Seattle based Boeing won a major victory today over French based Airbus after the World Trade Organization reversed an earlier ruling and said that Boeing did not receive state aid in the production of the commercial airliner 777X.
The World Trade Organization has played referee for years in the long running dispute between the two companies over whether one or both of them are receiving unfair benefits from their respective governments. The current dispute stemmed from tax breaks given by the state of Washington to locate a production facility in that state. The European Union said that those tax breaks amounted to $9 billion, enough to give Boeing an unfair advantage over foreign competitors. The World Trade Organization originally backed the European Union in that suit. But, today, the earlier verdict was overturned.
Boeing’s general counsel, J. Michael Luttig, said in a statement: “The latest of the false claims Airbus and its government sponsors have made has now been rejected by the WTO…The EU and Airbus, meanwhile, continue to be in flagrant breach of WTO rulings and must eliminate the massive illegal subsidies the WTO said a full year ago had not been addressed, or risk US sanctions against European exports.”
Two other cases between Boeing and Airbus are still pending before The World Trade Organization. The aviation industry is enormously capital intensive and relies on huge economies of scale. Few companies can compete with the scale of Boeing and Airbus, the two behemoths that control more than 70% of the global commercial aviation market, and both receive various forms of state aid. The questions before the World Trade Organization are exactly how much and in what forms would constitute illegal aid.
Airbus’ Executive Vice President for Communications said simply, “the game is far from over.”
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