EU says Boeing aid cost Airbus billions of dollars

GENEVA (Reuters) - The European Union said on Wednesday U.S. subsidies for Boeing Co. had caused Airbus billions of dollars of damage in recent years and described the U.S. response to the charges as weak.

The European Union and the United States are embroiled in a battle over the multi-billion-dollar large civil aircraft business, with each accusing the other of unfair state aid for their plane builders.

The dispute goes beyond stakes in a market worth about $80 billion a year for big jets and touches on sensitive defense concerns as Boeing and Airbus parent EADS are major defense aerospace suppliers.

Both Washington and Brussels have filed complaints at the World Trade Organization (WTO), which are being considered by a three-person dispute panel.

In the latest panel hearings on Wednesday, the European Union laid out details of U.S. aid for Boeing and dismissed U.S. defense arguments as ineffective or misleading.

In the EU's case against Boeing, the European Union says unfair U.S. subsidies to Boeing over the past two decades and running to 2024 total $23.7 billion.

The United States accuses Europe of granting $205 billion in illegal launch aid, including theoretical interest on the aid, to Airbus, now a fully-owned subsidiary of EADS.

ILLEGAL SUBSIDIES

Each side must prove that the other paid illegal subsidies and that their own industry suffered damage as a result.

"Boeing is relying on a smoke screen of inflated numbers and broad brush accusations," said Geoff Shuman, Airbus director of European affairs. "We will produce the cold facts to demonstrate subsidy by subsidy how U.S. subsidies have benefited Boeing and injured Airbus interests," he told reporters.

Between 2004 and 2006, Boeing received subsidies of roughly $5 billion used to keep down the price of Boeing aircraft and facilitate the early launch of Boeing's superior fuel-efficient 787 Dreamliner, an EU official said. As a result, Airbus lost $27 billion in revenue in that period.

But the United States says the EU complaint greatly exaggerates the amounts involved.

"The EU's claims are to distract attention from its own massive subsidies," Gretchen Hamel, a spokeswoman for the U.S. Trade Representative, said in a statement.

Airbus says Boeing is exaggerating the amount of launch aid it received.

The EU's charges revolve around two main forms of aid.

It says Boeing received tax breaks from local authorities including a $4 billion package from Washington state. The United States says these tax breaks were available to any business, but the EU said they had been specifically negotiated with Boeing.

The EU also charges that work Boeing did for the U.S. aerospace agency NASA and Defense Department amounted to disguised subsidies worth $16.6 billion.

Washington says this was properly contracted research, and that in any case under U.S. law military technology cannot be used on civil aircraft that can be exported or flown abroad.

But the European Union says some military technology can be used to construct civil aircraft even if it is not part of the finished plane, and research grants were not repaid.

U.S. officials also ask how Airbus can argue it suffered harm from any subsidies, if there were any, as its market share rose to 57 percent in 2005 from 37 percent in 2001.

Airbus's market share slipped to 54 percent last year but U.S. officials say any setbacks it suffered were due to design problems on its A350 and a misplaced decision to promote the mammoth and subsequently delayed double-decker A380.

Sales of the two are now running neck and neck, but Boeing is edging ahead in orders this year.