WTO ruling not to impact Gulf carriers

Dubai: The World Trade Organisation's (WTO) latest ruling on subsidies for Airbus from European governments terming them illegal will not have any impact on the Gulf carriers as the ruling will affect future aircraft developments and not the existing ones.

Max Sukkhasantikul, Consultant — Commercial Aviation, Aerospace and Defence Practice, Frost & Sullivan, said: "I do not think this ruling will have any impact on the Gulf's regional airlines. The orders that they have placed are signed off and would not be affected in any way."

Emirates, the world's biggest customer of A380s and Boeing 777s, have also ordered a large number of A350s currently under development.

Sukkhasantikul said the A350 orders won't be affected, either. "The WTO verdict on subsidies would, however, affect the new generation aircraft that both Boeing and Airbus are planning to develop."

Meanwhile, UAE airlines Emirates and Etihad — the two biggest customers of Boeing and Airbus in the region — declined to comment on the latest WTO ruling.

Verdict

The WTO on Wednesday ruled against Airbus on Boeing's plea, saying, "We conclude that, to the extent that the European Communities, France, Germany, Spain and the United Kingdom, have acted inconsistently with the SCM [Subsidies and Countervailing Measures] Agreement, they have nullified or impaired benefits accruing to the United States under that Agreement."

It has urged Airbus and its owners "take appropriate steps to remove the adverse effects or...withdraw the subsidy."

At the end of a 1,050-page document, WTO ruled: "Taking into account the nature of the prohibited subsidies we have found in this dispute, we recommend that the subsidising member granting each subsidy found to be prohibited withdraw it without delay and specify that this be done within 90 days."

Boeing on Wednesday praised the WTO's final ruling that billions of dollars in European launch aid subsidies used by Airbus to develop its commercial airplanes are illegal and must end. "This is a landmark decision and sweeping legal victory over the launch aid subsidies that fuelled the rise of Airbus and that continue to provide its products a major cost advantage," Boeing Chairman, President and Chief Executive Officer Jim McNerney said.

The WTO rejected several other accusations against Airbus, including US allegations regarding A350 funding.

"We consider that the commitments...did not confer any of the benefits the United States asserts were enjoyed by Airbus. Accordingly, we dismiss the United States' complaint against the alleged $1,700 million LA/MSF measure for the A350."

It also dismissed a US request for remedies, calling them "legally inappropriate".

"We note that the...rules ...do not require a panel to specify how the implementation of recommendations...should be effected by the subsidising member...In the absence of any requirement to do so...we do not make any suggestions concerning steps that might be taken to implement those recommendations," the WTO said.

In a statement, Airbus said the WTO report confirms Airbus's earlier predictions: 70 per cent of the US claims were rejected and wild allegations have been proven wrong. Neither jobs nor any profits were lost as a result of reimbursable loans to Airbus.

"These results are in line with the previous versions of the WTO panel's findings. Airbus, the EU and the Member States are closely analysing the report in advance of a possible review by the WTO Appellate Body," said Rainer Ohler, Head of Public Affairs and Communications of Airbus.

Research grants were condemned with important implications for the coming report on US subsidies to Boeing. Airbus expects the WTO to issue the interim report on Boeing subsidies very soon. "Only the availability of the report on the parallel case on Boeing subsidies will bring the necessary balance to allow for a possible start of negotiations, without any preconditions," Ohler added.

Airbus said it expects this WTO dispute to continue for a few more years. As in all other trade conflicts, resolution will finally only be found in trans-Atlantic or even multilateral negotiations.

The verdict follows years of hearings as the rivalry between the two manufacturers turned nasty. Airbus has been leading aircraft deliveries for several years, ending the dominance by its US rival, who also benefits from government support and protection.

Boeing had earlier filed a petition with the WTO against Airbus on airline subsidies as competition between them intensified.

"The discounts and subsidies offered to Airbus by European governments help Airbus to keep their costs low and help them in selling their aircraft cheaper, that hurts it competitor," Sukkhasantikul said.

He said the airlines should be able to develop new products without government subsidies.

"If aircraft manufacturers such as Bombardier, Embraer and others could develop new aircraft models and manufacture and sell them successfully without government subsidies, then why can't Airbus and Boeing?"