EU Governments Could Provide Funding... And Fuel New US Complaints

European airplane maker Airbus must decide where to seek additional financing to develop its $17 billion A350XWB, and is considering government assistance as an option.

When asked about a time frame, Airbus Chief Executive Tom Enders said, "My hunch is it has to be decided this year," according to the Seattle Post-Intelligencer.

Airbus, based in Toulouse, France, is developing the A350XWB as a direct challenge to Boeing's 787 Dreamliner.

Airbus and parent company EADS -- European Aeronautic, Defense and Space Co. -- must decide whether to seek government loans or other financing.

France and the other governments where Airbus has principal operations made an initial commitment in 2005 to assist with funding if needed. The governments involved have said they will honor that request.

Such assistance would probably trigger new legal challenges from the United States, which already has a dispute with the European Union at the World Trade Organization on aircraft subsidies. Europe has a case against the US as well.

"New launch aid for Airbus would be unacceptable," said Ted Austell, Boeing's Vice President for International Policy. "Following Airbus' repeated calls for a negotiated settlement, it would be difficult to imagine a greater display of contempt on the eve of a determination by the WTO on the legality of this practice."

WTO judges are scheduled to issue the first confidential report on the US complaint against Airbus in April, with a ruling on the European case against Boeing about six months later. However, both rulings could be delayed.

EADS is controlled 22.5 percent by Daimler AG, 15 percent by the French government, 7.5 percent by French publishing company Lagardere SCA and 5.5 percent by a Spanish government holding company. The remaining shares are held by external shareholders or employees.

The final A350XWB design is to be determined this year, with the model entering service in 2013. Boeing's 787 Dreamliner has been delayed until 2009, due to production challenges.

Airbus has a relatively strong financial position at this time, but anticipates a greater cash flow need as it ramps up production of the aircraft. Some of the larger subcontractors on the project are expected to contribute about 50 percent of the needed investment.

Chief Operating Officer Fabrice Bregier said in a briefing Wednesday, "We would welcome a funding mechanism... it would be up to the governments to make it WTO-compliant."

FMI: www.airbus.com; www.boeing.com