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EU Says It Has Complied With WTO Ruling on Airbus Subsidies

The European Union said it has complied with terms of a World Trade Organization ruling that Airbus SAS (EAD) got billions of dollars in illegal aid from EU governments to build aircraft including the A380 superjumbo.

WTO judges found that loans by EU governments including Spain, the U.K., France and Germany were unfair subsidies that had an adverse effect on U.S. rival Boeing Co. (BA) While the trade arbiter can’t force nations or companies to scrap illegal aid, it can authorize retaliatory sanctions against governments that fail to comply with its rulings.

“We are comfortable that this is a substantive response to the requirements that the WTO put on us,” EU Trade Commissioner Karel De Gucht said in an interview at Bloomberg’s headquarters in New York yesterday. The EU is dealing with subsidies “on all models that are the topic of this litigation.”

The EU’s compliance report was submitted to the U.S. and the Geneva-based WTO today in the seven-year legal battle over aid to Airbus and Boeing, the world’s two biggest commercial planemakers. The report wasn’t immediately made public.

The U.S. will review the EU statement before deciding on its next step, Trade Representative Ron Kirk said today in an e- mailed statement. The EU must “withdraw its subsidies or remove their adverse effects” to comply, according to the statement.

Illegal Subsidies

WTO judges ruled in June 2010 that EU governments provided illegal subsidies to Airbus in the form of so-called launch-aid loans as well through as infrastructure support and equity infusions.

Boeing has said Airbus received $18 billion in illegal subsidies, including $15 billion in launch aid, while the EU has called that a “fantasy figure.” WTO judges concluded in March that Chicago-based Boeing received at least $5.3 billion in illegal U.S. support, unfairly tilting the $70 billion civil- aviation industry. Both the EU and U.S. appealed that judgment.

“We expect the U.S. to do the same, to also give a substantive reply to what will be the result of the procedure before the body on the other case,” De Gucht said.

The EU and U.S. haven’t had talks on a settlement in response to the separate findings against Airbus and Boeing, De Gucht said.

“We are ready to engage in negotiations but without preconditions, and up to now the U.S. are not ready to do so,” he said.

‘Limited Changes’

The plane industry should develop guidelines to regulate state support to planemakers, rather than the U.S. and EU “punching each other in the nose about the WTO,” Airbus Chief Operating Officer John Leahy said today on a call with reporters from Washington. “The best way forward in this whole WTO issue is to sit at the table and get this thing sorted out,” he said.

Boeing said EU launch aid for Airbus must end to comply with the trade arbiter’s decision.

“We expect Airbus and its government sponsors to demonstrate that the practice of market-distorting launch aid -- the most pernicious form of subsidy Airbus was found to have received -- has ended,” Chicago-based Boeing said today in an e-mailed statement.

The two WTO panel reports finding that both aircraft makers got illegal subsidies may establish industry-defining guidelines for government support that become even more important as competitors from China, Russia, Brazil and elsewhere emerge.

The U.S. and Europe filed counter-cases at the WTO in 2004 after the administration of President George W. Bush unilaterally walked out of a 1992 aircraft-aid accord with the EU. Boeing lost its industry lead to Toulouse, France-based Airbus, a unit of European Aeronautic, Defence & Space Co., in 2003.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net; William McQuillen in New York at bmcquillen@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net; Larry Liebert at lliebert@bloomberg.net

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