"Another way Boeing is biting back is by offering the B737 to budget airlines at deep discounts"
I think Boeing has played this game perfectly ... with the one BIG assumption that the squabble with the WTO will result in fewer Airbus subsidies in the coming (5-10 years):
1) boeing refused to slash the price of planes just to rack up orders in the late 90's up to the present day. Airbus did this and has sacrificed profitability for good PR
and quick sales
2) boeing can now take advantage of the weak dollar and churn out planes at a nice margin while Airbus will struggle to make a profit with the 320 line and won't be able to make it up in more subsidies.
The next 18 months will be interesting. The boeing/airbus WTO issue is going to balloon into a huge US vs. EU thing.