WTO Rules Illegal Subsidies Within Airbus, Airbus Changes Lease Terms to Comply

The World Trade Organization stated that Airbus has failed to fix the harm done to Boeing from European government loans used to develop its A380 and A350 aircraft. The United States will seek to initiate tariffs against the European Union, which will impact the international trade system.

On Tuesday, Airbus said it altered the terms of its loans for the double-decker and long-range aircraft with Germany, Spain, France and the United Kingdom. The WTO ruled last week that an illegal subsidy harmed its U.S. based rival, Boeing.

U.S. trade lawyers have argued that those tariffs could amount to $22 billion (18.6 billion euros), equivalent to the amount in illegal subsidies that Airbus has received from the EU, according to Boeing's tally. The process of settlement can stretch out to lasting up to a year. Tariffs could be in place by the spring of 2019 unless EU governments comply.

Airbus’s chief executive, Tom Enders, described it as “half the story”, pointing to another WTO ruling due later this year on $11.7 billion of tax breaks from Washington state for Boeing’s 787 and 777X jets. Airbus disputes those numbers, saying they overstate the amount of support embedded in the contested loans.

On the counterclaim, the U.S commenced how the A380 aid meant that Airbus was able to gamble on building the world's largest jetliner without facing the financial consequences of market failure, maintaining a way that disadvantages Boeing.

"Companies should not have to compete with governments - that is what this case is about," said Robert Novick, co-managing partner at Boeing's trade lawyers WilmerHale.

This incident is at the point of heightened political tension between Europe and the U.S. President Donald Trump has threatened tariffs on EU exports of steel and aluminum. Both sides agreed to not act upon this before 2019. He pulled the U.S. out of the 2015 Iran nuclear deal last week despite European allies who are parties to the accord.

Trump’s trade representative, Robert Lighthizer, has threatened to use “every available tool”, including “countermeasures on EU products”.

Airbus will repay an A350 loan to the UK government this year and reduce the drawdown of additional loans. It also said the bankruptcy of Russian carrier Transaero, resulting in fewer A380 deliveries, had helped it to comply, while other aid had been blunted by the passage of time

"Airbus and the European Member States have agreed on some amendments to A380 and A350XWB Reimbursable Launch Investment (RLI) loans," Airbus said in a statement.

"The terms of these amendments – like the terms of the original RLI contracts themselves – remain confidential but they are aligned with current market conditions," added Airbus.

At this moment of a U.S. hard line on global trade policy lends an unpredictable edge to any settlement negotiations and even elevates the risk of a trade war.