THIS WEEK
flightglobal.com 10-16 December 2019 | Flight International | 9
Branson says he will
retain Virgin stake
Air Transport PW
hile Airbus has attempted
to present the latest report
from the World Trade Organiza-
tion (WTO) into subsidies for large
civil aircraft as a reason to cut US
import tariffs, trade officials in
Washington are threatening the
opposite course of action.
Released on 2 December, the
WTO report concludes that
changes made to A350 and A
development loans were insuffi-
cient to bring European govern-
ments into compliance with
WTO recommendations.
Citing a “lack of progress in
efforts to resolve this dispute”,
the Office of the United States
Trade Representative says it “is
initiating a process” to poten-
tially increase the tariffs, and
bring additional products with-
in their scope.
In October, the USA imposed
10% tariffs on large civil aircraft
imported from Europe, and 25%
tariffs on other products such as
Champagne and Scotch Whisky.
That move followed a WTO
ruling that permitted the USA to
impose $7.5 billion in annual tar-
DISPUTE DAVID KAMINSKI-MORROW LONDON & JON HEMMERDINGER BOSTON
USA mulls increasing tariffs on Europe
Washington considers expanding scope of import taxes after latest WTO report into subsidies for Airbus programmes
ASSESSMENT DAVID KAMINSKI-MORROW LONDON
Member-state financing ‘influenced’ Virgin A350-1000 sales
Virgin Atlantic’s order for 12
Airbus A350-1000s has played a
central part in the latest
assessment by the World Trade
Organization (WTO) as to wheth-
er subsidies influenced the com-
petitive field against Boeing in
the commercial aircraft market.
The UK carrier placed an
order for eight A350-1000s in
July 2016, with plans to lease a
further four.
In its evidence to the WTO
over the transatlantic subsidies
dispute the US side claimed that
the Virgin order was one of sev-
eral “significant lost sales” in the
twin-aisle market – along with
A350 deals from Emirates, China
Southern Airlines, Turkish
Airlines and others – which could
be attributed to subsidies
awarded to Airbus.
While it acknowledges the
difficulty in determining which of
these orders Boeing might have
won, the WTO says – in a ruling
on 2 December – that it took
“specific note” of the Virgin
sales campaign.
Three aspects of the order,
says the WTO, were “particularly
instructive” to its assessment.
The WTO had previously
concluded that Airbus, under a
different subsidies scenario post-
2013, could not have offered
Virgin the A350 for delivery until
at least 2022.
But Virgin secured earlier de-
livery slots, and received its first
A350-1000 in August this year.“All 12 delivery positions to
which Virgin Atlantic agreed
would have been unavailable in
the [alternative scenario],” states
the WTO ruling.
Without the A350, it argues,
Airbus would have been forced
to compete against the Boeing
777 with the A330 – a type
which is not intended as a rival in
the sector.
“These considerations, taken
together, convince us that Airbus
would not have won this Virgin
Atlantic sale,” says the ruling.
It concludes that the direct
effects of launch aid and mem-
ber-state financing for the A
programme amount to a cause
of lost sales to the US twin-aisle
aircraft industry.■iffs on European goods as com-
pensation for subsidies received
by Airbus from European govern-
ments that enabled the develop-
ment of the A380 and A350.COMPLIANCE PANEL
As the tariffs took effect, a WTO
compliance panel was examining
whether the EU and member
countries had already taken steps
to comply with its recommenda-
tions. However, it has now deter-
mined that the issues have not
been adequately addressed.
“The panel therefore conclud-
ed that the European Union and
certain member states failed to
implement the recommendations
and rulings... to bring its meas-
ures into conformity with its
obligations,” says the WTO.
Boeing calls the ruling “a com-
plete loss for Airbus and its
government sponsors”.
Airbus claims, however, that
the WTO’s findings should “im-
mediately” prompt a $2 billion
annual reduction in tariffs due to
the planned cessation of A
production in 2021.ments with market conditions
were “not sufficient”.
“Based on these findings,
Airbus would support to appeal
this report,” the airframer states,
while aiming “to comply with
the WTO recommendations”.
It accuses the US side of not
having taken “visible action” to
deal with its own illegal subsidies
for aircraft programmes including
the 777X, 787 and 737 Max.
Airbus is expecting a decision
on EU countermeasures, which
would impose similar tariffs on
US products – including Boeing
aircraft – in spring 2020.FULL COMMITMENT
Although the USA has ques-
tioned whether Airbus is fully
committed to terminating the
A380 programme – arguing that
production could continue with
a large enough order – the WTO
is sceptical of that claim.
“We do not share the [US]
view that prospects remain high
for Airbus to reverse its decision
to terminate the programme, or
that it would prove practicable to
do so,” the WTO says. It assesses
that the A380 is unlikely to gen-
erate demand sufficient to justify
reviving production after final
orders are fulfilled. ■“The US Trade Representative
now should accept the reality that
loans made to Airbus in the early
2000s – for the development of a
product that is no longer being
sold – do not have an impact on
Boeing sales,” Airbus says.
However, Airbus also notes
that the WTO found the meas-
ures to align A350 loan agree-Airbus
A decision on countermeasures from EU is expected in spring 2020