OP/ED: Airbus and Its Continued Subsidies By Europe (Part I), page 1

We will give Airbus the means to win the battle against Boeing – Lionel Jospin, French Prime Minster, in the Assemblee Nationale, Reuters, March 8, 2002

Recently the tide shifted away from American commercial aviation giant Boeing in favor of the once upstart Airbus. Established over 30 years ago, Airbus, was created by the governments of France, Germany, Spain and the UK. The public owned company we know today, owned European Aeronautic Defense and Space (EADS) Company and BAE Systems, continues to receive Subsides in the form of launch aid, debt forgiveness, grants, equity infusions, and dedicated infrastructure support. This constitutes an unfair advantage for Airbus at best.

---

Launch Aid.
Developing commercial airlines is a risky endeavor. Look at the fortunes of McDonnald Douglas, Lockheed which were almost forced to bankruptcy over the tremendous costs. The research and development that goes into the production of a new plane type is costly in both time and money. Airbus shifts the majority of the risk of launching a new aircraft to its member countries in Europe. Simply put, if the plane fails and development is canceled, Airbus does not have to repay the launch aid. The repayment of the aid is often forgiven or deferred. At the time Airbus and Europe claimed that the aid was necessary to help compete against the hugely successful Boeing, but now that it is indeed bigger why is such aid necessary? The chairman of Airbus recently indicated that launch aid may be asked for the new A350.

"We will apply for refundable launch aid for our A350, of course," Forgeard said Tuesday at the company's headquarters.
A350 Aid

Launch aid that was tendered by the governments of Europe amounted to more than 15 billion dollars (U.S.) To Airbus. If forced to borrow the money at commercial rates such as Boeing would have to, the debt alone would be well over 35 Billion dollars (1) Even after the plane is launched the generous nature of the launch aid payback schedule allows Airbus to maintain its advantage. For example, the A380 project which itself received over 4 billion dollars in launch aid.

Look at the A380, for example. Airbus has received nearly $4 billion in launch aid for the ultra-big airplane. Airbus claims there is a market for 1,500 A380s, so it will have to sell 40 percent of that amount-or 600 airplanes-before it has to pay back just one-fifth of the launch aid it has received for the A380. We think the market for such large airplanes is much smaller, and we doubt Airbus will ever sell 600. If Airbus doesn't sell at least 600 A380s, it may never have to repay any of that launch aid. (2)

No or low interest rates coupled with a repayment scheme that is based on aircraft sales, Airbus lives in a risk free environment, does not have to shoulder any of the development risks associated with the building of planes. This and other subsides allows Airbus to aggressively price its aircraft with little consideration for dealing with any or all development costs. All of this is possible to the generous support of the European taxpayers that are burdened with the financing of Airbus operations. Critics will point out that the “loans” are repaid, however, they can be because Airbus again can simply ignore any risk because it knows if an aircraft line fails to be developed, they will not be stuck with the tab, the taxpayers will. Airbus in effect has become a European jobs program at the expense of American workers.

Is Support for the 7E7 launch Aid?
Airbus has pointed out the tax breaks that the state of Washington granted Boeing to produce the all new aircraft there. However, the tax break only partially reduces the tax on sales of Boeing planes. What Airbus seems to forget to mention is the fact that no taxes are levied on the sale of its planes. The entire program is predicated on Boeing investing its own money into the program and should the 7E7 fail, Boeing will have to eat the full cost of development not the state of Washington. Airbus (But not the taxpaying European citizens) on the other had enjoys a risk free development cycle.

Further more the Washington state program is open to any and all aircraft produces, even Airbus. On the other hand it is doubtful that Boeing could set up shop in an Airbus country and receive the same generous level of support. Airbus already takes advantage of several state sponsored programs here in the United States including facilities in Florida, Louisiana, and Mississippi.

Airbus also benefits from community support in addition to the national level of support it receives. A 800 million dollar production facility was built by the city of Hamburg to help with production. Boeing on the other hand must build its facilities on its own.

Defense Expenditures
Airbus and its supporters like to point to Boeing’s expansive Defense contracts and use that to give the impression that the United States government gives defacto aid by this manner. However, that is simply incorrect. Airbus annual Defense revenues total 23.8 billion dollars, nearly the same as Boeing’s 23.7 billion dollars. This fallacy is strictly Airbus propaganda designed to cloud its Subsides issue. The fact is that if Boeing is given a Defense contract, it must produce a product as defined by the contract. It also has to spend the money for development and research for the product in question.

Research and Development Costs.
Yet another often heard Airbus complaint is that Boeing is unfairly the recipient of United Sates government research by agencies such as NASA. Once again they fail to point out the generous amount of research and developments funds that they have received from European countries and the European Commission. Also not mentioned is that as part of the condition that the European Commission required of the Boeing McDonnell Douglas merger, the company is required to give Airbus full access to any government funded patents that pertain to civilian aircraft. So any gains Boeing may receive are shared with Airbus. However, all the research that is funded by the governments in Europe stays with Airbus.

The time has come for the governments of Europe to stop the incessant subsidizing of Airbus. In what can only be described as an elaborate jobs program, the governments of Europe has manipulated agreements and international law to their advantage. The result of this is that Boeing must now compete in a market that is clearly unfair.

_______________________________________________________
(1) Trade Facts, October 6, 2004 “No New Subsidies” , Office of the United States Trade Representative.
(2) eHC Straight Talk With Harry Stonecipher (No Date) “Airbus Launch Aid Needs To End Now”


Related News Links:
www.ustr.gov
www.boeing.com
www.airbus.com


Further in this series:
Airbus and Its Continued Subsidies By Europe (Part II) - The 1992 LCAA and Japan
Airbus and Its Continued Subsidies By Europe (Part III) - The Case of Pratt & Whitney

[edit on 16-12-2004 by Banshee]

The article below while a bit old, is still in effect in regards to the 737 aircraft. It seems that the Boeing plane produces more jobs in france than the the Airbus A319 a direct compeditor.

LE BOURGET, France, June 19, 1997 - As the Boeing 737-700 prepared to depart the Paris Air Show, Ron Woodard, Boeing Commercial Airplane Group president, noted that the 737-700 program will generate more jobs in France over the next three years than will the Airbus A319, the competing airplane showcased here at LeBourget.

"Very simply, that's because 737s are delivered exclusively with CFM56 engines," Woodard said, "However, only a minor share of the A320 series incorporate these great Snecma engines."

CFM56 engines are produced by CFMI, a joint venture of Snecma and GE.

"Snecma and our other French suppliers have been major contributors to the success of the 737. And they should feel very proud of what we have built together," Woodard said. "In the past five years, this relationship has generated more than $2.5 billion in revenue for Snecma and its suppliers here in France.
French Jobs

[edit on 12/13/04 by FredT]

Originally posted by FredT
The article below while a bit old, is still in effect in regards to the 737 aircraft. It seems that the Boeing plane produces more jobs in france than the the Airbus A319 a direct compeditor.

LE BOURGET, France, June 19, 1997 - As the Boeing 737-700 prepared to depart the Paris Air Show, Ron Woodard, Boeing Commercial Airplane Group president, noted that the 737-700 program will generate more jobs in France over the next three years than will the Airbus A319, the competing airplane showcased here at LeBourget.

"Very simply, that's because 737s are delivered exclusively with CFM56 engines," Woodard said, "However, only a minor share of the A320 series incorporate these great Snecma engines."

CFM56 engines are produced by CFMI, a joint venture of Snecma and GE.

"Snecma and our other French suppliers have been major contributors to the success of the 737. And they should feel very proud of what we have built together," Woodard said. "In the past five years, this relationship has generated more than $2.5 billion in revenue for Snecma and its suppliers here in France.
French Jobs

[edit on 12/13/04 by FredT]

Nice research Fred. Wonder what would happen if Boeing desided to change engine types?

Pass the apple pie -

Puleeeze, I'm glad this was Op/Ed because it is slanted way heavy. So what if AirBus gets all that was posted, it still can't hold a candle to Boeing.

$1 BILLION lost"The Air Force on Thursday banned Boeing Co. from future satellite-launching contracts to punish the company for stealing sensitive information from a competitor," according to the Associated Press
"The Air Force also took away seven military satellite launches from Boeing and gave them to competitor Lockheed Martin Corp. -- a shift which represented about $1 billion worth of business, said Air Force undersecretary Peter Teets."
- - -
Remember her?
In return for a promised executive position at Boeing she steered billions in federal contracts their way, including $20 billion for the tanker program. Talk about a federal jobs program at taxpayer expense!

- - -
C-130 upgrades
- - -
NASA/Boeing Space Station apologetic site In real year dollars, more than $35 billion will probably have been spent on ISS by the time the last module is launched in 2006. However, it is worth keeping in mind that the previous (far less capable-) Space Station Freedom design also would have cost an estimated $35 billion through March 2001, when the station's assembly sequence was to be completed. So the existing ISS design has more capabilities and costs less in the near term than Freedom, although the project has been stretched to save money.

Remember that the space station 'build' contract was under $1Billion when awarded. Boeing has used the Space Station program along with NASA insiders to rebuild much of Boeing's smaller companies and develop new technologies that are not in the public domain.

Boeing is pure capitalism. No other force drives them. Top executives serve prison time off and on and various U.S. government agencies ban them but Boeing always comes back for more.

Back to AirBus subsidies- they pale in comparison.

Well Fred, I've read the thread as you asked and, perhaps not surprisingly, I agree with the people who have replied pointing out the clear bias of the thing. I had to smile when I read the comment about being able to 'hear the national anthem' as I was thinking the same thing as I read it.

Like the others have said, the bare facts contained in that post are irrefutable but the way it reads like 'nasty evil Airbus' and 'poor nice Boeing' is laughable. Perhaps most ridiculous of all is the line you typed in reply when you said something along the lines of 'all Boeing wants is a level playing field' Awwwwww bless.

When has Boeing EVER wanted that? It has, as any corporation would, always sought out the greatest advantage, unfair or otherwise, for itself that it is possible to get. Indeed that remains the case and is the real reason behind their current moves.

I notice your post fails to mention that Airbus has remained within the rules established in 1992 that it and Boeing agreed to and which apply to Boeing as well in equal measure and the only reason Boeing are going on one now is because they are losing the race and don't like those rules anymore. Fair enough, I can understand that position is a natural reaction but leats be honest about it. Boeing and honesty, from whay I've read that is contained in some of the links posted by others that would make a nice change

Also when you say that Boeing has to just 'eat' development costs that are not recovered through sales, this is quite clearly untrue as the biggest part of the development costs of the 7E7 are being met by Japan in return for a manufacturing share of the programme. Does that not count? If not, why?

just one of many sources on this angle

Also, you are being extremely naive if you are blaming Airbus for the loss of jobs in the US commercial aircrcraft manufacturing industry. Hasn't Boeing itself already contributed to this with the 7E7?

Union officials say the wing and fuselage work on the 7E7 represents about 1,000 new jobs that now appear headed elsewhere. And while a dozen years ago, engineering professionals couldn't have imagined sending wing work somewhere else, many employees say this latest move is just the continuation of a trend.

"The company doesn't even view it (the 7E7) as an American-made product," said Bill Barrett, who works at Boeing's Auburn plant.

The source of that quote

The US has momentarily withdrawn her complaint about Airbus in the WTO, after the EU filed a "contra complaint" about Boeing.
www.eubusiness.com...
www.suntimes.co.za...

The US is also opting to terminate the 12 years old treaty which allows 1/3 of R&D of a planemaker to be covered by government loans.
news.bbc.co.uk...

There are everywhere forms of government subsidies in the world of aircraftbuilding. Read also about the US subsidies on military hardware which allows Boeing to R&D technology which the aircraftmaker can implement (in)directly in it's commercial products.

www.orientaviation.com...

Blobber

[edit on 14-12-2004 by Blobber]

Big government subsidies don't fly

Found the above and thought it is relevant since it points out very good points.

Our EU colleagues often charge that American industry benefits from NASA research and development. In fact, NASA research and development is available to any company, in the U.S. or elsewhere. Airbus used NASA-developed winglet and fly-by-wire technologies before Boeing did.

Amazing EU/AIRBUS howlers that American Industry benefits from Nasa, yet fly by wire and winglets were used first by Airbus not Boeing. It is little things like that AIRBUS does not want known.

Back to my research

Originally posted by JoeDoaks
Pass the apple pie -

Puleeeze, I'm glad this was Op/Ed because it is slanted way heavy. So what if AirBus gets all that was posted, it still can't hold a candle to Boeing.

$1 BILLION lost"The Air Force on Thursday banned Boeing Co. from future satellite-launching contracts to punish the company for stealing sensitive information from a competitor," according to the Associated Press
"The Air Force also took away seven military satellite launches from Boeing and gave them to competitor Lockheed Martin Corp. -- a shift which represented about $1 billion worth of business, said Air Force undersecretary Peter Teets."
- - -
Remember her?
In return for a promised executive position at Boeing she steered billions in federal contracts their way, including $20 billion for the tanker program. Talk about a federal jobs program at taxpayer expense!

- - -
C-130 upgrades
- - -
NASA/Boeing Space Station apologetic site In real year dollars, more than $35 billion will probably have been spent on ISS by the time the last module is launched in 2006. However, it is worth keeping in mind that the previous (far less capable-) Space Station Freedom design also would have cost an estimated $35 billion through March 2001, when the station's assembly sequence was to be completed. So the existing ISS design has more capabilities and costs less in the near term than Freedom, although the project has been stretched to save money.

Remember that the space station 'build' contract was under $1Billion when awarded. Boeing has used the Space Station program along with NASA insiders to rebuild much of Boeing's smaller companies and develop new technologies that are not in the public domain.

Boeing is pure capitalism. No other force drives them. Top executives serve prison time off and on and various U.S. government agencies ban them but Boeing always comes back for more.

Back to AirBus subsidies- they pale in comparison.

Excuse me Joe, but talk about slanted, your info had nothing to do with Subsidies at all. I am willing to bet if one took a few minutes they could come up with similar events regarding Airbus/EAD or Government officals in Europe like you did on Boeing.

Posting the information however would not be relevant though would it, since it would not pertain to this discussion?

double checks title

[edit on 12/14/2004 by shots]

Wikipedia Fly By wire (FBW)
This is the most elementary and the earliest configuration, the simple analog fly-by-wire FCS, first fitted to Avro Vulcan* in the 1940's.

In this configuration it is necessary to simulate "feel", the electronic controller provides feel signals to electrical feel devices that provide the appropriate "feel" forces on the controls. Presently this is used in EMBRAER 170, EMBRAER 190 and was used in the Concorde, the first fly-by-wire airliner.
* Avro Vulcan -Avro began scale prototype testing in 1948 with the single-seater Type 707, and despite the crash of the first prototype on September 30, 1949 work continued. The first full-scale prototype aircraft, the Type 698, was completed in August 1952 and made its maiden flight on August 31. The Vulcan name was not chosen until 1953.

A modified NASA F-8C Crusader was the first digital fly-by-wire aircraft, in 1972. For airliners, it reduces weight, both by eliminating bulky mechanical items as well as smaller flight control surfaces, thereby lowering their operating costs. The pattern started by Airbus A320 is now followed by Boeing 777 and the new Boeing 7E7.

While NASA 'may' have invented the use of digital FBW it did NOT invent FWB. NASA really doesn't invent much- it provides funding for companies and issues contracts to fulfill requirements which many times are developed by the companies seeking the funding.

IFCS- “development is being spearheaded by NASA Dryden Flight Research Center[1] . It is reported that IFCS is mostly a software upgrade to an existing fully computerized digital fly-by-wire FCS. Some professional pilots are against the IFCS concept, since it apparently allows less experienced pilots to successfully fly large aircraft, even in a damaged state.
Retrieved from "http://en.wikipedia.org/wiki/Aircraft_flight_control_systems"

NASA has a mixed history regarding software. Remember the Mars Rover?

shots, of course my 'diatribe' was slanted. I merely pointed out a few deals- call them non-subsidies if you will but they operate the same way except Boeing (in these instances) controlled or attempted to control both ends. This is why Boeing got busted.

AirBus, Boeing, shipping lines and manufacturers throughout the world are subsidized one way or another by their governments. Many, many years back tariffs were used until they fell into disfavor. China subsidizes its entire economy.

waynos does bring up good 'repay' points.

I'm glad Fred started this thread- the entire idea of subsidy (no matter to which company) is real and pervasive. I was just messing around on the Boeing stuff- they are a fine company even if they are a classic example of feudalistic-capitalism.

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