WTO appellate body partially upholds Airbus subsidy ruling

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The World Trade Organisation's appellate body has partially upheld a June 2010 ruling against state subsidies to Airbus but has overturned certain conclusions on A380 funding, leaving both Airbus and Boeing once again claiming victory.

The appellate body said it upheld the WTO panel's earlier finding that certain subsidies provided by the European Union to Airbus were incompatible with WTO rules "because they caused serious prejudice to the interests of the United States".

These included launch aid from France, Germany, Spain and the UK for the development of the A300, A310, A320, A330/340, A330-200, A340-500/600 and A380.

"The appellate body confirmed that panel's decision that the subsidies caused Boeing to lose sales of LCA in the campaigns involving the A320 (AirAsia, Air Berlin, Czech Airlines and EasyJet), A340 (Iberia, South African Airways, Thai Airways International) and A380 (Emirates, Qantas, Singapore Airlines," said the appellate body report.

However, the body has reversed the panel's finding that the financing provided by Germany, Spain and the UK to develop the A380 was a prohibited export subsidy. As a consequence, the appellate body has reversed the panel's recommendation that the EU withdraw prohibited subsidies within 90 days.

Boeing has applauded the appellate body's report, which the US manufacturer said "confirmed that Airbus received $18 billion in illegal launch aid, adding that Europe "must comply within six months".

But Airbus responded that the report "confirmed definitively that government loans are a legal instrument and that none of the government loans made to Airbus over the past 40 years were prohibited".

"We see no significant consequences for Airbus or the European support system from today's decision, as the WTO has now fully and finally rejected most of the US claims," said Airbus head of public affairs and communications Rainer Ohler.

The US Trade Representative has requested that the European Union and Airbus "refrain from future launch aid disbursements", a reference to the A350 XWB, which did not exist when the complaint was first filed in 2004.

Boeing vice-president executive/legislative and regulatory affairs Ted Austell said the A350 and other future programmes "will be governed under the findings on actionable subsidies". Added Boeing outside counsel Bob Novick: "The goal is to have compliance and refraining from providing launch aid to the A350."

The USTR will move to have the final report adopted by the WTO on 19 May, triggering a six month period for the EU to "eliminate adverse effects" or "withdraw subsidies" to Airbus. The US declined to say how those "adverse effects" would or should be eliminated.

Overall, the appellate body rejected the US claim that launch aid was fundamentally illegal, but ruled launch aid to Airbus remained "inconsistent with WTO rules".

An October 2010 ruling by the WTO found that a counter case brought by the EU on behalf of Airbus found that Boeing had received "at least" $5.3 billion from NASA and the US Department of Defense from 1989 to 2006, directly aiding in the research and development of the 787.