World Trade Organization faults European Union for aid to Airbus

World Trade Organization judges gave the European Union a stinging rebuke Wednesday, saying the EU must halt prohibited export subsidies to plane maker Airbus that had injured U.S. rival Boeing Co.

The WTO panel concluded that Airbus had only been able to launch a series of passenger jets thanks to subsidies from the EU and member states Britain, France, Germany and Spain, without which it would be a very different and much weaker company.

The ruling marks a big setback for Airbus, but is not the end of its battle — the world’s largest and costliest trade dispute — with Boeing over subsidies in the market for large civil aircraft worth $3 trillion over the next 20 years.

“These subsidies have greatly harmed the United States, including causing Boeing to lose sales and market share. Today’s ruling helps level the competitive playing field with Airbus,� U.S. Trade Representative Ron Kirk said in a statement.

If the ruling is upheld on appeal and the EU refuses to stop the offending practices, the United States could ask the WTO for permission to slap sanctions on EU goods.

The WTO panel found that British, German and Spanish aid to Airbus for its flagship 525-seat A380, the world’s largest airliner, amounted to illegal export subsidies and must be corrected within 90 days. Boeing estimated the loans at $4 billion but Airbus declined to provide an estimate.

The WTO found that British, Spanish and German loans for the A380 contained illegal export aid but it cleared a French loan.

Allan McArtor, chairman of Airbus Americas, said the company was not obligated to repay any subsidies found by the WTO panel or any outstanding government loans.

“There is no requirement to repay anything in the WTO process,� McArtor said.

The ruling, which is subject to appeal, only imposes a “forward-looking� obligation on European governments that provide launch aid for Airbus, he said.

The European Commission said it would decide shortly whether to appeal the 1,000-page Airbus ruling.

Chicago-based Boeing said the ruling proved that Airbus had only been able to take market share from Boeing — nudging it out of first place in the process — because of subsidies.

“It has struck at the heart of subsidies for Airbus, held that they are illegal, and must end forthwith,� Boeing general counsel J. Michael Luttig said.

Final resolution of the case may well shape the civil aviation market, where Airbus and Boeing have together nearly $1 trillion of aircraft on their order books, for years to come.

More immediately, it could fuel a battle in the United States over one of the biggest defense deals in history.

Both Boeing and Airbus parent EADS are due to submit bids by July 9 for a contract worth as much as $50 billion for new tankers for the U.S. Air Force, based on converted passenger jets.

The EADS offering is based on the Airbus A330 — one of the planes found to have been unfairly subsidized — and Boeing is already making much of this, although it remains to be seen to what extent this will sway the Pentagon.