* European nations say may use loans for A350
* Boeing says any loans must be based on commercial terms
By Victoria Bryan and Tim Hepher
LE BOURGET, France, June 20 European nations on
Monday defended a system of state loans for planemaker Airbus
and broached the controversial subject of support for the
future A350, but Boeing warned that any aid must be on
Ministers responsible for aerospace in Britain, France,
Germany and Spain met on the sidelines of the Paris Air Show in
line with their tradition since these nations founded Airbus,
now owned by EADS EAD.PA.
The World Trade Organization has ruled that past uses of
the loans were subsidies that broke global trading rules.
Appeal judges last month cleared Europe of providing the
most aggressive type of aid known as prohibited export
subsidies, but said Airbus did receive billions of dollars of
unfair aid that harmed Boeing. [ID:nLDE74H21N]
Mark Prisk, Britain's minister for business and enterprise,
defended government funding for Airbus at a time when steep
spending cuts are being imposed in some European countries.
"It's something which is clearly beneficial and has shown
important returns for the taxpayer," he told journalists.
Washington has not ruled out filing a new trade complaint
if Airbus reverts to the system of government funding for the
"Any government support has to be on commercial terms," Ted
Austell, vice president of executive, legislative and
regulatory affairs for Boeing government operations, told
Boeing argues that interest rates on all loans to Airbus
should be in line with market rates.
Spanish minister Teresa Santero said Airbus had so far
received 70 million euros ($99.6 million), or one-fifth of a
five-year budgeted amount of 350 million euros, from Spain to
help with development of the A350.
"These mechanisms are in progress; there is no precise
amount we can give from the French side," French Transport
Minister Thierry Mariani said.
Boeing believes the European nations must first comply with
the earlier ruling by rectifying subsidized loans for the A380
superjumbo, from which it is still receiving benefits.
"The clock is ticking for compliance to begin. Europe has
an obligation to move into alignment with the WTO ruling by
December 1st," Austell said.
Although the A350 is not included by name in the WTO
ruling, U.S. officials believe the weight of evidence against
loans used in the past is so great that it would be virtually
impossible to re-use the system without breaking the rules all
However, it is not yet clear whether U.S. lawyers would be
able to challenge the A350 support by using the earlier case,
through the WTO compliance system, or would have to mount a
potentially costly and time-consuming new case.
"The A350 will be covered one way or another and if it is
not on commercial terms it will be in the crosshairs," Boeing
lawyer Robert Novick, a partner at law firm WilmerHale, told
The dispute, which also involves a parallel EU case against
U.S. aid to Boeing, has lasted seven years and cost tens of
millions of dollars. Analysts say it could drag on even
(Editing by Geert De Clercq, Gary Hill)