Airbus, Boeing At The WTO

Boeing Vice President of internation trade, Ted Austell, discusses the issue of launch aid given by the EU to Airbus.

In an article published by the Seattle Times this week, the key point made by Austell will likely reverberate for many months to come at the WTO until a conclusion materialises.

European governments provide billions of dollars to Airbus each time it develops a new airplane. Every dollar of government launch aid that Airbus receives is a dollar less it needs to borrow from commercial lenders, or take from profits earned on sales of existing products — a fact that enabled Airbus to lower its prices and grab significant market share away from Boeing.

Airbus too, has equally pushed forward its counter claims that Boeing has damaged its revenue base to the tune of some $27bn dollars.

“The lavish subsidies … allowed Boeing to engage in aggressive pricing of its aircraft which has caused lost sales, lost market share and price suppression to Airbus on a number of select markets,” Brussels said in a statement as the hearings started. “The support clearly aims at weakening Airbus’ position and competitiveness.”

Rather ironically, Airbus makes no mention or apology for its own price dumping tactics to ensure sales. One only need to go back to the Easyjet A319 deal to see what eyewatering prices were agreed. Or how about just last month when British Airways scored coup of the year when it secured a paltry 12 A380’s for nearly $12m-$20m per airplane less than launch customer Emirates, which is still seething with fury.

That’s not to say Boeing too doesn’t discount too. Ryanair also has in the past secured very favorable price deals on its 737-800 top-up orders.

Airbus North America chairman, Allan McArtor recently spoke on the issue:

Taken from Yahoo News:

“Let’s face it: if the WTO process plays out, we’re going to end up negotiating something anyway,” he said, calling for the EU and United States to update a mothballed trade pact of 1992 to detail their aerospace support.

“Why not skip the national histrionics and the lawyer-enriching trials and hearings and go right to the negotiating,” McArtor said, while insisting that the EU and Airbus remained confident of their case at the WTO.

Whatever the outcome, it will be a “second-best” solution for all parties involved. Could Airbus start the goodwill gesture as it has done so far it not (yet) seek launch aid for the A350?

Only time will tell.

Readers thoughts and comments to the Airbus-Boeing WTO dispute are most welcome. Further comments can be found over on Randy’s Journal - click here.

1 comment October 20th, 2007