WTO rules on Boeing 777X subsidies

Eleanor Steed
By Eleanor Steed November 28, 2016 10:14

WTO rules on Boeing 777X subsidies

The World Trade Organisation (WTO) has ruled today that Boeing has received illegal state tax breaks from the US Government in 2013 to produce the 777X. The US has been ordered to withdraw illegal state tax breaks for Boeing within three months. Two months ago the WTO found that the EU had failed to unwind billions of dollars in unlawful subsidies to Airbus. The EU and Airbus is appealing the ruling.

Boeing has argued in a statement that the WTO ruling today demonstrates it’s rejected of all of the EU’s challenges to six of the seven incentives and rejected most of the challenge to the seventh.  Boeing says that the WTO “held only and narrowly that a reduction in Washington state’s Business and Occupancy (B&O) tax rate for future 777X revenues is inconsistent with the WTO agreements.  The WTO threw out all of the EU’s other challenges to various incentive programs and left untouched even the B&O tax rate as it applies to revenue from the other Boeing models produced in Washington state–the 737, 747, 767, 777 (current model) and 787.”

Boeing also adds in the statement that the EU’s claim that Boeing had received $8.7 “billion in subsidies was £rejected by the WTO, which found future incentives totaling no more than $50 million a year to be impermissible.  The WTO found that to date Boeing has received no benefit from the 777X rate incentive, and will not until 2020, because the first airplane will not be delivered until then.”

“Today’s decision is a complete victory for the United States, Washington State and Boeing,” said J. Michael Luttig, Boeing’s general counsel.  “The WTO found in September that Airbus has received $22 billion in illegal subsidies from the EU and that without these subsidies neither Airbus itself nor any of its airplanes would even exist today.  By contrast, in rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies.”

“The WTO has repeatedly found that Airbus is entirely a creature of government, and they must now bring themselves into compliance with the international laws or risk massive sanctions,” said Luttig.

A statement from Airbus, however, paints a very different interpretation of the WTO statement, calling the report confirmation that the US has “ignored international trade rules by permitting illegal subsidies to Boeing, this time targeted at the 777X aircraft.  The Panel found Washington State’s multi-billion dollar subsidy regime for Boeing to include “prohibited” subsidies, which in the Panel’s words belong to “a special category… which Members have deemed to create such trade distortions that they are proscribed,” because they are “specifically designed to affect trade.””

“The United States and Boeing picked this fight at the WTO, and today’s ruling is yet another blow for that strategy,” said Tom Enders, Chief Executive Officer, Airbus Group.   “Those prohibited subsidies must be withdrawn immediately following today’s historic ruling, meaning that Boeing must give up these massive tax subsidies.”

“The earlier WTO rulings had already confirmed that B787 was the most highly subsidized aircraft in the history of aviation,” said Fabrice Brégier, Airbus President & CEO. “Today’s report leaves no doubt that Boeing has gone even further. The 777X will not cost Boeing a single dollar to develop thanks to Washington State’s taxpayers. We estimate the damage to Airbus and the European aerospace industry in the region to be $50 billion so far, and that’s only for the 777X. The United States Trade Representative (USTR) should take immediate action. This cannot go on any longer. It is time for the U.S. Trade Representative to insist that Boeing cease its anti-competitive behavior.”

This is certainly not the end of the long-running debate, which is likely to be shadowed by years of appeals. Airbus and Boeing contend the other has received several billion dollars in financial backing that contravenes international trade rule but despite two rulings in the past three months, their statements show that they are no closer to resolving this argument once and for all.

Remember to vote in the Aviation 100 Awards Survey

We are asking our friends in the aviation industry to vote for their peers in the annual Aviation 100 awards survey.

The Aviation 100 recognises the year’s most outstanding performers. The categories are: Airline, Lessor, MRO, Bank, CEO/Industry Leader, CFO/Treasury Team, Appraiser, Law Firm, and Parts Suppliers.

The top ten rankings for each category are based primarily on this industry survey vote, however the votes are then filtered to ensure fairness (votes for your own company will not count for example). Nominations for the law firm and bank of the year are also accepted and are judged using a combination of points awarded for specific criteria (see below).

The Aviation 100 also includes the Face of Aviation award, which is awarded to the individual that has made a significant contribution to the aviation industry. The winner of this category is decided through nomination, overall performance and editorial discretion.

Top ten criteria for each category

Airline of the Year
Criteria judged include: Profit, debt, load figures, RPK, orders and routes held, M&A/expansion activity

CEO of the Year
Criteria judged include: Performance of company over past 12 months, personal involvement with deals/expansions/agreements/unions among others.

CFO/Treasurer of the Year
Criteria judged include: Best finance deal in past 12 months but also looks at consistency of performance and deals book.

Lessor of the Year
Criteria judged include: Number and types of aircraft on books and increase over past 12 months, profit/turnover/debt, value of company against 12 months ago, client list – new clients won in the past 12 months, aircraft owners against aircraft managed, lease rate performance and results of the Aviation News survey for satisfaction.

MRO of the Year
Criteria judged include: Aircraft/engine types handled, contracts in place – won against lost, global facilities/new facilities/facilities planned, total number of aircraft/engines maintained during past 12 months, turnover, results of the Aviation News survey.

Law firm of the Year
Criteria judged include: Deals worked on, aerospace clients on books, Deal of the Year pitch, value of deals worked on, number of cases closed; number and office locations/employees, employee turnover in the aviation department in the past 12 months.

Appraiser of the Year
Criteria judged include: Results of the Aviation News survey, number of clients handled, number offices/employees, turnover in past 12 months, aircraft type specialism.

Bank of the Year
Criteria judged include: Number of deals closed in the past 12 months, value of deals closed, results of Aviation News survey.

Parts supplier of the Year
Criteria judged include: Parts stocked, clients on books/new clients in the past 12 months, locations/number of employees, ability to source, supply and timescale; plus results from the Aviation News survey.

Face of Aviation award
The Face of Aviation award celebrates one individual who has made the most outstanding contribution to the aerospace industry in the past 12 months. Nominations for this prestigious award are welcomed.

The aviation 100 awards gala dinner takes place during the Airline Economics Growth Frontiers Dublin conference on Monday January 16, 2016. Nominations for the overall Aviation 100 awards are now open. Cast your vote here: Aviation 100 Awards 2017. You have until December 14, 2016 to cast your vote. Please feel free to send out the link to you clients – but please note votes cast for your own company will not be counted.

The Aviation 100 Deals of the Year awards are also open for nominations.

Any company can nominate its clients or its own services for consideration to win one of the top ten categories by submitting a pitch to the Aviation 100 editorial team victoria@aviationnews-online.com. Please also send nominations for the Face of Aviation award to the same address, describing why that person deserves to win the award for the most outstanding contribution to the aviation industry in 2016.

The deadline for nominations and pitches for the Aviation 100 2016 awards is December 14, 2016.

Eleanor Steed
By Eleanor Steed November 28, 2016 10:14