The WTO Aircraft Decision

It's out, and it's just about as long as they said it would be.  Here's the "abbreviated" version -- just the background and findings, with the parties' arguments and annexes taken out -- on our web site.  This version is "only" about 870 pages of text.  Here's the full version, if you don't want to miss any details:  http://www.worldtradelaw.net/reports/wtopanelsfull/ec-aircraft(panel)(full).pdf

Here's USTR's summary of the key findings:

Launch Aid

The WTO panel found that European governments have provided Airbus more than 15 billion euros (face value) in launch aid – subsidizing every model of aircraft ever produced by Airbus in the last 40 years. This preferential form of financing permitted Airbus to introduce new models by offsetting the enormous costs and extremely high risks that characterize the development of large civil aircraft.

Launch aid provided by Germany, Spain and the UK for the Airbus A380 was prohibited per se under WTO rules because it was conditioned on the export of aircraft.

Infrastructure-Related Subsidies

The WTO panel found that France, Germany and Spain provided more than one billion euros in infrastructure and infrastructure-related grants between 1989 and 2001, including the creation of land in Hamburg to allow Airbus to expand production facilities, extending an airport runway in Bremen to allow Airbus to transport wings to other facilities for aircraft assembly, and transforming agricultural land in Toulouse into industrial facilities for the assembly of the A380.

Share Transfers and Equity Infusions

The WTO panel found that France and Germany provided billions of dollars of share transfers and equity infusions to Airbus between 1987 and 1998.

Research & Development Funding

The WTO panel found that the EU, France, Germany, Spain and the UK provided over one billion euros in funding between 1986 and 2005for research and development directed specifically to the development of Airbus aircraft.

Adverse Effects for the U.S. Aircraft Industry

The Panel found that the above subsidies caused adverse effects to the interests of the United States, in the form of lost sales – involving purchases of Airbus aircraft by easyJet, Air Berlin, Czech Airlines, Air Asia, Iberia, South African Airways, Thai Airways International, Singapore Airlines, Emirates Airlines, and Qantas – and lost market share, with Airbus gaining market share in the EU and many third country markets at the expense of Boeing.

Here's Boeing's press release.  They have a broad interpretation of the impact of the findings:

"Under today's decision, Airbus must repay the $4 billion in illegal launch aid it received for the A380 or restructure the A380's financing to proven commercial terms. Likewise, Airbus must abandon its plans to finance the A350 through the use of illegal subsidies," ...

The point about future subsidies to the A350 is very important.  One issue I'll be looking for as I read through is the following:  Is there anything in this report that affects future aid to new Airbus models?  From the press reports I read after the confidential version was issued to the parties, it seemed that the panel did not find that aid to Airbus was part of a single, general subsidies program.  As a result, the U.S. would not be able to challenge future aid to Airbus for new aircraft types as a failure to comply with this panel's findings of violation.  But I want to see for myself exactly what the panel said on this point.

As for whether the A380 loans have to be "repaid," well, there is the Australia - Leather, Article 21.5 decision in support, but that view was pretty controversial.  It will be interesting to see what position the U.S. government (as opposed to Boeing) takes on this point.

On the other side, France was was happy with some parts of the ruling:

"France is already delighted by the conclusions of the WTO report, which confirm, once again, that the repayable aid is not in itself contrary to WTO rules," ...

Nevertheless, Airbus may push the EU to appeal:

"Airbus, the EU and the member states are closely analyzing the report in advance of a possible review by the WTO Appellate Body," Rainer Ohler, head of public affairs and communications at EADS (EAD.PA) subsidiary Airbus, said in a statement.