UPDATE 2-Germany says close to A350 funding deal

Mon Mar 22, 2010 4:26pm EDT

* Government aerospace spokesman says conditions fulfilled

* Says A350 funding conforms with WTO rules

* Says Germany, Airbus need to work out a few more details

* Remarks come on eve of key WTO finding on aircraft aid (Adds Boeing comment)

By Maria Sheahan

FRANKFURT, March 22 (Reuters) - Germany is ready to provide 1.1 billion euros ($1.5 billion) of funding to European planemaker Airbus EAD.PA for the development of its A350 jetliner, a government official said, adding that only details remained to be ironed out.

The comments come a day before the World Trade Organization is due to make a ruling on state support for Airbus planes to clarify rules on industrial subsidies, which are at the heart of a transatlantic battle for industry dominance. [ID:nLDE62H1C9]

German government aerospace co-ordinator Peter Hintze reiterated that Germany had agreed in principle to make 1.1 billion euros available as its share of development funds for the future rival to Boeing's (BA.N) 787 Dreamliner.

He added in a newspaper interview on Monday that funding was available, and that all conditions for a positive financing decision had been met. Hintze's office confirmed that statement.

"On our side all the pre-conditions are fulfilled. The conditions of the loan are in conformity with WTO rules and the funds are available," Hintze was quoted as saying by Die Welt.

The United States has attacked loan payments by European governments for Airbus aircraft development as unfair subsidies, while the European Union, in a separate suit, accuses Boeing of receiving illegal support in the form of research spending.

The United States argues that Airbus got a total of $205 billion in unfairly priced loans and other benefits from France, Germany, Spain and Britain over two decades -- making the case by far the biggest international trade dispute.

Boeing criticized the proposed German funding in a statement.

"On the eve of such an important decision, it is unfortunate and disappointing to see news reports quoting a senior German official saying that Germany is prepared to provide 1.1 billion Euros for the development of the Airbus A350 -- a move that flies in the face of both the expected WTO decision and the rules-based global trading system we've all endorsed," said Ted Austell, Boeings' vice president, executive, legislative and regulatory affairs.

A confidential interim report in September found against the European loans, U.S. lawmakers said. European sources denied there had been a clear-cut result.

Tuesday's final report on the U.S. complaint will be confidential, but it will be published around the end of April.

Hintze had already said last year Germany was prepared to provide 1.1 billion euros financing to help Airbus get the 10 billion euro A350 project off the ground, but the timing of the new remarks could fuel the subsidy debate.

"Whilst the proposed A350 development by Airbus is not part of the WTO report conclusion, it is inevitable that the final ruling by the WTO will impact on the loan subsidy received for this aircraft development and as to how quickly it may need to be paid back," said Howard Wheeldon, senior strategist at BGC Partners in London.

One of Washington's main aims in its complaints to the WTO is to deter European launch aid for the A350 aircraft, which is designed to compete with Boeing's 787 Dreamliner. Europe says the WTO complaint does not apply to future models.

Boeing was first to the market with its successful 787, which completed its maiden flight in December.

Airbus has since recovered some ground as Boeing grapples with delays that pushed first deliveries to the end of this year. (Reporting by Maria Sheahan; Editing by Dan Lalor, Rupert Winchester and Bernard Orr) ($1 = 0.7401 euro)