US threatens WTO action on Airbus

[skyslave]

Let us, not forget why Phil and his friends left Boeing just a few months ago. That is right, you guessed it, because Boeing plays by the rules, and has never before, or will never again be involved in things that are illegal. Boeing for a long time has left the civil aviation market slip out of its hands, and now that they are behind they are crying foul play. Well I am sorry but it is their fault. When they went around destroying MD no one seemed to mind.
I do believe though that we need both Airbus and Boeing to exist in order to continue to have improvements in aviation. I do not believe that one or the other is better. They both have goods and bads, they just need to focus on making aircraft...

[BahrainLad]

The tax incentives to keep the production in the state of washington were to bring the state into line with other states and are available to anyone participating in aircaft production in the state of washington, including any work Airbus might choose to do there. Sooooo, If the EU governments are willing to give boeing 1/3 the developement costs on the same basis that they gave to airbus then I have no problems.

Well, the likelyhood of Airbus wanting to produce in Washington is as likely as Boeing wanting to produce in Southwest France, so this is a moot point.

But, development aid from EU governments is available to everyone, as the example of the Welsh Development Agency providing support to GE's BA maintenance facility in Wales shows.

As for the rest of your argument......if the "BOEING" part of the airframe is subsidy free and the remainder not, how do we judge the airframe as a whole?

[Flight Safety]

Back to the original topic...

Apparently the terms of the 1992 agreement are:

Under a 1992 US-European Union agreement, European support for new aircraft programmes - provided in royalty-based loans - was limited to 33% of the total cost, repayable with interest within 17 years.

On the other hand, indirect US support through NASA or military programmes was limited to 3% of turnover for the US large commercial aircraft industry.

Are these the correct terms of the agreement? If so, it certainly appears unfair to the US aircraft programs. Why not request a change, or demand one?

[GGV]

And that raises the question as to why Boeing and the U.S. agreed in the first place. Did the U.S. not notice it was "unfair", or was there more to this than meets the eye?

[humble_dor]

And that raises the question as to why Boeing and the U.S. agreed in the first place. Did the U.S. not notice it was "unfair", or was there more to this than meets the eye?

Boeing was then preparing its merger with MDD. Airbus at that time was the new entrant and the only Boeing's competitor. Airbus needed a helping hand otherwise it would have been crushed by Boeing. I think it was about something called antitrust.

Now the situation has changed. Airbus is not anymore a new entrant, it has become a true competitor. Last year and this year Airbus will have delivered more aircraft than Boeing. Airbus' order book is bigger than Boeing's. There is no more danger of Boeing domination in commercial aviation industry.

We can only hope that there will be a third player in the industry.

[Capt.KAOS]

When management fails to produce long term strategy and innovation you can always raise the subsidy rethoric, call in Mother Bush to punish the nasty neighbour, or you can try to lease 100 reengineered 767s as as refueling tankers (at 100 Billion USD with thanks to Dicky Perle....).

In truth, Boeing and Airbus have both certainly received various forms of government help over the years. Some of this controversy reflects two different cultural and business styles. European governments are more open about assisting private industry. The U.S government promotes limited government intervention into the markets but provides indirect help as well.

At the end it´s the product that makes the difference.

[Wino]

Flightsafety,

You hit the nail on the head, and that is why USA is going to withdraw from that agreement and challenge any future subsidies before the wto

Captain KAOS,
The kind of skim your are alledging (and which happen in EUROPE like in Parmalat) is impossible under US accounting laws.

sustaining a production line for military uses towards the end of an airframe's life (like was done with the 707 and possibly the 767) is not nearly the same thing as providing risk free financing.


When boeing borrows money it will have to be paid back, whether or not any aircraft are sold. Indeed the risk of that did in McDonnald Douglas, Lockheed, and convair. Production runs of 250 or so aircraft are the death knells of any airframer, unless of course you are airbus.

Cheers
Wino

[Cap 56]

In the end economics are just a small part of the game.

Politics may be the determining factor. I have no clear view on this, but I think most airlines are ordered by government owned airlines.

It may well be that Europe is doing a very good job at this.

[Capt.KAOS]

wino, the KC767 deal was already forged into a compromise on aerial refueling by the fiscal 2004 National Defense Authorization Act, passed by Congress 07 November 2003. The fact that the decision was deferred by Rumsfeld recently was not because of accounting laws but data evaluated by the Defense Science Board’s Aerial Refueling Task Force which led him to conclude that the corrosion problem on KC-135s can be managed and the operating and maintenance cost growth on the tanker fleet may not be as large as earlier estimates. And probably also several proposals filed by Sen.McCain in the Senate recently.

Parmalat is a completely different cup of milk, won't go into that here, moddies are watching

[corsair]

This is mostly election year politics. There is a perception among Americans, I've noticed, that Airbus is French. (Air Hag!) . It's not as we all should know.

The reality is that Boeing have failed to compete and seem to have lost the innovation habit. So they want Uncle Sam to bat for them. But what is good for Boeing is not good for the American aerospace industry as a whole.
No less than 50% of the Boeing A380 will be American. Any damage to Airbus will damage American industry. Anyone who works in the industry knows just how international the whole aviation business is. With American products dominating. If Boeing or President Bush thinks this is a way of helping the American aeropspace industry they are sadly mistaken. It won't even help Boeing in the end.

[Wino]

This isn't about the A380.

This is about making sure that when the competition to the 7e7 is fielded boeing will be competing against a company vs a pan European government that has a history of launching commercial flop after commercial flop with no regards to the consequences of their actions.

The fact that they got lucky once just proves how dangerous that is.

If the 7e7 is crushed by a competitor two years later that the market wouldn't have supported on its own, then boeing is out of business. Its that simple.

However, on a business case basis there is no way Airbus can launch a competitor because it would be in the position of not only competeing with the 7e7 but also competing with itself (the 330/340) and killing those aircraft before they had paid for themselves (again something no fiscally responsible corporation could do).

So the only way that Airbus could launch a 7e7 competitor is with generous state aid. They have the 330 already. Let it stay that way

Cheers
Wino

[Ronbmy]

Flight Safety

Are these the correct terms of the agreement? If so, it certainly appears unfair to the US aircraft programs. Why not request a change, or demand one?

It would appear that these terms are indeed correct and it all needs to be sorted out before the escalating subsidies cause too much of a diminishing return.

A web search will reveal quite a bit of data. You can also ask your politicians for the printed word and they will, more often than not, give you all the information you require.

A few quotes can be taken from...

http://europa.eu.int/comm/trade/good...t/overview.htm

The last sentence of this quote is enlightening..

On the other hand, the agreement establishes that indirect support (i.e. benefits provided for aeronautical applications of NASA or military programmes) should be limited to a 3% of the nation's LCA industry turnover. This discipline is primarily targeted to the support system in use in the US. In contrast to the European system of repayable royalty-based loans, since the repeal of the US rules on recoupment, there is no requirement for indirect support to be reimbursed.

The next quote is even better...

(3) In 1998, according to a monitoring study carried out on behalf of the Commission, it was estimated that the amount of US Government indirect support to its LCA industry reached almost $ 2 billion in 1997, i.e. around 7% of its commercial turnover (thus well above the 3% limit set by the 1992 Agreement).

I have yet to locate the minutes of the Uruguay negotiations but they should make interesting reading given that one side - or both - are engaged in active protectionism.

Quote..

The EU regrets that, at the end of the Uruguay Round negotiations, the US blocked the adoption of a new Civil Aircraft Agreement supported by all other negotiating parties. Although negotiations have continued since, no progress has been made.

No doubt the agreement did not suit the best interests of the US. Had the US gained the support of other parties then the EU would probably have blocked it.

Both sides of the fence are the same. The grass is not greener.

[CarltonBrowne the FO]

...the only way that Airbus could launch a 7e7 competitor is with generous state aid. They have the 330 already. Let it stay that way

Just as Boeing continued to make and sell 737s, 757s and 767s for some years after the entry into service of the more advanced A320, A330 and A340, so will Airbus continue to make and sell their current generation of aircraft after the 7e7 enters service, despite the advantage of technology the 7e7 will enjoy.
Until Airbus introduces a new range and siezes the lead.... until Boeing takes it again... until.....
All this, of course, unless they decide to join forces against competition from the ever-growing "regional jets", or the ex-Soviet manufacturers, or......
It's all business, and I doubt jingoistic roarings on either side will prove to be more than a distraction.

[goates]

We can only hope that there will be a third player in the industry.

Bombardier and Embraer (sp?) are slowly rolling out larger and larger aircraft. Each one has a plane that is approaching the size of the smallest Airbus and Boeing. As new designs they may well be better aircraft too (from what I've read in Air International). I don't think that Boeing will survive too long with Airbus producing larger aircraft on one side and Bombardier and Embraer producing smaller ones on the other, unless they start getting creative again. They've done it before (707 and 747), now they just need to do it again.

goates

[eal401]

a history of launching commercial flop after commercial flop

More details please?

[humble_dor]

Wino said

However, on a business case basis there is no way Airbus can launch a competitor because it would be in the position of not only competeing with the 7e7 but also competing with itself (the 330/340) and killing those aircraft before they had paid for themselves (again something no fiscally responsible corporation could do).

In my humble opinion, what Wino said is correct.

Any new Airbus aircraft competing with 7E7 will end A340-300 programme. A340-300 will have two Airbus competitors (the new aircraft and the A340-500). The problem is that A340-500 has a tough competitor now 777-200LR plus 7E7-8LR in the long term.

If Airbus launches a 7E7 competitor based on A330 then A340-300 and A330 classics will see the end.

[GGV]

Fuzzy logic

Yes, Wino. I'd like an answer to that too! (eal401's question).

In fact you have made a lot of assertions that seem to reflect a particular point of view, rather than the facts on the ground.

And, if Boeing are going to launch a new aircraft, why would it then be foolish for Airbus to launch a direct competitor? In fact, would a direct competitor aircraft that was better (sells more, if you prefer) than the Boeing product not be the key to overall corporate success?

Why could it only be done with subsidies ... in fact do Airbus not claim that it gets support in the form of government loans? All of which, they say, have to date been paid back with interest. True or not?

[GearDown&Locked]

Well, aviation industry is not only Boeing/Airbus... If you take the military planes into the equation then you all see how fair is the aviation game as the same guys who bought Airbus for civil transportation also own true all-american lil' fighters , chopers, cargo, etc, not counting with all the associated equipment envolved from electronics to fire trucks. Soooo, for all you one-track-minders, give us a break.

GD&L

[Cejkovice]

The 7E7 is however Boeings response to Airbus' A330-200 which has, and still is, proving to be very successful. All the marketing from Boeing regarding 20%+ efficiency savings quoted are not against the A330-200 and more likely to be the outgoing B767. If you truely compare the A330-200 and B7E7 the dreamliner really isn't that much more efficient.

Technology is always moving forward so each airframer will always strive to implement this technology, so it is inevitable that there will be another aircraft from Airbus in the future.

The two governments need to sit down, have a little chat and come up with new guide lines but levelling the playing field will have an equally large impact on the US as it will on the UK. You have to remember that the B747 was mostly paid for as a military transport project yet that has been Boeings biggest cashcow for the last 30 years which has enabled Boeing to sell its other aircraft with huge discounts. Today the aerospace is a global industry much more today than it was 30 years ago so guidelines need to be drawn up taking that fully into account and not to try and benefit a few single members of that community.

Wino, You said europe just turns out failure after failure after failure in terms of a/c. Which are these and if so why is the Airbus order book so big? In terms of repayeble loans these have certainly been paid back for A320, and the earlier A330/A340 aircraft already. The more modern a/c are soon to be paid back too. All of these have been at higher rates of interest than Airbus could have got had they gone to financial institutions rather than the governments.

As I said before, both airframers need each other to keep aircraft developing. It would be good if a few other manufacturers were in there too. Just what the whole industry doesn't need at the moment is a few politicians who don't really know what is going on mouthing off just for their own personally publicity. Lets get the dialogue going again between all those involved and keep it away from publicity hungry "desperate to keep their job" politicians and a slaging match in the press and get back to what we all do best and build some planes!

[goates]

the B747 was mostly paid for as a military transport project yet that has been Boeings biggest cashcow for the last 30 years

I think it was in the book "Flying High" about Boeing that talked about how it took about 20 years for Boeing to pay off the 747 project. That was sometime around 1990, so it's only been a cash cow for the past 15 years. They did have some of the design work paid for from the military project, but no where near enough to complete an airliner. Boeing has had to basically mortgage the company for each of it's big aircraft projects.

With China and India developing more aircraft on their own, both Airbus and Boeing could find them selves with new competitors in another 20 or 30 years. Canada and Brazil are already starting to compete at the low end so I don't think airlines or consumers have to worry about a monopoly just yet.

goates