Airbus to Defend WTO Ruling by Saying A380 No Threat to Boeing

(Bloomberg) -- Airbus SE is ready to tell the World Trade Organization that the threat posed to Boeing Co. by its most ambitious program ever, the double-decker A380 jetliner, is so marginal that any U.S.-led sanctions against the European Union over illegal aid should be minimal.

The European company will cite the superjumbo’s slow sales and also contend that state support for the more popular A350 model was only slightly more of a benefit given cheap alternative funding available at the time amid historically low interest rates, its head of litigation Karl Hennessee said in an interview.

Airbus to Defend WTO Ruling by Saying A380 No Threat to Boeing

Airbus is on the back foot after Boeing last week won the latest in a series of disputes over illegal subsidies for the A380 and A350 spanning more than a decade. The WTO ruled that the Toulouse, France-based planemaker failed to adequately address what amounts to billions of dollars in funding from state backers, opening a route for President Donald Trump’s administration to levy tariffs against EU goods.

The U.S. is expected to begin those proceedings in coming weeks, setting up the next stage of arguments: how much financial damage Airbus’s subsidized jets have done to Boeing. That process could take years, Hennessee said.

“The only thing that would allow sanctions to be levied is if Boeing is able to prove the A380 poses a direct and imminent and massive competitive cost to their business,” Hennessee said in an interview. The A350 subsidy was “so small that it was not capable of affecting the launch of the aircraft” and had a “tiny, tiny impact on pricing,” he said.

Chicago-based Boeing told Bloomberg that the final WTO ruling makes clear that $9 billion of illegal launch aid to the A380 and A350 caused it real and ongoing harm that will “translate into billions of dollars in tariffs on European exports to the U.S. annually.”

Keith Rockwell, a spokesman for the Geneva-based WTO, declined to comment.

The claim that the A380 presents little competition to Boeing exposes Airbus to some risk by acknowledging that the model is a disappointment. The world’s largest commercial jetliner has secured barely 330 orders worldwide since its launch in 2000 and the manufacturer long ago acknowledged that it will never maker a profit on a program that cost $18 billion to bring to market.

At the same time, Airbus argues that the superjumbo has massive pent-up potential as airports struggle to cope with surging global travel, favoring planes that can cram the maximum number of people onto each flight. Its focus for the A380 in recent years has been on breaking even on a per-plane basis so that the model is still being built should there be a resurgence in demand.

Negotiated Settlement

Airbus is betting its arguments on the A380 and A350 will limit the scale of punitive levies that the WTO arbitrator deems appropriate. The manufacturer is also holding out for a ruling by the trade regulator on a counter-claim that Boeing has similarly benefited from illegal funding for its 777 and 787 wide-bodies that would expose the U.S. to tariffs from the EU, Hennessee said.

Airbus has meanwhile agreed terms with the governments of France, Germany, the U.K. and Spain to roll back subsidies in line with with the WTO’s report, it said Tuesday. The confidential changes amount to “minor adjustments” and the company is confident that it’s now in “full compliance” with the trade body’s stipulations, General Counsel John Harrison said in a statement.

While the WTO has yet to determine to what extent Airbus has benefited from illegal aid, the figure is expected to reach into the billions, whereas Boeing’s exposure could be as little as $377 million, based on previous rulings.

Ultimately, Airbus is hoping to negotiate a settlement with Boeing, Hennessee said.

“We’d rather extend a hand in friendship,” he said. “If we end up with sanctions on both sides, if those are imposed, what are we going to achieve?”

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