Air Transport

State funding for Beijing airliner ambitions highlights need for international rules on global aircraft production

China's aviation ambitions are driving the need for clear funding rules as the country firms up its plans to build large passenger aircraft to rival US and European airframers.

China in February declared its intention to launch 150-plus passenger capacity aircraft manufacturing, with initial estimates pegging research and development costs between $6.5 billion and $7.7 billion.

A development schedule has yet to be revealed, but early reports suggest a prototype could be flying by the end of 2010, with the first aircraft targeted at the Chinese domestic market before export potential is explored.

Dr David Pritchard, a US academic from Buffalo University, poses the question that with much of the funding for the new aircraft likely to come from government coffers, where will the aircraft programme sit with current World Trade Organisation rules on the funding of large aircraft?

The issue could potentially see a repeat of the ongoing WTO dispute in which the USA and the European Union have launched reciprocal complaints over subsidies to Airbus and Boeing. The US case has targeted government loans to Airbus for new aircraft programmes, while the EU has challenged support given to Boeing by US state governments as well as the US Department of Defense and space agency NASA.

"Will the USA file a WTO case against China as the aircraft will infringe on Boeing's market or will the USA and Europe go silent on this topic? If the WTO wants to end up with a comprehensive agreement on global aircraft production, it needs to include China and Japan," Pritchard says.

"WTO filings are expensive for companies to litigate and should either the USA or EU file a case against China, they will be fighting against a country that has endless resources to continue the case for up to a decade until they have their aircraft built and flying," he adds.

Boeing chief executive Jim McNerny last week said the US airframer - while remaining a "tough competitor" - may choose to support Chinese efforts to develop large commercial aircraft as China will need international partners to secure the high technology required for such a programme.

The US Trade Representative department told Flight International: "Subsidies distort the market and create an unlevel playing field. Considerable progress has been made over the past 20 years in eliminating subsidies in the manufacturing sector, and we would be very concerned about the introduction of any new subsidies in the commercial aircraft sector."

The WTO is to make its first ruling on the US complaint in September. The EU's case against alleged US assistance to Boeing is due to come before the panel on 24 July with a ruling on that dispute expected in February 2008.

• Airbus vice-president Alain Flourens confirmed last week that Airbus will own 51% of its A320 final assembly line joint venture in Tianjin outside Beijing, with Chinese state-owned partners. Aircraft assembly is due to begin in the second quarter of 2008. Production will build to two aircraft a month by the end of 2010 and four by 2011-12.