Airbus steps up battle with Boeing on subsidy

Airbus stepped up its legal battle with Boeing at the World Trade Organisation, alleging that defence subsidy programmes and promotion campaigns in countries such as India contributed adversely to its sales in third country markets, a senior EU official said.

"We have established that Boeing received subsidies to the tune of $10.4 billion from eight specific NASA programmes for the development of new technologies that are currently being used by Boeing," the EU official said, suggesting that this helped the American company to enormously in the race to capture markets world over.

In addition, Boeing benefited enormously from the US Department of Defence subsidies for dual-use technologies that are used in both military and civil aircraft industries, the official added.

Boeing kicked off the dispute almost three years ago when it suffered a drop in sales. However, the American company sold more aircraft last year than Airbus.

While the European aircraft maker, which is a subsidiary of EADS, the Franco-German aerospace and defence group, received 1341 new orders last year, Boeing secured 1,413 orders in the same period.

Boeing is in no mood to give up the legal challenge even though its sales are suddenly peaking at this juncture, said legal analysts, arguing that the dispute will go on for a while until new subsidy rules for the civil aircraft are developed.

Aircraft and shipbuilding industries have received support from governments historically, but intense competition between companies is posing a challenge to continuation of the subsidy programmes.

The costliest trade dispute between the trans-Atlantic trading partners would have damaging consequences for countries that are still in an early stage of developing their civil aircraft industry because of potential new subsidy disciplines that propelled Airbus and Boeing, analysts argued.

Countries such as India and China are in an early stage of developing their civil aircraft industry, which needs to be supported through subsidy programmes. Stringent rules against aircraft subsidies might not help the new companies, analysts said.

Verdicts on the tit-for-tat disputes between the two companies are being delayed, said sources, suggesting that the Boeing's dispute against Airbus would be decided at an interim stage by April this year.

The final ruling in Boeing's case against Airbus - which allegedly developed new planes that led to the loss of market share for the American company - is likely to be issued in June this year.

Having benefited a great deal all these years from a bilateral agreement, the two companies should ideally reconcile their positions due to the rising sales of civil aircraft in the emerging markets, said a subsidy dispute analyst, while suggesting that the WTO should not be dragged into this case.

In fact, the two companies will find it difficult to convince the adjudicators because of their growing sales over the last two years. The global trade body has already issued strong verdicts in the subsidy disputes, but governments have not fully implemented them.

Recently, Brazil won a major ruling from the WTO against Washington's lack of implementation of the dispute settlement body's recommendations in the cotton subsidy dispute.