February 14, 2019 / 9:00 PM / 4 months ago

Airbus A380 production halt to fuel transatlantic trade spat

TOULOUSE, France (Reuters) - Airbus’s decision to shut production of the A380 looks set to reignite a translatlantic trade row over mutual claims of illegal aircraft subsidies, even as Airbus implements a two-year plan to stop making the world’s largest airliner.

An A380 Airbus superjumbo sits on the tarmac where it is dismantled at the site of French recycling and storage aerospace company Tarmac Aerosave in Tarbes, southwest France, February 14, 2019. REUTERS/Regis Duvignau

The planemaker announced the shutdown on Thursday due to weak sales, eliminating a model at the heart of a record trade dispute between the European Union and United States over government support for Airbus and its U.S. rival Boeing.

After 15 years and thousands of pages of arguments, the two sides are locked in arbitration proceedings at the Geneva-based World Trade Organization to determine the amount of harm each has caused through support, a possible precursor to sanctions.

The WTO’s appeals body last year said the EU had failed to remove subsidized government development loans for the world’s largest airliner, the A380, and Europe’s newest long-haul jet, the A350, causing losses for Boeing and U.S. workers.

Now, the EU is preparing to argue to the WTO that A380 subsidies no longer exist because the aircraft is being taken off the market, said a European source familiar with the case.

It will argue that the A380 part of the case should be halted because it will not be built after 2021, citing an earlier decision to drop charges on the now defunct A340, two European sources said.

The United States argues that subsidies paid to the A380 in the form of government loans have irreparably caused lost sales to Boeing and that this should be remedied through sanctions.

Airbus and Boeing declined to comment.

Last year’s appeals ruling was part of a two-way battle between the EU and the United States over aircraft subsidies that could spark tit-for-tat reprisals between the two trade superpowers.

The Trump administration last year said the United States would slap countermeasures on European goods unless the EU stopped “harming U.S. interests”. WTO rules allow it to target any industry since all goods fall into one category.

Boeing has predicted such tariffs could reach billions of dollars a year starting as early as 2019.

The EU has highlighted wins in a parallel case against U.S. subsidies for Boeing, and Airbus says this could in turn spark EU sanctions against the United States.

Airbus said on Thursday it would no longer need to repay state loans on the A380 because governments had agreed to share some risk in the roughly 15-billion-euro project.

It is estimated to have 1 billion euros in remaining unpaid government loans tied to the A380.

The United States has consistently called on Airbus to forego the European loans or pay them back at market rates.

Reporting by Tim Hepher; Editing by Alison Williams

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