Kevin O'Toole/LONDON

The European aerospace industry is considering calling for the cancellation of the 1992 transatlantic agreement on aircraft subsidies as one of its options to keep up pressure on the USA in the wake of the Boeing/McDonnell Douglas (MDC) merger, say sources in Brussels.

The Airbus partners are already understood to have met the European Commission (EC)to assess their next move, following the last-minute concessions wrung out of Boeing as the price for approval of its merger.

European industry is keen to retain the initiative, with growing support for a challenge to the USA over the Large Commercial Aircraft (LCA)agreement, seen as being weighted against Airbus.

The agreement imposed a limit of 33%on government launch aid going to Airbus programmes, together with a 3% ceiling on the indirect support favoured by the USA. Europe claims that, while it is has been forced to comply with the launch aid limits, the USA has consistently breached the funding levels through a mix of tax breaks, NASA spending and research spin-offs from the Department of Defense (DoD). The latest in a series of EC annual reports on US funding suggests that levels of indirect support channelled through Boeing and MDC during the 1995 fiscal year amounted to $1.3-2.6 billion, depending on the amount of DoD research spending which is directly attributed to civil industry.

Both companies had combined commercial-aircraft sales of just over $18 billion in the same year, suggesting a level of funding of 7-14% and well beyond the 3%limit.

Figures for the 1996 fiscal year are of a similar order, claims Prof Philip Lawrence who leads the Aerospace Research Group, an international grouping of academics which has been studying the subsidies issue.

Lawrence adds that there is another $300 million being spent directly by NASA each year on the High Speed Commercial Transport programme.

The EC report does not comment on the likely success of a challenge within the World Trade Organisation (WTO), partially because of the difficulty in extracting exact numbers for civil support from within the DoD's $7 billion research budget. Europe, however, does have the option to give a year's notice of its intention to withdraw from the LCA agreement, so effectively forcing a renegotiation.

"There is a consensus emerging that Europe has to renegotiate the bilateral," says Lawrence. "There is increasing evidence that the EC has realised that it was stitched up in 1992," he adds.

Although there is no immediate prospect of Airbus coming up against the 33%launch aid limit, the issue could become pressing towards the end of 1998 when the consortium is due to launch the $8 billion A3XXprogramme.

A source close to the discussions says that, given the need for one year's notice, there is an argument for mounting the challenge now - a position which is being supported by the UK. "The thinking is that we should denounce this bilateral now while things are calm," he says.

Source: Flight International