Airbus looks for a little help — again

Airbus, caught in a sudden downdraft, is once again looking to its government patrons for big-time lift. There may indeed be some lifting — of heads.

The European aircraft consortium’s biggest projects are faltering. Deliveries of the jumbo A380 will be delayed into 2010. The A350, a dud with airlines, must be radically redesigned, pushing the plane’s launch into 2012. That will give the Boeing Co.’s 787 Dreamliner at least a three-year head start in the market for mid-sized, fuel-efficient airplanes.

Catching up could cost as much as $10 billion, money Airbus executives are reportedly ready to seek from the European Union. A decision will likely come before next month’s Farnborough International Airshow, one of the events at which aircraft builders display their latest wares and announce new orders.

“Launch aid” triggered a U.S. complaint with the World Trade Organization in 2004. Back in the early 1990s, when Airbus was a fledgling, the U.S. agreed to let the Europeans subsidize the company. The aid consists of interest-free loans with payments deferred until Airbus began delivering planes, typically several years in the future. And if a plane flops in the marketplace, the company may not have to repay the loan at all.

As a result, Airbus has thrived. Thanks to $15 billion in launch aid so far, the company surged to supremacy in the commercial airplane market. Airbus has sold and delivered more planes than Boeing for several years running, but the 787, with more than 350 orders, will likely end that streak this year or next.

Spokane area manufacturers like Kaiser Aluminum and Triumph Composites supply both companies, and so have a stake in their successes.

The Office of the U.S. Trade Representative’s complaint with the WTO says continuing government support for Airbus violates global trade rules. Airbus counters with a complaint of its own, claiming U.S. government defense contracts with Boeing indirectly subsidize commercial airplane operations. More to the point from Washington’s standpoint, Airbus asserts that the various tax breaks the 2003 Legislature granted aerospace manufacturers was a Boeing subsidy as well.

Not too many months ago, before the A350 so clearly disappointed buyers, Airbus officials were downplaying any future need for assistance. Last month, reports indicated progress toward resolving the dispute outside the WTO.

But a spokesman for the U.S Trade Representative says there are no ongoing discussions.

“We continue to hope we can come to an agreement,” says Steve Norton. “But we still believe launch aid is inappropriate.”

He notes new Trade Representative Susan Schwab reiterated firm U.S. opposition to such assistance during her recent Senate confirmation.

“Europe needs to decide what it wants, launch aid or an agreement,” Norton says. “It wouldn’t be encouraging if new launch aid is announced.”

Boeing spokesman Tim Neale says U.S. reluctance to compromise has frustrated the Europeans. Boeing would prefer a negotiated solution, he says, but any renewed call for government assistance by Airbus would set back talks.

“It seems to be coming to a head again now,” he adds.

More like a head and a half. Potential bidders for a new U.S. Air Force tanker contract were required to divulge any government assistance they receive in information filings that set the stage for bidding next year. Airbus’s parent, European Aeronautic Defence & Space Co. will likely partner with Northrup Grumman to make a run at what will be a lucrative contract. An EADS/Northrup bid will be in for some intense political flak if the launch aid issue is still out there, especially with the likelihood the contractor will be selected as the nation enters another presidential election year.

Also, the dispute is wrapped within the larger stalemate over a comprehensive global trade agreement in which the U.S. strongly opposes continuation of protectionist agricultural policies dear to European farmers.

Meanwhile, Airbus co-Chief Executive Officer Noel Forgeard has some explaining to do over suspiciously timely stock sales, not to mention his stewardship of the A380 program. He will be in an awkward position to seek launch aid four months after pocketing $3 million in profits on sales of Airbus stock.