The Looming Trade War

Airbus vs Boeing – at Moneyweek.co.uk - the best of the week's international financial media.

Virgin Atlantic will demand compensation from Airbus after the aircraft maker warned that it's experiencing delays in filling the orders for its new double-decker A380s, says BBC.co.uk. Airbus, who is also supplying a number of its new planes to Qantas and Singapore Airlines, said that the super-jumbo could be delayed by up to six months. Virgin has now requested urgent talks with Airbus, and called the delay "disappointing"."In most airline programmes of this size including those of our competitors things can run a little later than originally planned," a spokesman for Airbus said last week.

Yet Airbus's problems don't end there, says Sylvia Pfeifer in the Sunday Telegraph. The aircraft maker has been hit by "internal wranglings" over the appointment of a new chief executive to replace Nol Forgeard. Forgeard will become co-chief executive at EADS, which holds an 80% stake in Airbus.

Moreover, the ongoing trade war between Airbus and Boeing has taken a turn for the worse: just last week the US trade representative said he would report Airbus to the World Trade Organisation for the European government subsidies it receives. Under 24 hours later the EU had hit back, saying that Boeing has received billions of dollars in "illegal subsidies" from America. Although the aid that Airbus receives will have to be repaid and is not interest free, it is possible to write off the debt if the plane is not a commercial success, says Pfeifer. Also, if Airbus fails to sell more than 500 planes, it will also not need to repay the fee. According to the Americans, this contravenes WTO rules on subsidies and have harmed Boeing in the process.

The WTO is in no hurry to resolve the matter: it could take up to two years to reach a verdict, says Pfeifer. And even if one of the parties were to be found guilty, penalties would be impossible to impose unless the "winning side is prepared to use trade sanctions".

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