FE Editorial : Airbus, Boeing, Airbus...

May 23 2011, 03:31 IST
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SummaryThe US couldn’t have predicted—in 1992, when it made a deal with the European Union giving both governments the autonomy to support their aircraft makers within certain limits—that Airbus, a company 44 years Boeing’s junior, would outscore Boeing in its own game to become the world’s largest passenger-jet company.

The US couldn’t have predicted—in 1992, when it made a deal with the European Union giving both governments the autonomy to support their aircraft makers within certain limits—that Airbus, a company 44 years Boeing’s junior, would outscore Boeing in its own game to become the world’s largest passenger-jet company. Such was the rise of the Toulouse-based company’s market share that the US felt compelled to charge the EU with being a cheater. The first case filed by the US against Europe in 2005 resulted in a WTO ruling in favour of the US, declaring that Germany, Spain, France and the UK had indeed given Airbus loans worth $18 billion with unfair terms of repayment that amounted to ‘prohibited’ subsidies. The EU appealed this report and the appellate body has returned a mixed verdict. While upholding the ruling that Airbus benefited from some subsidies that allowed it to develop aircraft faster and more efficiently, resulting in a larger share of the large civil aviation market, the body overturned the earlier finding that the A380 received ‘prohibited’ export subsidies. To the US’s accusation, the EU promptly responded with a lawsuit of their own, accusing Boeing of having received $5.3 billion in improper government subsidies, without which it would have been unable to bring the 787 Dreamliner to market as quickly as it did. This was upheld by the WTO, has been appealed and the report from the appellate body is expected in February 2012.

The WTO has given the EU six months within which to comply—while the public line remains that the judgement has to be studied carefully before any action is taken, European officials privately acknowledged that they would have to adjust the interest rates on government loans to Airbus to bring them in line with commercial rates, according to FT. While the end to this dispute is far from nigh, it has larger implications for the global aviation industry, especially emerging economies, like China, Brazil and Russia, that are aiming to develop their own passenger-jet industries. The outcome of this long-running case will help lay the foundation for a level-playing field, thereby containing the dominance of any one manufacturer.

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