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Launch Aid (Airbus) Vs. Tax Cuts (Boeing)  
User currently offlineClickhappy From United States of America, joined Sep 2001, 9668 posts, RR: 68
Posted (10 years 2 weeks 17 hours ago) and read 5330 times:
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Much has been brought up about the amounts, and types, of money/loans/tax breaks that both Airbus and Boeing recieve (or dont receive). Here is an interesting bit from Business Week.

RISKIEST BUSINESS. Since its inception in the early 1970s, Airbus has received $15 billion in such support, according to the USTR and European government documents, including $3.2 billion for the mega A380 carrier's development. Commercial plane manufacturing is probably the riskiest business on the planet. Launch aid shifts the risk from Airbus to the European governments because the manufacturer isn't required to repay if the aircraft program is unsuccessful.

Lamy and the Europeans claim that Boeing's new fuel-sipping jetliner -- the 7e7 -- is receiving illegal subsidies. They mostly refer to the $3.2 billion tax break from Washington State that Boeing secured for its new plane program.

But the differences between launch aid, essentially cash up-front, and a tax break spread out over 20 years, is huge. For example, Washington State's help only partially reduces the tax on Boeing aircraft sales. By contrast, Airbus pays no sales levies on its exports. Boeing receives the tax benefit only after it invests its own money in development and begins delivering jetliners to customers, which will begins in 2007. Boeing shoulders all of the initial risk.

If 7e7 sales flop, Boeing receives nothing. If the A380 fails to sell, Airbus doesn't have to repay the $3 billion in loans. And unlike EU support, the tax break is available to every player in the aerospace industry, including Airbus and its suppliers.

SAME BREAKS. Moreover, Boeing's $3.2 billion tax break pales in comparison with the total of $6 billion in up-front development aid and production support that the European governments have earmarked for the A380, according to the USTR and European government documents. Besides the $3 billion in launch aid, Airbus has received more than $1.5 billion in local-government support, as stated in European government documents. The city of Hamburg, for example, shelled out $800 million to expand an Airbus production plant for the A380.

Ironically, Airbus and its parent company, EADS, benefit from the same U.S. tax breaks that Lamy in his comments claim are "illegal." Airbus in 1997 received a total of $6.6 million in such assistance when it built a pilot-training facility near Miami International Airport. Dade County offered the European jet builder $3.5 million in tax-free industrial-revenue bonds, $700,000 in county land-lease breaks, and the possibility of $2.4 million in forgiven county rents.

In 2003, EADS, Europe's largest defense contractor, received $8.6 million in tax breaks for locating a Eurocopter assembly factory in Mississippi. That included $6 million from local governments for new buildings to lease to Eurocopter and $2.6 million in state incentives.



See the difference? Boeing has to invest its own money to save money on the taxes it pays. Its called spending money to save money, there is no risk on the State of Washington's part.

However, with the launch aid Airbus received for the A380, they aren't on the hook for anything unless they actually sell enough A380's to meet the terms of the contract. If they dont, the governments who fronted the money get stuck with the bill. This is very low-risk for Airbus.

[Edited 2004-12-16 00:20:58]

25 replies: All unread, showing first 25:
 
User currently offlineAither From South Korea, joined Oct 2004, 862 posts, RR: 0
Reply 1, posted (10 years 2 weeks 17 hours ago) and read 5262 times:




Never trust the obvious
User currently offlinePlaneSmart From New Zealand, joined Dec 2004, 1119 posts, RR: 0
Reply 2, posted (10 years 2 weeks 17 hours ago) and read 5233 times:

Nearly all plant modernisation, new equipment, management cars, cafeteria improvements, could be designated as 7e7 development costs in the next 3yrs.

And then there's good old transfer pricing as well.

I'm sure B will be able to utilise those tax breaks much sooner than 2024.

A tax break is money u don't have to part with, versus a loan u don't have to repay. Both means you can spend $'s without paying out / paying back. And the difference is...........


User currently offlineTrex8 From United States of America, joined Nov 2002, 4887 posts, RR: 14
Reply 3, posted (10 years 2 weeks 14 hours ago) and read 5183 times:
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Clickhappy when you file your 1040 this spring, just ask the question, do you want to reduce your tax by x amount or have the IRS guarantee your ability to get a loan you can use for that same amount which you probably will in all reality have to pay for eventually with interest though in a very deferred time period?

User currently offlineWidebodyphotog From United States of America, joined Jun 1999, 917 posts, RR: 67
Reply 4, posted (10 years 2 weeks 13 hours ago) and read 5173 times:

This is the typical socialist argument against American companies. The Europeans assume all money in an economy belongs to the government and thus any relief from taxes given to companies as an incentive to create business is viewed as some kind of gift to that company.

The difference is that the the government confiscates less of a Boeing's earnings while Airbus is getting a gift of the confiscated tax dollars of European citizens. One is using the money they earn to make capital improvements and the other is using the money forcibly collected by government to fund projects.

widebodyphotog



If you know what's really going on then you'll know what to do
User currently offlinePVG From Hong Kong, joined Dec 2004, 728 posts, RR: 2
Reply 5, posted (10 years 2 weeks 13 hours ago) and read 5173 times:

Many states in the US offer tax breaks/incentives to attract new investment/plants/jobs. I think that Airbus got a similar deal (smaller scale) from the state of Florida to open a training center in Miami. Toyota got a deal from Kentucky & Texas to open plants there. HONDA in Ohio. BMW got a sweet deal in South Carolina. DaimlerChrysler from Alabama. It happens everyday! Airbus could probably get a great deal if they decided to move production of one of their models to a US site! So, if the WTO rules the local tax breaks as illegal, then everyone is going to have to give it back! I bet that GM & FORD are salivating at that possibility! However, it's alot different than a direct subsidy to cover risk investment/capital which a company would probably have trouble raising on the capital markets.

User currently offlineTrex8 From United States of America, joined Nov 2002, 4887 posts, RR: 14
Reply 6, posted (10 years 2 weeks 13 hours ago) and read 5165 times:
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it is certainly difficult to get the upfront costs of starting a new program by generating it internally but a tax credit is never paid back , a loan is, even if it may legally not have to be if the program is not profitable, but while the non payment for a non profitable program is an advantage, the reality is that every A program of any length so far has been "profitable".
If my dad used to get, and my uncle still does get, mucho greenbacks from uncle sam for growing a crop which no one should be growing in N America because its economically senseless to do so, I don't see why Washington can't give a few cents to high tech industry to keep my other relatives and myself in a job and not export it to China or Korea or Brazil or even Japan or the EU as Boeing sends all its subcontracts abroad!


User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 7, posted (10 years 2 weeks 9 hours ago) and read 5119 times:

You expect us to beleive that EADS doesn't get tax cuts? Please.

User currently offlineSebolino From France, joined May 2001, 3682 posts, RR: 4
Reply 8, posted (10 years 2 weeks 7 hours ago) and read 5069 times:

It's funny that BusinessWeek forgot to talk about the money invested by Japan.

More of that, the argument is stupid. The tax break is not for a particular program. It's not: "you didn't sell enough 7E7, so you won't have any tax breaks". It's for a particular plant, where Boeing is doing absolutely what they want. The simple fact of having a plant with many people to pay is already a source of tax breaks. Boeing knows that the workforce cost will be lower than it should normally by 3,2 billions dollars in the plants of the state of Washington. I find it a very efficient risk limiter !

Once again, an American source is twisting the facts. They compare the numbers, but ommit of course to insist that Airbus will pay back. Of course they could if something went wrong not repay it. But they would still have lost 2/3 of their investments. So they have a risk, and they must succeed anyway, like any business.
Anyway, I really doubt that the A380 program will fail.
Another distortion: they talk about Airbus since the 70's, great ! The deal was made in 1992.

Boeing will finally benefit from the tax breaks whatever happens, and that's no problem for me as long as it stays in the limit of the agreement.


User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 9, posted (10 years 2 weeks 7 hours ago) and read 5060 times:

Yes, but while Boeings tax breaks are 5-10 years, Airbus may never break even on a project and not pay a dime. It's apples to oranges for me, but Airbus seriously needs to start selling planes for a profit and start stabalizing the 320 family book values. They're killing their operators by pushing planes out the door left and right resulting in devaluation which the airlines have to write down every block hour as an expense.

User currently offlineKEESJE From , joined Dec 1969, posts, RR:
Reply 10, posted (10 years 2 weeks 5 hours ago) and read 5049 times:


Boeing persuaded the state of Washington to provide a tax break worth, according to the State University of New York, Buffalo, $3.2 billion. This was in return for doing the final assembly of the new 7E7 in its home state. It hawked the project around alternative sites and Kansas came up with an interest-free bond worth $200m to fabricate noses and cockpits. And the Italian government is putting up a subsidy worth $590m for the manufacture of the rear fuselage by its partly owned aerospace firm, Alenia.

But the grandaddy of aid going to Boeing comes from Japan. This emerged last November when Airbus persuaded the EU to investigate a $1.5 billion subsidy that the Japanese government is, in effect, putting into the 7E7. A consortium of three companies, the heavy-industry parts of Fuji, Kawasaki and Mitsubishi, will make the wings and fuselage wing box for the 7E7.
http://www.economist.com/agenda/displayStory.cfm?story_id=3267320

It seems that for the 7E7 project alone 5.4 Billion state subsidy is involved, of which >10% is european.

And Boeing will probably need a lot more state support in the next five years (737 replacement, 747 adv, closing 767/717 lines, 777 upgrade).
http://www.airliners.net/discussions/general_aviation/read.main/1808809

So expect them to attack the EU / Airbus hard in that period to distract attention on whats happening & justify "leveling the playing field".
http://www.economist.com/agenda/displayStory.cfm?story_id=3267320


Eight years ago, Boeing was not a major defense company. Today, it is the United States' second-largest defense contractor. Today more than half it's turn is from this business.
http://www.cbronline.com/companyprofile.asp?guid=3A4234D6-7800-4171-ABE5-823C05585F45
The largest part of this turnover comes from the US governement. We are talking >$15 Billion.... a year. How competitive these deals are.. I don't know is up to the court at this moment.

If the commercial & military business should be linked in a comparison, I don't know. For sure it's one bottom line for Boeing.




User currently offlineAdria From , joined Dec 1969, posts, RR:
Reply 11, posted (10 years 2 weeks 5 hours ago) and read 5036 times:

"This is the typical socialist argument against American companies."......maybe you should take some history books and then you'll see that in the EU socialism doesn't exist. Or better ask yourself what this word really means.

"You expect us to believe that EADS doesn't get tax cuts? Please."......and you know this from where?....... Maybe from an US magazine? That's why you have such an objective opinion Smile. You really believe everything what you're told from the US media Smile



User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 12, posted (10 years 2 weeks 4 hours ago) and read 5003 times:

Eight years ago, Boeing was not a major defense company. Today, it is the United States' second-largest defense contractor. Today more than half it's turn is from this business.
http://www.cbronline.com/companyprofile.asp?guid=3A4234D6-7800-4171-ABE5-823C05585F45
The largest part of this turnover comes from the US governement. We are talking >$15 Billion.... a year. How competitive these deals are.. I don't know is up to the court at this moment.

If the commercial & military business should be linked in a comparison, I don't know. For sure it's one bottom line for Boeing.


The defense business is accounted for separate from the commerical aerospace business unit. They don't mix the funds. You can't steal from Peter and give to Paul when it comes to Government contracting. It's against Federal Contracting Law. The money for a program has to stay with the program. They can't take money from a government contract for cruise missles and invest it in the 7E7.


User currently offlineTrex8 From United States of America, joined Nov 2002, 4887 posts, RR: 14
Reply 13, posted (10 years 2 weeks 4 hours ago) and read 4980 times:
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True, but you can use tech and manufacturing capacity funded for one contract to eventually use for another and everyone does that.
WA state AFAIK does not give billions in tax credits to any other of its industry, they may give hundreds to forestry and fishery. And while there are undoubtedly multitides of local/regional tax breaks in various EU countries for all sorts of industry, there are unlikely to be any specifically written for aerospace to this magnitude.

The problem is not A getting money from the government in whatever form or B getting state tax credits or "military " subsidies, the problem is this blind obsession in the States by some that aid should not be given to industries, except when politically expedient, like farmers (always) and steel workers, or even car workers once! The reality is that for decades major US industries have always benefited from federal investment in research which is then used for corporate economic advantage. Its federal taxpayer money to benefit individuals in private corporations. Would US industry be where it is today, whether in IT, aerospace, health or anything else without the DoD/NASA/NIH programs. I think not.

Giving taxpayer money to aid industries is not "socialist", the pacific rim economies do that all the time. You think the Japanese got where there are without MITI helping them out? Some government intervention can be very useful if done correctly.The Koreans and Taiwanese are still "intervening" and trying to build up their high tech industries with all sorts of direct and indirect government financial intervention and I never hear anyone call them socialists.

There just needs to be a level playing field which is transparent for all parties.


User currently offlineBoeing7E7 From , joined Dec 1969, posts, RR:
Reply 14, posted (10 years 2 weeks 3 hours ago) and read 4961 times:

Personally, aircraft efficiency needs to be improved across the board. All of them should get 1-2 years of unlimited support to upgrade aircraft (say $5-15 billion from their respective government) and get the fuel burn down as much as possible and at the same time improve comfort of aircraft seating with better width and pitch, and improved navigation. The industry as a whole needs a kick in the pants before it collapses as a system under it's own weight. It's time for full implementation of WAAS and LAAS, and serious investment in the airport infrastructure. The US highway system wouldn't be what it is today without the government, and the aviation system will be gas guzzling delay layden disaster tomorrow if they don't do something on both sides of the pond and the equator.

User currently offlineWIDEBODYPHOTOG From United States of America, joined Jun 1999, 917 posts, RR: 67
Reply 15, posted (10 years 2 weeks 2 hours ago) and read 4937 times:

maybe you should take some history books and then you'll see that in the EU socialism doesn't exist. Or better ask yourself what this word really means.

There are many aspects of socialism in the EU. One does not need to look through history to discover this. However the policies may be better described un the euphamism of "Social Democracy". But specific aspects of socialism is not the point. It's the attitude towards who owns and controls capital that is at the heart of the conflict. More simply put to argue against tax breaks, or reduced government confiscation of wealth, as being unfair is to presume that earned money does not belong to the earner but belongs to the State and that my friend is socialism.

-widebodyphotog



If you know what's really going on then you'll know what to do
User currently offlineKeesje From , joined Dec 1969, posts, RR:
Reply 16, posted (10 years 1 week 6 days 18 hours ago) and read 4864 times:

For Boeing, which depends on a steady stream of military contracts for half of its $50 billion in annual revenue, the scandal threatens to cost the company billions of dollars in business, as McCain and others are calling for financial punishment and the breaking of air force contracts with Boeing.
.
Already, scores of contracts that Druyun either awarded or reviewed are being scrutinized by investigators, including 11 contracts, valued at more than $33 billion and awarded from September 1997 to September 2001, in which Druyun had the final say. Boeing was awarded all or part of the winning bid in five contracts, valued at more than $16 billion.
.
The air force is also looking into dozens of other contracts in which Druyun participated in the decision-making, but was not the ultimate authority. And Lockheed Martin is asking that $6 billion in contracts in which Druyun admitted favoring Boeing be overturned.
.
McCain has not accepted the air force's contention that Druyun acted alone. He plans to hold hearings early next year on Pentagon buying practices and the revolving door between the Pentagon and military contractors.
.


It seems Boeing is drifting on unlawfull government money.
http://www.iht.com/articles/2004/12/16/business/tanker.html

Seems behind the curtains there is still a big crisis at Boeing because of too couzy relationship with the Pentagon. Even Harry isn´t safe..


User currently offlinePVG From Hong Kong, joined Dec 2004, 728 posts, RR: 2
Reply 17, posted (10 years 1 week 6 days 8 hours ago) and read 4806 times:

If getting military aid was such a bonanza for commercial aircraft producers, how come Lockheed and MD are out of the game and out of sight respectively?

No socialism in Europe. Are you kidding? The communist parties are still represented in some parliaments, and they were very strong in Italy and France until about 20 years ago. Until recently it was fashionable to refer social democracies.


User currently offlineLeskova From Germany, joined Oct 2003, 6075 posts, RR: 70
Reply 18, posted (10 years 1 week 6 days 5 hours ago) and read 4771 times:

PVG, if communist parties in parliaments meant that Europe were socialist, then we'd be facists as well, because some parties on the very far right have gained seats in parliaments throughout Europe as well...

So, in essence, your arguement of Europe being socialistic because communist parties (by the way, socialism and communism are two quite different things) are in parliaments here is, quite simply, false.

And, at least here in Germany no-one I know has ever talked of a "social democracy" - those two things, democracy and looking out for the weaker ones of the society so they don't fall through the net and land on the streets without any help at all, are - in most European's eyes - two things that go hand in hand: the view here is that democracy will not work if it's only there for those who can afford it.


Regarding those tax credits for Boeing, by the way: are they connected to the B787 in a way that would only enable Boeing to use them as soon as the B787 is profitable, or do they get those in any case? And are they for Boeing in general, or for Boeing's commercial aircraft division?

Because if they get them in any case, then you can, in fact, consider them money in the bank - or do you honestly think Boeing will not be making money for the next years? The only real risk would occur if airlines around the world would suddenly stop buying B737s, B777s and B787s, not to mention the B717, B767 and B747 orders still appearing on occasion.

While it's not "no risk", the extra cash Boeing get's through the tax cuts can certainly be called "low risk".


And, yes, the money Airbus gets from European governments does take pressure off them, at least for the moment - because you can be sure that they'd be under a hell of a lot of pressure once they actually build a project that fails and declare that they weren't going to be paying back the money received: not only would they not - and, yes, you can be quite sure of that - receive further funding any more, but most involved governments would, at that time, undertake all means possible to force Airbus to repay whatever they owe on profitable projects...

The way I see it, Airbus' position is a bit that of Damokles sitting under his sword - it's nice as long as it lasts, but as soon as something goes wrong...

Regards,
Frank



Smile - it confuses people!
User currently offlineWIDEBODYPHOTOG From United States of America, joined Jun 1999, 917 posts, RR: 67
Reply 19, posted (10 years 1 week 6 days 5 hours ago) and read 4765 times:

Government confiscation and redistribution is socialism pure and simple. It does not matter if you call it aid, subsidy, investments or whatever. It is not voluntary exchange between taxpayers and the recipients of taxpayer dollars. Just because a policy or method has existed for years does no make it exempt from scrutiny.

Companies earning money through voluntary exchange of values with their customers and keeping the values they earn to invest in the continued production of values is called capitalism. If a company produces values that are viable in the marketplace they need not resort to demanding the confiscated tribute of citizens.

Not necessarily directly pertinent to the topic but I'll put my chip in the game here:

Let the investigators investigate military contracts or any of Boeing's revenue streams for that matter. The situation is that in many cases Boeing and it's related companies are the only ones that can do what they do and enjoy the benefits of setting whatever price they seem appropriate. If the contracts don't go to Boeing who else will produce what they produce on the scale that meets the needs of the military? And If the competition can provide the same things at lower prices then they will win out in the end especially considering the current government fiscal climate.

-widebodyphotog



If you know what's really going on then you'll know what to do
User currently offlineKEESJE From , joined Dec 1969, posts, RR:
Reply 20, posted (10 years 1 week 6 days 4 hours ago) and read 4740 times:

in many cases Boeing and it's related companies are the only ones that can do what they do and enjoy the benefits of setting whatever price they seem appropriate.

seems pretty hard line socialistic to me..



User currently offlineWIDEBODYPHOTOG From United States of America, joined Jun 1999, 917 posts, RR: 67
Reply 21, posted (10 years 1 week 6 days 4 hours ago) and read 4731 times:

No, socialism would be if the government forced Boeing to equally distribute it's production capabilities among their competitors so they enjoyed no advantage, and then required those companies to produce goods at prices that the government arbitrarily fixed irrespective of profit or loss.

This is akin to the way American pharmaceutical companies are forced to produce flu vaccines and thus why most of the vaccines consumed by the US are produced outside the US.

If Airbus can figure out how to get the EU's foot of it's neck and hands off their earnings then more power to them. Boeing has been able to lower their tax burden by leveraging their economic benefits to various jurisdictions and that is great for them as well.

-widebodyphotog



If you know what's really going on then you'll know what to do
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 22, posted (10 years 1 week 6 days 3 hours ago) and read 4716 times:

Frank,

I disagree with your analysis. Did A300/310 pay themselves off with a decent rate of return with a commercially viable period of time? A lack of return has never discouraged the EU from handing over cash to Airbus to develop specific airplane types.

I am sure if Airbus actually skipped a payment of any kind, a few conference tables will be pounded and letters sent. But the EU would never tolerate a situation where Airbus has to tighten its belt and *gasp* layoff a few workers. Especially in France. Much easier to forgive the debt of a corporation rather than to do anything remotely regarded as anti-labor.

********************

- Boeing is trying to get indirect subsidies from Japan. That is true and the EU is trying to prevent that. However the EU was never bothered by that very same Japanese aerospace subsidy system on the two occasions that they already used it for their projects: Eurocopter and some RR/IHI?? engine.

-For 3rd or 4th time, any company that builds a big plant employing a lot of people can go get big tax breaks the state of Washington or pretty much any other U.S. state. If Airbus wants to build a big plant in Washington, then lo-and-behold-- tax breaks are offered. Same deal for Nestle, Michelin, Siemens, or Alstom.

-A tax break has a contingent value based on assumptions about the future. That's why it takes studies by people holding PhD degrees at SUNY to figure what Boeing may or (may not) be receiving.

-The value of cash that may or may not be repaid can be ascertained by simply sitting and counting.

-For the 2 reasons above, I prefer cash. Clickhappy is right.

-Europe has some very socialistic attributes. Ordinarily the government is not the lender of first resort in free market economies. Yet for Airbus, that was the first source that came to mind when thinking about A350 development finance. Usually banks and capital markets do the job. But since professional investors are unwilling to lend at Airbus at the rates it wants to borrow at, they go to government. Put another way since Airbus cannot or will not pay the true cost of capital at the level at which it operates, the goverment lends them (or gives them) the money they need.

-Airbus has basically been a socialist scheme since its birth in 1969 or whatever. The 1992 agreement does not mark the birth of anything. Rather it was as an attempt to curb the ultimately pernicious, market-distorting influence of EU subsidies to Airbus which bascially pits the European continent against U.S. corporations. For EU policy makers it's one down, one to go.



User currently offlineLeskova From Germany, joined Oct 2003, 6075 posts, RR: 70
Reply 23, posted (10 years 1 week 6 days 2 hours ago) and read 4697 times:

N79969, I would have been quite surprised if you'd have agreed with me...  Big grin

Nonetheless...

You're right in saying that the A300/A310 probably didn't pay for itself in terms of cash - but there's one point in which these two planes did serve a purpose, and one that I think should not be underestimated: they created the brand "Airbus" - suddenly airlines knew that name, and even those who didn't (or still don't) operate their planes started seeing them as a manufacturer of commercial planes instead of just the idea of a few European governments that probably wouldn't last long anyhow...

So the lack of return on that project doesn't figure into the arguement that I was trying to make: I was, in fact, considering the current (yes, I know the A300/310 are still being built) range of planes - the A320/330/340/(350)/380 series.

Anything before the beginning of the A320's success goes into a different category - I am certainly well aware that, had Airbus not received the money for building the A320, they'd most likely not be around today - but anything that came after the A320 is, here in Europe, being measured by the A320's success: our politicians by now know that Airbus actually can build and sell planes successfully, so the mark that they have to reach with each plane has gone up - and with it, the hurdles for Airbus getting government money again.

As for other companies getting tax breaks as well - the same is valid here in Europe, so that's nothing special about the US...

... and the question of the money that Airbus receives from several governments within the EU: I would not rule out Boeing getting quite a bit of money if they were to start production here (and if they had a good negotiating team with them, one that doesn't work along the lines of "we're from the US, so we're the best" as, unfortunately, quite a few US delegations have in the past, then they could, in fact, most likely get quite a large chunk of money) - but since, as opposed to Airbus opening a production line in the US, that seems highly unlikely, I guess we'll never find out.

Regarding the "cash or credit" debate - I guess it depends a lot on how the respective countries taxation regimes look: here in Europe, we're - unfortunately - used to quite high taxes, so a tax credit is, to most Europeans, an equal choice to getting cash paid out and still having to pay the same taxes... I, for one, still couldn't care less whether I get money paid to me or a tax break for the same amount...

And the debate of "[government money] ... was the first source that came to mind when thinking about A350 development finance" - are you honestly saying that if Boeing could get money from the US government at good/great rates and conditions, it would say "no thank you, we'll take more expensive money from banks!"???

As for your opinion that Europe is out to kill the US aviation sector - I agree that some very unfortunate comments have been made by some in the past, but I don't see the goal that you see as being on the agenda: no-one in their right minds in Europe want's to destroy Boeing - because anyone with at least one working brain cell left will know that the demise of the main opponent will simply breed a new one, so "killing" Boeing would, in the end, not make anything easier for Airbus at all.

Regards,
Frank



Smile - it confuses people!
User currently offlineN79969 From , joined Dec 1969, posts, RR:
Reply 24, posted (10 years 1 week 6 days 2 hours ago) and read 4682 times:

Frank,

Like you say, both the EU and U.S. states allow tax breaks for firms of any nationality that locate in the right neighborhood. Basically it's the equivalent of a coupon: it's basically available to anyone who wants one and requires the holder to actually spend money first to get the benefit.

That's why I regard the European claim that this is the equivalent of sector-specific cash up front aid that they provide only to European firms as just obfuscation.

I did not raise the A300/310 to complain about the financing on those projects. I have said in other threads in the past and will say again that I understand and am even somewhat sympathetic to what the EU was doing in the early 1970s to help a nascent industry get started even if I disagree in priniciple. Also like I have said before, I am infuriated that the EU never quit.

I have little doubt that a European country would give Boeing a tax break if they were to employ people in the region. However, the EU will not extend repayable loans to the US and assume the risk for Boeing. That is an exclusive benefit available only to one firm.

A lot of the Airbus afficionados fault the US for not emulating the European system of "repayable" loans. That is ludicrous. If we were to follow the EU down that road, it would basically that would turn what was more or less a working free-market for airplanes into something resembling US or EU agriculture policy which are almost pure jobs programs everywhere in the first world.

The EU has known about the strong unlikelihood of the US starting an industrial policy and basically played us for fools. Much like the way German CEO of DaimlerChrysler bragged in an interview about fooling American mangers about his intentions before the merger. The negotiators in Brussels should be given a pat on the back for a hoodwink well done.

Like I have said on numerous occasions, Airbus is basically around to create employment for Europeans and wiping out Boeing would be an acceptable price. Otherwise the EU would not bother lending them money everytime they want to build an airplane. In the mind of such policymakers, the value having a European monopoly in the large airplane market is that it would be a humdinger of a job creator and would outweigh any harm to their airlines. Monopolies are bad for consumers but decidedly not the supplier. Since Europe would be a net supplier and thus extract monopoly rents in such a scenario, the incentives are crystal clear.

If Lufthansa's costs go up because of monopoly well, so do the costs of their competitors worldwide who use the same category of airplane. Besides that they can mess with taxes and landing fees and all that to give the airlines relief without resorting cash subsidies.

Lionel Jospin said his country was ready to stump up the cash for Airbus to beat Boeing. And I do not think his views are an outlier.




[Edited 2004-12-17 16:09:42]

User currently offlineVfw614 From Germany, joined Dec 2001, 4062 posts, RR: 5
Reply 25, posted (10 years 1 week 6 days 1 hour ago) and read 4674 times:

Why don't we just let the WTO sort this out ? If it would be so plain obvious that this however-you-wish-to-call-it Airbus receives is illegal, it would not have lasted since 1992.

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