Tuesday, October 19, 2004

"Free the airspace economy" EADS say

Talks between the U.S. and European Union to rework the
terms of government aid to aircraft makers should
include Brazil, Canada and Japan, said Philippe Camus,
co- chief executive of European Aeronautic, Defense &
Space Co.

Paris and Munich-based EADS, which owns 80 percent of
aircraft maker Airbus SAS, wants government subsidies
worldwide eliminated, including what it says is $1.6
billion in Japanese government payments to suppliers of
Boeing Co.'s 7E7, he said.

``We want an open and fair aerospace economy,'' Camus
said in an interview from New York where he is meeting
with investors. ``Let's put it all on the table and
discuss it. Everybody linked to aircraft should be
brought into this.''

The World Trade Organization already ruled the Brazilian
and Canadian governments unfairly subsidized their
aircraft makers -- Empresa Brasileira de Aeronautica SA
and Bombardier Inc. respectively. The Japanese aid to
Boeing suppliers is part of what Camus labeled as an
``unacceptable'' financing plan for Boeing's 7E7. Boeing
and Airbus are the only makers of large commercial

The U.S. earlier this month withdrew from a 12-year-old
agreement on subsidies to aircraft makers and filed a
complaint at the World Trade Organization, saying
European start-up loans give Airbus an unfair advantage
over Boeing. The EU responded with a WTO complaint of
its own targeting aid for Boeing's 7E7.

As part of the WTO process, the U.S. and EU will begin
formal consultations this month in Geneva to resolve the

Japanese Suppliers

The EU says Boeing's suppliers in Japan got $1.6 billion
in government loans, in violation of a 1992 agreement on
aircraft aid. So far the EU hasn't filed a complaint
against Japan or requested that Japan join the WTO

``We don't receive any support from Japan or the
Japanese government,'' Boeing spokeswoman Amanda Landers
said. ``We're not privy to how suppliers work within
their own country.''

The overall U.S.-EU dispute may force each planemaker to
find new financing to develop aircraft. It also risks
damaging the $400-billion U.S.-EU trade relationship,
already marred by discord over U.S. export tax breaks,
an EU moratorium on genetically modified foods and
European customs procedures.

Both Camus and his counterpart, Boeing Chief Executive
Harry Stonecipher, say they want all subsidies to
aircraft makers to be accounted for and removed, in
order to ``level the playing field.''

``What we'd like to do is see everything brought to the
table, provide full transparency and have the discussion
in an open and honest way,'' Stonecipher said last week.

7E7 Competitor?

The U.S. says its complaint is aimed at preventing new
aid to Airbus if it tries to develop a competitor to
Boeing's 7E7. Airbus said Friday it was considering such
a competitor and would seek government aid, drawing a
quick rebuke from the U.S.

``He flouted the fact that Airbus would ask taxpayers to
foot the bill even though Airbus can afford to fund the
plane itself,'' said Neena Moorjani, a spokeswoman for
the U.S. Trade Representative's office. ``It's time to
level the playing field.''

Camus today said that Airbus is in discussions with
airlines about a possible new aircraft, although stopped
short of the specifics Airbus offered on Friday.

``We are not looking at matching the 7E7. We are in
discussion with out customers about how to meet their
needs,'' Camus said.

Camus also said today that the company would spend $600
million to build an assembly plant and hire 1,000
workers in the U.S. if it got a contract to make
aerial-refueling tankers.

``In order to be accepted as a competitor, we will have
to comply with the rules of having large U.S. content,''
Camus, 56, said in an interview in New York. ``The U.S.
tanker we will supply will have more than 50 percent
U.S. content.''

Shares of EADS rose 16 cents to 21.71 euros in Paris
trading today. They are up 15 percent so far this year.

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