Seattle PI Aerospace Blog

By Aubrey Cohen

Boeing 787 Dreamliners destined for launch customer All Nippon Airways are lined up in Boeing's Everett widebody plant on Sept. 27, 2010.

Boeing received billions of dollars in illegal subsidies, a World Trade Organization panel determined in a ruling released to the parties Monday.

But the two sides offered vastly different accounts of the ruling, which will remain confidential for several more weeks, until the WTO releases official translations.

Airbus said the subsidies amount to at least $5 billion, plus $2 billion more pledged for the future, and cost Airbus at least $45 billion in lost sales -- much more than the impact of illegal subsidies a separate panel found that European nations gave to the European plane maker.

"From today, Boeing can no longer pretend that it doesn't benefit from generous and illegal state subsidies. It has been doing so from the start and it's time to stop the denial," Rainer Ohler, Airbus' head of Public Affairs and Communications, said in a news release. "We expect the WTO dispute to carry on for several more years and as in all trade conflicts, a resolution will only be reached through negotiations. The myth that Boeing doesn't receive government aid is over and we hope this sets the tone for balanced and productive negotiations going forward."

In a statement, EU trade spokesman John Clancy said: "This solid report sheds further light on the negative consequences for the EU industry of these U.S. subsidies and provides a timely element of balance in this long-running dispute."

But Boeing called the ruling "a sweeping rejection of the EU's claims," saying the panel found just some $2.6 billion in illegal subsidies.

"Nothing in today's reports even begins to compare to the $20 billion in illegal subsidies that the WTO found last June that Airbus/EADS has received," Boeing said. "The WTO's decisions confirm that European launch aid stands alone as a massive illegal subsidy only available to Airbus, which has seriously harmed Boeing, distorted competition in the aerospace industry for decades, and resulted in the loss of tens of thousands of good-paying U.S. jobs."

Nefeterius Akeli McPherson, a spokeswoman for the U.S. trade representative told The New York Times that officials were “confident that the W.T.O. will confirm the U.S. view that European subsidies to Airbus dwarf any subsidies that the United States provided to Boeing.”

That take on the ruling fueled calls by Boeing supporters to penalize EADS North America's bid for the U.S. Air Force's $35 billion aerial refueling tanker contract, because EADS' plane is based on the Airbus A330.

“As the Defense Department moves forward with the tanker competition, it cannot ignore the fact that Airbus has fueled its bid with billions of dollars in illegal subsidies from the European government," U.S. Representative Rick Larsen, D-Wash., said in a statement. "A fair, open and transparent competition must take into account the unfair competitive advantage that Airbus tanker received from these massive subsidies.

Larsen and like-minded legislators have been trying to enact legislation that would force the subsidy consideration by the Air Force and Pentagon, which have refused to do so on their own accord.

Airbus also reported that the panel found Boeing would not have been able to launch the 787 Dreamliner without illegal subsidies, and that the subsidies have caused "significant harm to the European aerospace industry" and will continue to have an effect into the future. It said the subsidies come from the Pentagon, NASA, Washington and Everett, home of Boeing's wide-body airliner plant.

It said the panel "commanded Boeing to end its illegal R&D cash support from NASA, (the Department of Defense) and the U.S. taxpayers."

Not so, according to Boeing.

"Today's decision will not require any change in policy or practice, or other remedy that comes close to approaching the billions of dollars of launch aid that must be repaid by Airbus or restructured on proven commercial terms," the U.S. plane maker said. "As a result of the June WTO ruling, EU governments and Airbus/EADS must repay or restructure $4 billion in still outstanding illegal launch aid subsidies Airbus received to develop the A380. They must also remedy the adverse effects of the additional $16 billion in other illegal subsidies Airbus received."

It said European nations must withdraw still-outstanding prohibited launch aid for the A380 super-jumbo jet and finance the new A350 XWB on commercial terms. European nations have pledged billions in financing for the A350, which will compete against Boeing's 787 and 777.

The $2.6 billion figure appears to represent about $400 million in state and local tax breaks and $2.2 billion in previously cited export-related aid under a program that was phased out in 2006, The New York Times reported, saying both sides confirmed these findings in the report.

The Times also quoted a European source saying the report found illegal subsidies in eight different NASA programs and about 130 specific contracts from 2001 to 2006.