Let’s Be Honest: Airbus Misleads On Subsidies

Issue Brief

The head of Airbus has launched a cynical initiative to find common ground with Boeing on the subject of commercial aircraft subsidies, arguing that both companies have sinned in accepting government aid. According to the October 22 Financial Times, CEO Thomas Enders told a London audience, “Let’s be honest about it, the simple truth is, in the aerospace or aeronautic business, none of us, none of the companies that play a role in it, has been growing without any government support.” Enders warned that if the two companies can’t overcome their differences on subsidies, emerging aircraft producers like China will find it easier to compete with them.

This appears to be a new approach to the concept of honesty. Having displaced the United States from its dominant role in the global airliner market through the systematic application of predatory business practices over four decades, the European side now says it is time for a ceasefire in the subsidies dispute. And having been found guilty by the world’s preeminent trade body of receiving roughly eight times the improper subsidies given to Boeing, its European competitor thinks a case for moral equivalence is in order. The Airbus version of honesty thus seems crafted to secure the most favorable outcome for its business as Washington and the rest of the world move to crack down on trade abuses.

Since Airbus seldom has trouble buying sycophantic friends in America, it is useful to review the relevant facts. The World Trade Organization ruled this year that European governments have given Airbus about $20 billion in illegal subsidies since its inception, enabling the company to introduce a family of commercial transports much faster than any purely commercial enterprise could, and price each plane more aggressively than market conditions otherwise would permit. Three-quarters of the illegal subsidies Airbus received were low-cost or no-cost loans euphemistically called “launch aid” that the company did not have to pay back unless its planes broke even in global markets — meaning that European governments were assuming much of the risk of developing and marketing the planes. The value of all that prohibited launch aid in today’s dollars approaches $200 billion.

The trade organization also issued a preliminary ruling in a companion case filed by European governments alleging Boeing had received over $20 billion in prohibited subsidies. The WTO found only a smattering of improper subsidies on the American side totaling about $2.6 billion over many years. Boeing received nothing like the billions of dollars in illegal launch aid given to each new Airbus plane. Bottom line: American companies and workers have been hurt a great deal by illegal trade practices benefiting Airbus, while Europeans have barely been hurt at all by improper U.S. actions.

It isn’t clear that Airbus would even exist without continuous infusions of illegal cash and credit. But because the money kept flowing for forty years in total disregard of free-trade rules, Airbus now controls half of the global transport market. And European governments are working overtime to figure out how they can get billions of additional euros to Airbus to develop a competitor for Boeing’s 787 Dreamliner, despite the recent WTO ruling against them. Why the U.S. government would want to reward such behavior by considering purchase of an Airbus tanker based on the company’s most subsidized airliner is a question that voters might want to ask themselves on Election Day.