"Launch aid"

The notion of government subsides for the major airplane manufacturers is at the heart of a debate that’s now before the World Trade Organization (WTO).

When it comes to “launch aid,” does everyone do it? No, everyone does not do it. And that’s the point made by my Boeing colleague Ted Austell, our vice president of international trade. He’s written an interesting commentary today, and it’s worth a read.

Comments (12)

G (France):

There is no such thing as a free launch.

Gareth Richards (Cincinnati (but reading from Paris)):

To G (France):

tres amusant!

PS: apropos of nothing in particular...I work in the aviation industry and this week I have been visitng our partners near Paris. It reminded me of something...

I thought I would share a saying of my son's; he is always fond of saying "We are living in the future". How true.

I left Cincinnati Sunday night, worked in France all week and tomorrow (Friday) I'll go back home. It's my 6th trip this year. While I am here I stay in a favorite hotel, eat at restaurants I know well and say hi to the waiter, take a familiar shortcut to work because the traffic is better, check email every 10 minutes on my BBerry, check my favorite websites, pay my cable bill...all of this as if it is nothing out of the ordinary to go to work 4,000 miles away for 4 days!

And it is aviation that makes it all possible. 100 years ago it would have taken me a week to make the crossing in one direction port to port, much less door to door in 10 hours.

So indeed we are living in the future. How lucky we are.

ManagerJosh (Southern California, USA):

I'll say this once: If the EU panel rules against Boeing, it just goes to show how big of a mockery the EU system is.

Boeing receives tax breaks and incentives to choose certain sites and locations. Airbus receives them as well in the US if they opt for that spot. (I doubt Boeing btw, would receive the same tax breaks in the EU).

Boeing receives government contracts. So does EADS (parent company of Airbus). Anything they do could be at one point traced back to both of these contracts at one point or another.

Airbus receives launch aid for aircraft, AND only needs to pay it BACK IF AND ONLY IF THE AIRCRAFT IS A SUCCESS. Boeing doesn't receive ANY launch aid.

So in short, if you do a comparison in general, everything EADS is WHINING about has no merit because they get the same benefits from the EU and respective governments. Only difference between Boeing and Airbus: Launch Aid.

Joshua Lyman (Haverford, Pa, USA):

Europe vs US... US vs Europe... It unfortunately became a popular combat at the UN back in 2002. But do we also have to go through in the aviation industry? Is this what the latter has become?

Just take one look at all the aviation blogs and forums and it's just like a sports contest turned sour. Let's leave the WTO argument to the Washington and Brussels lobbyists, and you can concentrate on getting the 787 flying and delivered and convincing more customers to sign on.

Chris C (South Africa):

Boeing’s business practices are ethical, mature, and professional. I concur with the report you highlighted above, and although these highlighted matters go much deeper and more involved than the general public are given knowledge of, the fact remains that Airbus have played the game unfairly, by having a tilted playing field, in their favour.

As I said about a year ago in a comment to this great Blog, if Airbus’s products fail to meet their expectations, such as the A380, Airbus will not pay for it, but most definitely, the customers, shareholders and governments will!! It is always intriguing, and perhaps amusing, to read on how many billions of dollars to A380 is over-budget, and how many billions Airbus has had to pay in compensations, and yet after five or six major, extremely costly redesigns of the A350, they have the finances to finance the A350XWB’s multi-billion dollar programme as well!?

This truly does not add up. Some one should shout foul play, and rule in favour of the Boeing Company. Further, it seems that Airbus are having all their feathers ruffled, not only from a significantly better commercial airplane line-up from Boeing, but also from internal issues. Airbus indeed is a tough competitor, but it usually is due to very keen discounts on their products to better the efficiencies of such of the Boeing offering, period.

Ed (Dublin, Ireland):

Boeing signed an agreement with Airbus on launch aid in the early 90's.

Would somebody care to put a figure on the net financial benefits that Airbus and Boeing have individually recieved from the US and EU governments since this agreement was signed? If you look into it you will find that Airbus have payed back considerably more than they have recieved since then, and there are still billion's outstanding.

G (France):

Is seems that Boeing's concern is only about the "Launch Aid".

To Ed in Dublin:
You said Airbus had payed back more than it has recieved in Launch Aid. Do you mean that a loan from banks at normal a rate would be more attractive?

Steve (London):

The indirect subsidies that Boeing is receiving from Japanese industry as part of the 787 production are almost certainly illegal under WTO terms.

A US win at the WTO is a far from certain thing, and I suspect neither side will be happy with the outcome there.

"Boeing’s business practices are ethical, mature, and professional."

Hmm, you obviously missed all the recent scandals then. ;-)

"If the EU panel rules against Boeing"

Which EU panel would this be then? Do you mean the WTO?

The US and EU agreed to a set of rules by which to play the game. As soon as the US started losing the game, it thew its toys out of the pram and went crying to the WTO. Boeing may well regret the day they convinced the US government to take this action.

Chris C (South Africa):

Although deviating from the subject of ‘Launch Aid’, Airbus have recently made the rather childish, and amusing, remarks of how much ‘better’ their A350 XWB is, compared to the super-efficient, and phenomenally advanced Boeing 787 Dreamliner. What Airbus seems to fail to mention is that they have no offering to combat the extremely lucrative, and important market the 787-8 is optimised to suit which is between 200 and 250 seats, and further, Airbus seems to think that the A350-800 is a 787-8 competitor, whilst the –900 is a 787-9 competitor, which is not the case at all.

The 787-9 is a competitor to the A350-800, whilst the A350-900 and –1000 will face extremely stiff competition from the superior 787-10 and new, advanced 777 offerings respectively, in the future. In essence, the –800 model is completely obliterated by the largest 787 offering the –9. Airbus claim they “think” the A350 will have a 5% less fuel burn than the 787, but they fail to highlight which 787 and A350 family member(s) they are comparing. More than likely, they are comparing the A350-800 to the 787-8, which is grossly inaccurate!

The fact remains that the 787 is the superior offering, and is more technologically advanced in many areas where the competition falls short, hence Airbus’s childish comments lately.

Paulo M (Johannesburg, RSA):

I like the fact that I can post to this blog/forum from my phone from almost absolutely anywhere I choose.

The other fact is also relatively simple. How ever the WTO rules will set precedents with undesirable consequences downstream - for both sides. If the EU position wins then both sides will be competing with launch aid for, say Chinese future airliners - say 20 years from now. By then, China will have a massive tax base from which to draw increasingly large funds for increasingly ambitious projects.

The pretext will be familiar - "stake out a future for itself through key technological endeavours - thus independence from the US". Harsh, but true. If the US position wins, then expect increasing competition, so far as military projects are concerned, again from countries such as China, but also increasingly the likes of Brazil (which has a similar system to that of the US).

Note that most of the competition/challenges will be from Chinia due to the shear size of the respective countries' populations, their rapidly expanding economies, and thus taxes.

So what's it going to be? Do we want a super clear answer, or should we have this drag on for some extended period of time? It more messy than most think.

G (France):

Steve (London) said,
The indirect subsidies that Boeing is receiving from Japanese industry as part of the 787 production are almost certainly illegal under WTO terms.

You'd better call it "investment of japanese industry" or "partnership with japanese industry" because Japanese private industry will share the profit of the 787 production.
Japanese industry becomes Boeing supplier. Why should it be illegal under WTO terms?

ManagerJosh (Southern California):

@Steve

My reference to the EU was merely an allusion to similar parallels towards the recent ruling on Microsoft. Totally different topic for a totally different blog.

As for the indirect subsidies, we can't call it subsidies for Boeing. Why? Boeing never gets a dime, Or sees a penny. Or even a yen for that matter. All subsidies the Japanese Government issues goes to THEIR companies. Now if the Boeing Company Japan division received such subsidies, then yes, I would most whole heartly agree with you. But at last check, Fuji Heavy Industries and others were not owned by Boeing.

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