Through The Fly's Eyes: Boeing & Airbus

from Joseph Lazzaro of Theflyonthewall.com













Boeing & Airbus: The Subsidy Spat Continues

The European Union Thursday fired the latest shot in the Airbus (FR:EADS) vs. Boeing (NYSE:BA) joust by accusing the United States of giving Boeing $24 billion in state aid.

The claim was included as part of written evidence to a World Trade Organization panel probing the EU's complaint against the U.S., the BBC News reported.

Boeing's shares were down 40 cents to $90.40 in Thursday afternoon trading. EADS shares closed Thursday up about 41 cents to Eur22.19.

Airbus is publicly subsidized, but the company is also attempting to transition to a more-private, for-profit corporate structure: the company has often been criticized by the U.S. as not conforming with WTO bylaws. Among other points, the U.S. lists "launch aid" to Airbus since its birth in 1970 as a $16.7 billion European subsidy.

The EU has countered that Boeing benefits from U.S. Department of Defense contracts [which some view as a de-facto subsidy], and hidden state subsidies, including $4 billion in tax breaks and exclusive infrastructure work from the State of Washington.

Still, many aerospace analysts argue that the complex EADS / Boeing case before the WTO is less about fact discovery and violation of WTO rules, as it is about what international production framework represents a level playing field for both sides.

Further, while no one denies the impact of a WTO ruling, the market undoubtedly will play a large -- or larger role -- in each company's ultimate success. Boeing has captured air carriers' imagination with its fuel-efficient, modern 787 Dreamliner, while Airbus expects its new superjumbo A380 widebody to displace Boeing's 747.

Moreover, even with a one-side or split WTO decision, it's hard to envision that decision displacing the ultimate 'judge' in the Airbus / Boeing battle: the marketplace, in the form of plane orders.