US threatens WTO action on Airbus
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No Benefit for Boeing in Airbus Cuts
Monday September 6, 6:05 am ET
By Slobodan Lekic, Associated Press Writer
No Benefit for Boeing in Airbus Subsidies Cut, EU Says
JAKARTA, Indonesia (AP) -- U.S. aviation giant Boeing Co., facing stiff competition from Airbus, won't be helped by a cut in government-backed loans to the European aircraft maker, a top EU official said Monday.
European Union Trade Commissioner Pascal Lamy also dismissed as "election-year politics" President George W. Bush's threat last month to challenge "unfair" subsidies to Airbus at the World Trade Organization.
Claims by Boeing that Airbus receives unfair government subsidies date back to the founding of the West European consortium three decades ago.
Airbus has responded by pointing out that Boeing, the world's largest aerospace company, receives massive indirect subsidies through government contracts in defense, space and transport.
More recently, questions have been raised about a US$3.2 billion incentive package the state of Washington offered late last year to secure the assembly plant for Boeing's new 7E7 Dreamliner.
Low-level EU-U.S. talks are planned next week in Brussels, after an initial meeting in July, with Washington seeking to prevent any new government loans as Airbus mulls whether to build a challenger to the 7E7.
The United States is also pressuring the EU to renegotiate a 1992 trans-Atlantic civil aviation accord that allowed European governments to pay up to 33 percent of research and development costs involved in launching new models.
The U.S. pressure is the result of a "public relations campaign mounted by Boeing," Lamy told The Associated Press in Jakarta, where he was attending a conference of Southeast Asian economic ministers.
"Any agreement can be changed, of course," he said. "But if the 1992 agreement is renegotiated we will do it but we will make sure that the level playing field is maintained and that Boeing does not benefit from its own subsidies."
Last month, the EU said it was willing to consider limiting government support to Airbus -- but only if Washington cuts direct and indirect subsidies to Boeing.
The controversy has heated up in the past two years as the European manufacturer has steadily pulled ahead of Boeing as the world's largest maker of civilian jets.
Airbus has booked the most orders in four out of the last five years and in 2003 delivered the most airliners for the first time, 305 planes versus only 281 for Boeing.
Boeing is particularly worried about Airbus' new 555-seat, A380 superjumbo jet, for which the U.S. manufacturer has no equivalent.
Monday September 6, 6:05 am ET
By Slobodan Lekic, Associated Press Writer
No Benefit for Boeing in Airbus Subsidies Cut, EU Says
JAKARTA, Indonesia (AP) -- U.S. aviation giant Boeing Co., facing stiff competition from Airbus, won't be helped by a cut in government-backed loans to the European aircraft maker, a top EU official said Monday.
European Union Trade Commissioner Pascal Lamy also dismissed as "election-year politics" President George W. Bush's threat last month to challenge "unfair" subsidies to Airbus at the World Trade Organization.
Claims by Boeing that Airbus receives unfair government subsidies date back to the founding of the West European consortium three decades ago.
Airbus has responded by pointing out that Boeing, the world's largest aerospace company, receives massive indirect subsidies through government contracts in defense, space and transport.
More recently, questions have been raised about a US$3.2 billion incentive package the state of Washington offered late last year to secure the assembly plant for Boeing's new 7E7 Dreamliner.
Low-level EU-U.S. talks are planned next week in Brussels, after an initial meeting in July, with Washington seeking to prevent any new government loans as Airbus mulls whether to build a challenger to the 7E7.
The United States is also pressuring the EU to renegotiate a 1992 trans-Atlantic civil aviation accord that allowed European governments to pay up to 33 percent of research and development costs involved in launching new models.
The U.S. pressure is the result of a "public relations campaign mounted by Boeing," Lamy told The Associated Press in Jakarta, where he was attending a conference of Southeast Asian economic ministers.
"Any agreement can be changed, of course," he said. "But if the 1992 agreement is renegotiated we will do it but we will make sure that the level playing field is maintained and that Boeing does not benefit from its own subsidies."
Last month, the EU said it was willing to consider limiting government support to Airbus -- but only if Washington cuts direct and indirect subsidies to Boeing.
The controversy has heated up in the past two years as the European manufacturer has steadily pulled ahead of Boeing as the world's largest maker of civilian jets.
Airbus has booked the most orders in four out of the last five years and in 2003 delivered the most airliners for the first time, 305 planes versus only 281 for Boeing.
Boeing is particularly worried about Airbus' new 555-seat, A380 superjumbo jet, for which the U.S. manufacturer has no equivalent.
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Boeing is particularly worried about Airbus' new 555-seat, A380 superjumbo jet, for which the U.S. manufacturer has no equivalent.
GD&L
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Im sorry ORAC, but if you expected me to believe that non competitive bidding that goes on in EUROPE some how provides lesser profits than boeing, then I am very suprised at you.
How does Beoing know WHEN its time will be, yet it must devote engineers and time to preparing bids all of which may come to nothing. While on the other hand EADS KNOWS they are gonna get the A400, the EUROFIGHTER, RAFAEL etc. There is no one else to go to, and at the end of the day they won't be allowed to go broke. Nor have I seen them be required to reimburse Europe for cost over runs which I happens in the USA.
And you convieniently leave out the export plans for the Eurofighter and the A400m out of your arguement.
Cheers
Wino
How does Beoing know WHEN its time will be, yet it must devote engineers and time to preparing bids all of which may come to nothing. While on the other hand EADS KNOWS they are gonna get the A400, the EUROFIGHTER, RAFAEL etc. There is no one else to go to, and at the end of the day they won't be allowed to go broke. Nor have I seen them be required to reimburse Europe for cost over runs which I happens in the USA.
And you convieniently leave out the export plans for the Eurofighter and the A400m out of your arguement.
Cheers
Wino
Ecce Homo! Loquitur...
You mean the export markets where the US government twists arms in favour of the F-16 instead, and then offers "surplus" F-16s to fill the gap before production at a peppercorn rent? And exactly which A-400M exports are you refering to, or do you know something i dont?
And there is someone else to go to - Boeing and LM. Which is why most of Europe is signing up to buy the JSF and not the Typhoon and why the A-400M has had to compete for orders against the C-130J, ordered by the UK, Italy and Denmark. A d**n sight more competition than is allowed for in the USA.
It would seem to me that, until they have a bit less of a blatantly protectionist attitude to their own domestic military market, the Americans should be the last ones to take comment on the procurement practices of some of their best customers....
And there is someone else to go to - Boeing and LM. Which is why most of Europe is signing up to buy the JSF and not the Typhoon and why the A-400M has had to compete for orders against the C-130J, ordered by the UK, Italy and Denmark. A d**n sight more competition than is allowed for in the USA.
It would seem to me that, until they have a bit less of a blatantly protectionist attitude to their own domestic military market, the Americans should be the last ones to take comment on the procurement practices of some of their best customers....
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I think the reason that most of Europe is signing up for the JSF and not the typhoon has more to do with its mission. The typhoon in the first couple of tranches won't be able to even drop a bomb for all practicall purposes, and Kosovo has tought a lot of people about the need for that. The days of the battle of britain style air engagements are pretty much over, but the need for Close air support as GROWN. The Eurofighter was not optimized for that.
I know you must read flight international, 3 weeks ago they had a long list of potential customers for the A400m...
Cheers
Wino
I know you must read flight international, 3 weeks ago they had a long list of potential customers for the A400m...
Cheers
Wino
This thread has run out of news and seems to have retreated to ill judged opinions masquerading as facts along with rubbishing the 'competition.'
Since we seem to run out of both rumours and news can we now move it to Jet Blast where most of the opinions seem to belong.
Since we seem to run out of both rumours and news can we now move it to Jet Blast where most of the opinions seem to belong.
Bear Behind
Just to add complication - who is getting paid for the F/A-18E/F? Who gets paid by the DoD to DEVELOP new aircraft programs, allowing them to transfer that technology onto civil airframes? Wino quotes Boeing aircraft that succeeded in getting a production run. How about all the upgrades to those aging aircraft? How about the payment for "inherited" programs (see F-18 comment). What about developmental prototypes that don't enter production. Just because it isn't in production doesn't mean money hasn't been spent on it. Even Aviation Week mentions some of this stuff!
Whether the GEnx is used on a 7E7 or an A330 development is irrelevant - it's still a subsidy neither Pratt nor Rolls can benefit from, so don't be all innocent about that.
As for subsidies being open to all from Washington State, jolly good. I daresay if Boeing were to transfer lock, stock and barrel to Toulouse, then they'd get themselves some serious incentives, too.
Whether the GEnx is used on a 7E7 or an A330 development is irrelevant - it's still a subsidy neither Pratt nor Rolls can benefit from, so don't be all innocent about that.
As for subsidies being open to all from Washington State, jolly good. I daresay if Boeing were to transfer lock, stock and barrel to Toulouse, then they'd get themselves some serious incentives, too.
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GearDown&Locked:
IMHO this is the cause for all these talks. In a nutshell, Boeing has betted on the wrong horse by giving green light to the 7E7, for wich Airbus can come up with a good answer in a short period of time (A350??), instead of presenting a worthy competitor of the A380, and now they're trying desperatly not to loose ground to Airbus.
IMHO this is the cause for all these talks. In a nutshell, Boeing has betted on the wrong horse by giving green light to the 7E7, for wich Airbus can come up with a good answer in a short period of time (A350??), instead of presenting a worthy competitor of the A380, and now they're trying desperatly not to loose ground to Airbus.
panda-k-bear:
I daresay if Boeing were to transfer lock, stock and barrel to Toulouse, then they'd get themselves some serious incentives, too.
I daresay if Boeing were to transfer lock, stock and barrel to Toulouse, then they'd get themselves some serious incentives, too.
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Gear Down & Locked,
Is that the same as an Anti-lock Braking System???
Many European car makers are installing high-tech systems on their products, things like Anti-Blocking System
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Wino
I'm sure that EADS (www.eads.com) "getting" Rafale will be news to them, and to Dassault Aviation (http://www.dassault-aviation.com)
I'm sure that EADS (www.eads.com) "getting" Rafale will be news to them, and to Dassault Aviation (http://www.dassault-aviation.com)
Last night's Discovery wings channel featured the development of Dassault's sexy Falcon. Maybe Dassault was not an important forerunner of Airbus, if at all. But the Dassault design team used certain characteristics of the sexy Etendard (another export product)-maybe it also incorporated features of a Mirage fighter?
The Falcon, though small and sexy/sleek (like a baby Douglas jet
), appears to have been a commercial success. A number were bought by the US Coast Guard, certain US companies and were the initial aircraft for FEDEX (. 
).
The Falcon, though small and sexy/sleek (like a baby Douglas jet
), appears to have been a commercial success. A number were bought by the US Coast Guard, certain US companies and were the initial aircraft for FEDEX (. ).
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Harry Stonecipher Article on FT.com
Article as published on ft.com
Airbus's ‘launch aid' has to be grounded
By Harry Stonecipher
Published: September 14 2004 20:40 | Last updated: September 14 2004 20:40
This week, trade officials from the US and the European Union are due to discuss subsidies in the commercial aircraft market. The talks must focus on the subsidy that distorts the market the most - “launch aid”, which has allowed Airbus to develop a full family of aircraft without assuming the commercial risk for doing so.
Resolving trade disputes is the proper role of government but I would like to clear up some myths that muddy the negotiating waters.
During a recent visit to the UK, I realised there was a fundamental misunderstanding about the notion of so-called “indirect subsidies”. Boeing's defence contracts do not, as some claim, amount to an indirect subsidy to its commercial aircraft division. Little, if any, benefit flows from defence work to commercial activities, a point reinforced by the experiences of several major US defence contractors no longer in the commercial aircraft business. It is much more likely that technological benefits flow from commercial activities to military applications, such as the A400M transport aircraft being developed by Airbus. And let us be clear: any benefits that do exist go also to Airbus, whose parents - BAE Systems of the UK and EADS, the European group - have greater defence revenues, and thus a greater opportunity for commercial benefit, than Boeing.
Another myth is that Boeing gets unique tax and infrastructure benefits from governments around the world. Publicly available records show Airbus and its parent companies benefit from economic development incentives commonly available to industry in the US - including in Louisiana, Florida and Mississippi. These incentives benefit those communities as a whole. In contrast, the government support Airbus received for facilities to build and assemble the A380, its next project, is not for the benefit of the general community - it is uniquely for Airbus.
Finally, the discussion of launch aid is most muddied by the claim that this form of support, which is unique to Airbus, is not a subsidy and does not distort competition in the civil aircraft market. Nothing could be further from the truth.
Airbus receives 33 per cent of each new aircraft model's development costs upfront, as a subsidy from European sponsor governments. None of the $15bn in launch aid Airbus has received from European governments has been repaid on commercial terms - in fact, much of it has not been repaid and may never be. Indeed, a great deal of it has been forgiven entirely. Thanks to this subsidised “borrowing”, Airbus has avoided at least $35bn in debt.
This subsidy indeed distorts the market. The French senate has stated the case thus: “Launch aid ‘socialises' risk. Advances made to companies need only be reimbursed if the programme is successful. In the event of failure, the public money is lost and the advance becomes a subsidy, a sort of insurance policy for the company against industrial risk.” This “insurance policy” has allowed Airbus to develop aircraft without the attendant commercial risk, and thus without the commercial discipline nearly every other company around the world works under.
And now Airbus is receiving about $3.7bn in launch aid for the A380. It began receiving this money five years before the aircraft's first expected delivery, and under the terms of the 1992 US-EU Agreement on Trade in Large Civil Aircraft, Airbus could have almost five more years beyond first delivery before it has to begin repaying this A380 launch aid. If it does not hit its projected sales total, Airbus may never have to repay the money. While it is clear that this agreement has outlived its usefulness, it has never relieved our nations of their broader international obligations.
US and EU trade authorities can best serve the global aviation industry by creating a framework for the future that eliminates trade-distorting aid to commercial aircraft manufacturers and creates a level playing-field with complete visibility on both sides.
European officials deserve credit for their publicly-stated
willingness to reconsider launch aid to Airbus. This week, I hope they will follow these statements with actions that display a seriousness of purpose. This will dispel any notion that they are stalling in the hope this is simply a political issue that will evaporate after the US presidential election. Both US presidential candidates have expressed support for ending launch aid to Airbus, but any impression that this is merely election-year politics is mistaken. Airbus is a mature, profitable company. It no longer needs launch aid to compete. It is time for launch aid to end.
The writer is president and chief executive officer of Boeing
ENDS.
Airbus's ‘launch aid' has to be grounded
By Harry Stonecipher
Published: September 14 2004 20:40 | Last updated: September 14 2004 20:40
This week, trade officials from the US and the European Union are due to discuss subsidies in the commercial aircraft market. The talks must focus on the subsidy that distorts the market the most - “launch aid”, which has allowed Airbus to develop a full family of aircraft without assuming the commercial risk for doing so.
Resolving trade disputes is the proper role of government but I would like to clear up some myths that muddy the negotiating waters.
During a recent visit to the UK, I realised there was a fundamental misunderstanding about the notion of so-called “indirect subsidies”. Boeing's defence contracts do not, as some claim, amount to an indirect subsidy to its commercial aircraft division. Little, if any, benefit flows from defence work to commercial activities, a point reinforced by the experiences of several major US defence contractors no longer in the commercial aircraft business. It is much more likely that technological benefits flow from commercial activities to military applications, such as the A400M transport aircraft being developed by Airbus. And let us be clear: any benefits that do exist go also to Airbus, whose parents - BAE Systems of the UK and EADS, the European group - have greater defence revenues, and thus a greater opportunity for commercial benefit, than Boeing.
Another myth is that Boeing gets unique tax and infrastructure benefits from governments around the world. Publicly available records show Airbus and its parent companies benefit from economic development incentives commonly available to industry in the US - including in Louisiana, Florida and Mississippi. These incentives benefit those communities as a whole. In contrast, the government support Airbus received for facilities to build and assemble the A380, its next project, is not for the benefit of the general community - it is uniquely for Airbus.
Finally, the discussion of launch aid is most muddied by the claim that this form of support, which is unique to Airbus, is not a subsidy and does not distort competition in the civil aircraft market. Nothing could be further from the truth.
Airbus receives 33 per cent of each new aircraft model's development costs upfront, as a subsidy from European sponsor governments. None of the $15bn in launch aid Airbus has received from European governments has been repaid on commercial terms - in fact, much of it has not been repaid and may never be. Indeed, a great deal of it has been forgiven entirely. Thanks to this subsidised “borrowing”, Airbus has avoided at least $35bn in debt.
This subsidy indeed distorts the market. The French senate has stated the case thus: “Launch aid ‘socialises' risk. Advances made to companies need only be reimbursed if the programme is successful. In the event of failure, the public money is lost and the advance becomes a subsidy, a sort of insurance policy for the company against industrial risk.” This “insurance policy” has allowed Airbus to develop aircraft without the attendant commercial risk, and thus without the commercial discipline nearly every other company around the world works under.
And now Airbus is receiving about $3.7bn in launch aid for the A380. It began receiving this money five years before the aircraft's first expected delivery, and under the terms of the 1992 US-EU Agreement on Trade in Large Civil Aircraft, Airbus could have almost five more years beyond first delivery before it has to begin repaying this A380 launch aid. If it does not hit its projected sales total, Airbus may never have to repay the money. While it is clear that this agreement has outlived its usefulness, it has never relieved our nations of their broader international obligations.
US and EU trade authorities can best serve the global aviation industry by creating a framework for the future that eliminates trade-distorting aid to commercial aircraft manufacturers and creates a level playing-field with complete visibility on both sides.
European officials deserve credit for their publicly-stated
willingness to reconsider launch aid to Airbus. This week, I hope they will follow these statements with actions that display a seriousness of purpose. This will dispel any notion that they are stalling in the hope this is simply a political issue that will evaporate after the US presidential election. Both US presidential candidates have expressed support for ending launch aid to Airbus, but any impression that this is merely election-year politics is mistaken. Airbus is a mature, profitable company. It no longer needs launch aid to compete. It is time for launch aid to end.
The writer is president and chief executive officer of Boeing
ENDS.
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Problem is that EU people is confortable with the aids given to Airbus, and apparently US people are not willing to give the same aid to Boeing (weapons are far more important than civil affairs, so the American people send their tax $$ to build F22's). Do we hear EU people crying about that? like "Hey stop giving aids to your MIL programms, 'cos we cant compete with you fair and square"
Gimme a break!
GD&L
Gimme a break!
GD&L
"The military programs are not AID.
That is simply the government purchasing things that they need, just like bridges and roads."
Even when by buying US they are buying an inferior product? 767 tankers rather than 330 MRTT, S-92 rather then US101, etc.
Even when Boeing get orders for new aircraft when an upgrade of existing aircraft would make better economic and military sense?
Boeing gets massive 'under the counter subsidies', let's not be disingenuous.
That is simply the government purchasing things that they need, just like bridges and roads."
Even when by buying US they are buying an inferior product? 767 tankers rather than 330 MRTT, S-92 rather then US101, etc.
Even when Boeing get orders for new aircraft when an upgrade of existing aircraft would make better economic and military sense?
Boeing gets massive 'under the counter subsidies', let's not be disingenuous.
Union Goon
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Better by whose definition?
They buy what they want and need for the job at hand.
When the government goes out to build a bridge they don't always put up a 12 lane double decker bridge.
US TAX dollars should most certainly be spent in the USA.
Cheers
Wino
They buy what they want and need for the job at hand.
When the government goes out to build a bridge they don't always put up a 12 lane double decker bridge.
US TAX dollars should most certainly be spent in the USA.
Cheers
Wino
It is a sad fact that military spending is not always directed to 'buying what they want and need.' Such blandishments show a naive belief. The military normally ask for more than they want to fulfill a job they are directed to do knowing that less (but normally sufficient) will usually be delivered. That is to ignore industrial lobbying and inter service rivalries.
Isolationist industrial spending by governments has a justifiable position in politics, usually during recessions when moribund industries need to be kick started by government intervention. However, economically it isn't always good sense, especially if you end up paying more since to do that you have to tax more.
Isolationist industrial spending by governments has a justifiable position in politics, usually during recessions when moribund industries need to be kick started by government intervention. However, economically it isn't always good sense, especially if you end up paying more since to do that you have to tax more.