LDN - Business

Airbus moves to comply with WTO ruling on aircraft subsidies

[May 22, 2018] By Tim Hepher

PARIS (Reuters) - Airbus <AIR.PA> said on Tuesday it had taken steps to comply with a World Trade Organization (WTO) ruling on subsidies for its A350 and A380 jets, which has seen the United States and Europe trade legal blows on behalf of Boeing <BA.N> and Airbus.

The move comes after the United States won the right to seek sanctions against European Union goods following a partial victory in its 14-year legal battle against European government support for Airbus at the WTO.

The EU says it expects to strike a similar legal blow in a parallel case on U.S. support for Boeing later this year.

"Airbus and the European member states France, Germany, Spain and the UK have agreed on some amendments to A380 and A350XWB Reimbursable Launch Investment (RLI) loans," Airbus said in a statement.

"The terms of these amendments – like the terms of the original RLI contracts themselves – remain confidential but they are aligned with current market conditions," it added.

Airbus shares slipped 0.4 percent, slightly underperforming the broader Paris market <.FCHI>.

The subsidies row coincides with transatlantic tensions over U.S. aluminum and steel tariffs, and the impact on European firms from Washington's decision to exit an Iran nuclear pact.

It is also part of a two-way battle between the EU and the United States over aircraft subsidies that could spark tit-for-tat reprisals between the two trade superpowers.

In a rare public face-off between senior strategists in the dispute, Boeing's chief external lawyer in the case told the BBC that the United States would be free to target any European products, not just aerospace.

"The WTO will decide what the proper number is and ... give the U.S. that authority," Robert Novick, co-managing partner at U.S. law firm WilmerHale, told the BBC Today program.

"In parallel, the U.S. will develop a list of products on which it might consider imposing counter-measures," he added.

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An employee works on an Airbus A380 plane inside the Air France KLM maintenance hangar at the Charles de Gaulle International Airport in Roissy, near Paris, France, May 31, 2016. REUTERS/Philippe Wojazer/File Photo

The transatlantic dispute stems from mutual claims that the world's two largest planemakers benefited from illegal aid in the form of subsidized government loans to Airbus and research grants or tax breaks to Boeing.

Underscoring the cost and complexity of the case, the two sides have been arguing since 2011 about whether they complied with earlier rulings.

Airbus did not say how it would comply with the final ruling on European aid but a European Commission document said it would repay an A350 loan to the UK government this year and reduce the drawdown of other loans. https://bit.ly/2GDHWVK

It also said the bankruptcy of Russian carrier Transaero, resulting in fewer A380 deliveries, had helped it to comply, while other aid had been blunted by the passage of time - an argument that has previously been rejected by Washington.

Karl Hennessee, senior vice president and head of litigation at Airbus, told BBC Today that Airbus wanted a peace settlement similar to one between Canada and Brazil that set the tone for global aircraft export financing.

Nevertheless, Boeing has appeared to rebuff the offer.

"The most important message that Europe and Airbus can send to the rest of the world about the rules of trade in civil aircraft is to comply with this decision," Novick told the BBC.

(Reporting by Tim Hepher; Editing by Sudip Kar-Gupta and Mark Potter)

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