EU and US in plane aid battle

THE US government and European Union authorities are on a collision course at the World Trade Organisation over subsidies to planemakers Airbus SAS and Boeing.

The EU yesterday asked the WTO to outlaw US aid to Boeing after the Bush administration revived its case against no-risk European government loans to Airbus.

Boeing lost its lead as the world’s top seller of commercial jets to Airbus two years ago.

Boeing, which EU Trade Commissioner Peter Mandelson said was instrumental in pressuring the US to lodge the complaint, is attacking Airbus “not because it fears subsidies, but because it fears competition,’ he told a Brussels news conference. “I can assure you Europe’s interests will be fully defended.”

The disputes deepen tension in the $750 billion trans-Atlantic trade relationship and threaten to disrupt the financing used by the world’s only makers of large commercial planes to develop new models.

At stake is funding worth a combined $5billion for the 250-seat Boeing 787, to be introduced in 2008, and so-called launch aid worth $1.7 billion for its rival, the Airbus A350.

The two governments had been trying to reach a negotiated solution even after formal talks broke down in April.

The US action came just hours after the EU had made a new proposal to resolve the dispute by slashing aid to both planemakers.

Airbus, based in Toulouse, France, last month asked four European governments for $1.7 billion in loans for the A350.

Airbus hasn’t yet given the go-ahead for the jet.