The World Trade Organisation's final report into state subsidies to Airbus raises two key questions: who won, and what effect will it have on the way the European airframer's multi-billion dollar programmes are funded?
There is a third: will the ruling - published on 30 June - derail Airbus parent EADS's attempts to sell its A330 tanker to the US government, whose Office of the US Trade Representative initiated the WTO investigation in 2004, or compete in future Department of Defense contests.
Surprisingly, given the emphatic way both sides claimed victory, or vindication, neither of the first two are clear. Although the USA has triumphed in at least some of the crucial legal arguments, what that means for the competitive landscape is uncertain.
© Airbus Military
As far as the KC-X tanker contest is concerned, it is evident that Boeing's supporters in Congress, the unions and the media will step up their campaign - begun when the WTO's interim findings emerged last September - to stop the US military choosing a foreign supplier they claim has been able to challenge a domestic rival only as a result of unfair subsidies. Indirectly, that could be the biggest punch Boeing has landed on its opponent.
Given the extent to which details of the report have already emerged in recent months, the report's content contained few surprises. Essentially, the WTO panel investigating the case has found that a series of loans to Airbus over the years, including reimbursable launch aid for the A380 and other infrastructure grants, did break international trade rules enshrined in the so-called Subsidies and Counterveiling Measures (SCM) agreement. However, crucially the WTO rules that A350 launch aid - agreed after the case began in 2004 - has not so far been illegal.
The Geneva-based organisation - an umpire in trade disputes - also finds that the effect of the subsidies constituted "serious prejudice to the interests" of the USA in terms of it being able to sell its exports in Europe and other world markets.
Implications for KC-X and EADS's US defence prospects
Boeing's political supporters in Congress - most of them from states in which the airframer or its suppliers have an industrial presence - seized on the initial findings as evidence for banning EADS (which originally partnered Northrop Grumman) from the KC-X competition, and stepped up their campaign following the report last week.
Although the administration has always been careful to keep the arguments separate, pressure will mount on President Obama to opt for a solution that preserves the most American jobs at a time of high unemployment. EADS argues that the "only beneficiary of such a non-competitive action" would be Boeing. The losers, it claims, would include, the US military, the taxpayer and 48,000 Americans who would be employed building and supporting the A330-based tanker.
Massive federal bail-outs and loan guarantees for US auto makers and other industries following the banking crisis - although admittedly not for aerospace - has also weakened the moral case against government subsidies.
It recommends that all prohibited subsidies should be withdrawn within 90 days.
However, importantly but rather confusingly, the WTO says the USA has failed to establish that the effect of the subsidies led to "significant price undercutting" or "significant price depression" by Airbus, and that the funding caused "injury" to the US aerospace industry.
Not surprisingly, Airbus and Boeing put very different spins on the findings and what should happen now. Boeing chief executive Jim McNerney hailed the report as "a landmark decision and sweeping legal victory over the launch aid subsidies that fuelled the rise of Airbus and that continue to provide its products a major cost advantage", adding: "We now join the US government in urging full compliance with the ruling and a permanent restoration of fair competition within our industry."
Airbus retorts that the WTO has rejected seven in 10 of the US claims and that the panel agreed that subsidies did not cause "material injury" to Boeing in terms of lost jobs or profits.
What happens now is also uncertain. Boeing is unstinting. "Airbus must repay $4 billion in illegal launch aid it received for the A380 or restructure the A380's financing to proven commercial terms," it says, also warning that Airbus must not resort to illegal subsidies to finance the A350. Although it expects Europe to appeal against the ruling, it says that process should be concluded by the end of 2010.
Airbus, however, expects the dispute to "continue for a few more years", partly because of Europe's corresponding case against alleged illegal subsidies to Boeing, which a separate WTO panel is expected to report on later this year, and has called again for both sides to negotiate a new agreement to replace the 1992 deal.
"Only the availability of the report on the parallel case will bring the necessary balance to allow for a possible start of negotiations, without any preconditions," says the airframer, adding that "resolution will finally only be found in transatlantic or even multilateral negotiations".
Those multilateral negotiations could be key. The glacial pace of the deliberations so far have meant that the investigation has not kept up with the changing business landscape. Since the lawyers got to work in 2004, Airbus has launched the A350 and Bombardier the CSeries while the Chinese are developing the Comac C919. The Russians, Chinese and Japanese all have regional jet programmes.
Ian Godden, chairman of UK trade body ADS, says it is "sad" that industries in the West are "distracting themselves with an internal dispute, while countries elsewhereare developing competitor aircraft", all with state support. "The trade dispute has the potential to tie up existing market leaders while such newcomers take market share," he adds.
Ian Giles, an aviation lawyer at London-based law firm Norton Rose, who has been following the case, says the ruling represents a defeat for Airbus "but it is a long way from the end of the story".
He adds: "Airbus has already said it does not believe the ruling impacts on funding plans for the A350 - Boeing clearly do not agree, and so another chapter in the dispute is likely to be played out before the WTO. As has been the case throughout this dispute, both sides are trying to portray the WTO ruling in their favour.
"For Boeing, the WTO finding that the interest rates granted by the EU governments were so far below market rates as to be illegal is a positive, while for Airbus, the finding that these type of state-backed loans are not per se illegal will give them hope that they can restructure the funding with minimum disruption. Also several of the US claims as to specific measures being illegal were rejected."
No one should expect a quick resolution to the dispute, he says. "The WTO ruling has to be seen as part of a wider political negotiation. The EU is not going to bow to this ruling without similar compromises from the USA, and the scope for countersuits before the WTO is far from exhausted. You get a sense of perspective on this dispute when you realise that there are still arguments before the WTO about the relevance of data from the 1960s. This still has a long way to run."
THE BACKGROUND TO THE DISPUTE
Airbus and its European "home" nations - France, Germany, Spain and the UK - have always been open about the fact that the airframer's programmes have been supported by the taxpayer since the consortium began building aircraft in 1970.
Created as an attempt to consolidate Europe's small national airliner manufacturing assets - most of them government-owned - into a rival for the USA's then big three, Airbus took many years to be taken seriously by Boeing.
However, by the 1990s, with its A320 family selling strongly and the A330/A340 making inroads into the long-haul market, Airbus's market share was creeping up on Boeing - by that time the only other big aircraft manufacturer.
A "gentleman's" agreement between Europe and the USA in 1992 - which set out ground rules for state funding of aircraft - was abandoned unilaterally by the USA in 2004 following Boeing pressure. This was just as Airbus was overtaking its rival for the first time and clocking up orders for the A380, a hugely ambitious, expensive and risky programme supported by reimbursable launch aid from European governments.
After the USA pushed the WTO to investigate the subsidies, Europe in turn filed a counter case, claiming that US federal research and technology grants and funds from individual states represented illegal subsidies.
The first panel hearing in the USA versus Europe case took place in March 2007, with the parallel European-initiated process kicking off that September.
Airbus's case has always been that every piece of launch aid it has received has been borrowed on comparable terms to the market, and paid back to lenders with interest, arguing that investing in the company has been a lucrative investment for governments.
The USA has argued that subsidies distort the market by allowing Airbus to fund riskier programmes with state guarantees against failure.