The 14-year old dispute between Boeing Co. (NYSE: BA) and Airbus may have come to a conclusion Tuesday morning with a ruling from the World Trade Organization (WTO) that both sides are claiming as a victory. According to a summary of the decision at the WTO website, the European Union did provide illegal subsidies for single-aisle aircraft but the effects of the subsidies expired before they caused adverse effects in the market.
Mark that up to a partial victory for Airbus. Regarding illegal EU subsidies to Airbus on its dual-aisle programs, the WTO found that Airbus had not complied with earlier rulings to stop the subsidies and that the prior decision remains operative. That’s a partial victory for Boeing.
Leeham News cites an attorney who explained that Airbus claims that 94% of Boeing’s complaints have now been rejected while just 6% of claims involving the A350 and the A380 have been upheld. If we infer that those percentages refer to the more than $22 billion in damages that Boeing claimed in suffered, Airbus is a clear winner.
In its statement on the ruling, Boeing said the decision “ends the dispute and clears the way for the United States Trade Representative to seek remedies in the form of tariffs against European imports to the United States.” The company continued:
The authorized tariffs are likely to total billions in duties per year, unless and until Airbus addresses the illegal subsidies it received from European governments for its most recently launched airplanes. It is anticipated that U.S. tariffs will be authorized up to the amount of annual harm this market-distorting tactic is causing. Tariffs could be scheduled as early as 2019. This is expected to be the largest-ever WTO authorization of retaliatory tariffs.
Not so fast, says Airbus:
The WTO has now dismissed in their entirety 94 percent of Boeing’s original claims.
The WTO confirmed that all aspects of the A320 and A330 programs are now in full compliance, and that only minor action remains on the A380.
On A350, minor elements of the [repayable launch investment] remain to be addressed. Airbus is currently implementing changes to respond to these findings. This means that any potential US sanctions, now likely to be minor compared to what we expect on the case against Boeing’s subsidies, could result to be counter-productive and ill-timed.
The case Airbus is referring to is expected to get a ruling from the WTO later this year. The complaint was filed by Airbus against the subsidies Boeing received from the state of Washington for the 787 and 777X, among other things, totaling some $20 billion in “non-repaid, illegal subsidies over $100 billion, in damage to global trade,” according to Airbus.
Boeing’s take on the remaining case is that a decision is due late this year or early next and the company believes the ruling against it at a previous hearing will be reversed. But:
[I]f not, Boeing has pledged to do whatever necessary to come into full compliance in the interest of upholding rules-based trade, which is essential to fairness and the future prosperity of the global aerospace industry.
In order words, it’s not over ’til it’s over and that could be a while yet. Leeham News has more details.
Boing stock traded down about 0.8% in the noon hour Tuesday, at $341.84 in a 52-week range of $175.47 to $371.60. The Dow Jones industrial average is down about 0.9% as well, so it’s not clear if the WTO ruling has played much of a role in Boeing’s share price.
Airbus stock closed down 0.9% in Paris at €96.25 in a 52-week range of €68.42 to €100.42.