WTO Rules On Airbus Subsidies -- They're Illegal

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When Airbus launches a new aircraft design it has, in the past, received government loans that, if the new design does not prove profitable, do not need to be repaid. Now, due to a ruling from the World Trade Organization (WTO), that may change. The Wall Street Journal Friday summarized the words of "a person familiar with the matter," stating that the WTO has found that "every launch aid package given for the A380 passenger jet was an illegal subsidy." The loans have long been a sore point for Boeing, Airbus's main competitor, because they effectively reduce risk and initial costs inherent in bringing a new ambitious design (such as the double-decker Airbus A380) to market. The rift eventually led U.S. trade officials in 2004 to file a case with the WTO to contest the legality of such a program and, according to the Journal, the WTO published its thousand-page report in only two paper copies, delivered to the U.S. and European Union (EU) governments. The papers are only an interim report (a final ruling is expected next year) and there's another side to this story -- the EU's case against Boeing. If the WTO rules against Boeing as well, it may force the two manufacturers to form an agreement regarding acceptable practices.

The EU has also filed against the U.S. for its aid to Boeing and the WTO is expected to rule on that case by year-end. The case is already the most expensive in 14 years of WTO history and the outcome may adjust the scales in Boeing's development of the long-developed 787 Dreamliner and Airbus's answer to that, the long-range A350. Demand for Boeing's commercial jetliners dropped 11 percent in August, month-over-month, and deliveries fell by 22 percent. The company expects to deliver about 110 more jets this year than last year's 375.