Airbus announces final step to tackle transatlantic trade war

European planemaker Airbus on Friday made what it described as a final step aimed at halting a transatlantic trade war over billions of dollars of aircraft subsidies.

Airbus said it had agreed to pay higher interest rates on government loans it received from France and Spain to help develop its A350 jet, which entered service in 2015.

It did not disclose the cost of the extra payments, which fall due whenever the plane is delivered abroad.

The government loans are among European measures that the World Trade Organisation (WTO) has deemed illegal subsidies as part of a pair of cases also targeting US support for Boeing.

Meanwhile, French Junior Industry Minister Agnes Pannier-Runacher spoke to the media after a meeting with Airbus workers’ unions representatives at the Airbus delivery centre on a visit focused on the future of the aeronautics industry on Thursday, in Colomiers, France. At the end of June, Airbus said it was planning to cut around 15,000 jobs worldwide in response to the coronavirus pandemic, which had triggered the “gravest crisis” the industry had ever seen.

The European Union’s failure to withdraw Airbus subsidies completely led to WTO approval for US sanctions starting from late last year on up to $7.5 billion of European goods ranging from wine to whisky.

Trade groups are bracing for an escalation of the row in the autumn when the EU is expected to win WTO approval to hit back with its own tariffs on U.S. goods in retaliation for subsidies for Boeing, which the Geneva trade body also found illegal.

In a record dispute dating back to 2004, the WTO has ruled the EU and United States awarded subsidies to their respective jetmakers. For the last eight years, the argument has mainly been about whether each side has obeyed those rulings.

“With this final move, Airbus considers itself in complete compliance with all WTO rulings,” Airbus said.

In May, the United States declared itself in full compliance with WTO findings after Washington state abolished aerospace tax breaks that largely benefited Boeing.

Although Airbus is not officially a party to the case, which pits the United States against the EU as well as Britain, France, Germany and Spain, Friday’s statement opens the door for negotiations to end the dispute, a European source said.

Both sides have repeatedly urged negotiations while accusing the other of failing to respond seriously to the invitation.

The Airbus move comes as industries hit by US tariffs including Scotch whisky and Spanish farmers are increasingly complaining about being targeted as a result of the aircraft row and pressuring Airbus and governments to resolve the case.

Airbus said US airlines that had ordered Airbus jets were also among those being hurt by the tariffs.

European officials say they have grounds to quash the US tariffs but that they have been thwarted by a procedural row at the WTO after Washington blocked appointments to its appeals body. US President Donald Trump has been critical of the WTO.

“We are in an impasse and need to get out of it. It is a way to show good faith and open the door to find a solution,” a European industry source said, referring to the loan decision.

The United States Trade Representative and Boeing were not immediately available for comment. A US source said any concessions from Airbus would be welcome but would have to be studied in detail.

Meanwhile, two of Boeing Co’s biggest commercial airline customers said on Thursday they are still committed to the 737 MAX despite delays in its return to flight and the coronavirus pandemic, though the head of Southwest Airlines said contracts need to be “completely reset.”

Boeing is behind on hundreds of 737 MAX deliveries since regulators grounded the jet worldwide last year in the aftermath of two crashes that together killed 346 people.

Since then, airlines’ financing on jet orders has expired, forcing a scramble by Boeing to arrange new financing as it awaits regulatory approval for design changes.

American Airlines Chief Financial Officer Derek Kerr said the carrier is in “good discussions” with Boeing to finalize financing terms on 17 737 MAX jets that were to be delivered this year, adding that the airline still wants its full order for 100 MAX planes, over time. “We totally plan on taking those aircraft,” Kerr said on a quarterly conference call. “Just when we take them is the discussion that we’re having.”

Reuters