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Boeing Live Event Coverage

Seattle Times aerospace reporter Dominic Gates covers top industry events to bring you the latest news, highlighting how it impacts Boeing and its competitors.

July 21, 2010 at 9:18 AM

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Passive / Aggressive: Airbus and Boeing on the WTO ruling

Posted by Dominic Gates

At the Farnborough Air Show, Airbus executives were coolly dismissive of the World Trade
Organization (WTO) ruling that found Airbus had taken illegal government subsidies.

"I know nothing about it. I'm not spending much time on WTO," said Airbus chief executive


Tom Enders (right) in an interview. "We have lawyers who are well paid for that. ... The whole thing is pretty ludicrous."

In contrast, top Boeing executives had to talk detail to defend their aggressive political push to have the ruling factored into the U.S. Air Force refueling tanker competition. 

Boeing chief executive Jim McNerney in an interview said the illegal subsidies have lowered Airbus's capital costs significantly and allowed them to avoid risk.

"For a fixed price development contract like the tanker, if you perceive your source of funding as being lower risk, you'll take more risk for the bid," said McNerney."It's hard for me to be as aggressive (on price) as they could be. That's why I'm fighting this issue."

In London the weekend before the Show began, the head of Airbus parent company EADS, Louis Gallois, laid out a precise basis for the dismissive European attitude.

He said that the ruling found that two loans -- the French loans for the A380 and on the A330-200 programs -- were "not inconsistent with WTO rules, which means they are legitimate."

The conclusion Airbus draws from that is that, though all the other loans broke the rules on technical grounds, in principle there is nothing illegal about loans to launch airplane programs.

The trouble with that argument is that while those two loans were found not to have

violated the fair trade rules in the same egregious manner as the rest, they were still found to have violated the rules. Boeing lawyers cite chapter and verse on that from the ruling.

Enders wouldn't address such detail. "That's not our reading" he said. 

Rather than deny that Airbus has been heavily subsidized, Enders preferred to focus on parallel Boeing subsidies.

When the WTO finally rules on those subsidies in a countersuit brought by Europe against the U.S., Enders said the balance of guilt "will not be lopsided."

"We'll all see that when the ruling for EU against US comes out,"  he said.

"Let's be real," Enders said. "Can you show me one great military or commercial airplane program that has not in some way been subsidized."

Boeing's McNerney (right) was not apologetic about the bitterly political anti-Airbus


tanker campaign back in the U.S.

Boeing insists that taking into account Airbus's real airplane program costs in the tanker battle -- asking the Pentagon to add in billions to cover what they say is the ongoing financial impact of those illegal subsidies given to Airbus years ago -- is not unilateral retaliation for the illegal subsidies, which would itself be illegal.

Though so far the Pentagon shows no sign of agreeing, Boeing executives say such a reckoning is the only fair way to compare real costs in a competition that is likely to come down to the lowest bid.

"When we make a mistake, for example on the 787 development, we pay every dime," McNerney said. "They won't have to pay every dime if things go wrong."

"They can probably take more risk (on price) than I can," McNerney said. "That's what concerns me."

Enders said Boeing's tough stance on the $40 billion tanker contract is "not surprising."

"This is not kindergarten," he said. "We're talking big money here."

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