to preserve import duties to protect its home industry from foreign intervention. It has been officially stated that Russia is not going to accept any circumstances to cancel import duties on aircraft equipment. 

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Author`s name Olga Savka