WTO rules Airbus received illegal subsidies, Boeing claims victory

WTO yesterday settled a six-year old dispute between Airbus and Boeing – ruling a majority of Boeing’s claims were correct and calling Boeing the winner of the case.

WTO’s 1000 page report released yesterday ( which you can download here ), on case DS316 “European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft”, ruled that launch aid received by some Airbus programs were illegal and must be paid back without delay.

Some highlights from the ruling are as follows

Airbus A380 program received illegal launch aid from European communities
i. Funding from Germany, UK and Spain for A380 amounted to prohibited export subsidies
ii. All of these subsidies and loans ( believed to be $4b ) must be repaid or restructured “without delay”
Some of launch aid for A320/A330/A340 programs deemed illegal subsidies
Some of launch aid for A300/A310 programs deemed illegal subsidies
Subsidies provided for construction of infrastructure at Hamburg and Toulouse ruled illegal
KfW equity acquisition and later stake transfer of Deutsche Airbus ruled illegal
1987,1988,1992,1994 French government equity infusions ruled illegal
Second, third, fourth, fifth and sixth EC Framework R&D subsidies ruled illegal
Various R&D grants by France, Germany, UK and Spain ruled illegal
Boeing’s claims of EIB Loans being illegal were rejected

WTO ruled that Airbus must repay illegal A380 loans or restructure the program’s financing. Airbus was told to abandon its plans for financing the A350 program through use of similar subsidies, to which Airbus has agreed. It was ruled that any future aircraft programs by any manufacturer must only be financed on commercial terms. Boeing won 52 of its 71 claims ( of claims being prohibited per se or being actionable where they have had adverse effects to US interests ) .
Boeing has claimed the ruling a “landmark decision and a sweeping legal victory”.
With the ruling, the A350 program’s financing is now at an uncertain state.
The following specific launch aids for other programs were ruled illegal
A380 – France, Germany, Spain, UK
A340-500/600 – France, Spain
A330/A340-200/300 – France, Germany, Spain, UK
A330-200 – France
A320 – France, Germany, Spain, UK
A300/A310 – France, Germany, Spain

Following Boeing’s case against Airbus, EU filed a case stating Boeing 787 program has benefitted from research grants – for which the ruling is expected on 16th July.
Airbus called Boeing’s claim of Airbus having to repay $4bn “fairytale” pointing out the figure was related to overall size of the loans, not just elements of subsidy.
The complicated nature of the ruling however has enabled both parties to claim victory – where Boeing is claiming victory for Airbus aid being ruled illegal and Airbus claiming victory for the illegal aid being considered not injuring to Boeing.
WTO concluded that had Airbus relied only on market financing, “the increase in the level of debt Airbus would have accumulated… would have been massive”.

WTO Full Report
Boeing’s page on the case

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