Lumberton
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Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:01 am

I must say I'm not surprised, although the timing could have been better. Maybe a trial balloon to test the waters? Maybe a negotiating tactic? However, the article points to the possibility of a trade war and that would NOT be good. Note that Mr. Aboulafia says:

Quote:
"This is no longer a mere product-development launch aid, it is a rescue package: This aid is absolutely essential," said Richard Aboulafia, an aerospace analyst at Teal Group, an aerospace and defense consulting group based in Fairfax, Virginia. "The prospect of a trade war has racheted up a notch."

Full article here:
Airbus looks likely to request state aid

[Edited 2006-06-19 02:02:35]

[Edited 2006-06-19 02:03:26]
[All edits for spelling!]

[Edited 2006-06-19 02:04:15]
"When all is said and done, more will be said than done".
 
Aither
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:10 am

The launch aid request for the A350 was postponed last year but it was always clear they would request some as the 787 benefit from large subsidies.

Today Aboulafias and alike are keen to talk about "rescue plan" for Airbus. The fact is this request was expected anyway.

[Edited 2006-06-19 02:11:34]
Never trust the obvious
 
Lumberton
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:18 am

Quoting Aither (Reply 1):
Today Aboulafias and alike are keen to talk about "rescue plan" for Airbus. The fact is this request was expected anyway.

Just to be clear...you disagree with Mr. Aboulafia's characterization of would be aid rendered to Airbus at this point as a "rescue package"?
"When all is said and done, more will be said than done".
 
dutchjet
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:21 am

The bad news out of Toulouse continues.....

Is Airbus calling the loans a "Rescue Package" for public relations reasons or are things really that bad?

And, it will be interesting to see how the state aid issue flies after last weeks stock scandal.

One thing is for sure, things will get even worse before things get better....look for a major trade dispute and for Boeing and Washington to flip out.

Quoting Aither (Reply 1):
The launch aid request for the A350 was postponed last year but it was always clear they would request some as the 787 benefit from large subsidies.


[Edited 2006-06-19 02:11:34]

Huh? What subsidies does the 787 benefit from?
 
airfrnt
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:23 am

Quoting Aither (Reply 1):
The launch aid request for the A350 was postponed last year but it was always clear they would request some as the 787 benefit from large subsidies.

The Airbus cheerleaders are fond of repeating this, and then ignore the fact that the A380 also gets the exact kind of logistical support aide as Boeing has received on top of the launch aide.

Airbus will loose this fight in the WTO.

That being said, Airbus has got to be feeling the pinch with ~8 Billion Euro's additional expense that wasn't projected for this year.


From the article:

Quote:

He stopped short of saying that Airbus would request the aid - which could run into billions of euros - but called the money "indispensable" for establishing what he called a level playing field with Boeing. "Launch aid is the only available system right now," he said.

No, they can do the exact same thing Boeing does, get the banks and the free market to capitalize this.

Quote:

However, a senior Airbus executive, speaking on condition of anonymity, stressed that any decision to ask for the loans would be largely symbolic at first

If it's symbolic, why does Airbus want it?

Quote:


"For Airbus, launch aid is becoming topical again," one executive familiar with the company's financial situation said. "When the coffers are empty the pressure rises."

Hmm. Seems like Airbus will admit what the cheerleaders around here won't.

Quote:

"We remain ready to put launch aid on the table if there is a commensurate offer on the U.S. side," Power said.

That's the problem right there. Launch aide was permitted when Europe was complaining about how all of the aircaft manufacturors were American. America allowed the launch aide and rejected the exclusivity agreements that Boeing had. Now Airbus and the EU wan't more concessions for something that the WTO will find illegal.

WTO is there for a reason. Time to use it. I love the A320. I think it is a great plane. I will root for Airbus if there is a level playing field. Playing these kinds of games turns me off to Airbus as a company.
 
spartanmjf
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:24 am

Again, the evidence that Airbus and, by extension, EADS is anything but a state-run manufacturing concern is bubbling to the top.

A normal company would have to reorganize itself and seek investment from private capital markets. This is what its primary competitor, Boeing, had to do. But then, Airbus is no Boeing.
"Nuts to the man in 21D!"
 
boeingfever777
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:25 am

I didn't think they could request help from the gov. being this would be classed as subsidies. Why would they call it a "rescue package" Airbus is not that bad off are they?

Quoting Aither (Reply 1):
787 benefit from large subsidies.

Rubbish... links?
Faire du ciel le plus bel endroit de la terre.
 
halls120
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:42 am

Quoting AirFrnt (Reply 4):
The Airbus cheerleaders are fond of repeating this, and then ignore the fact that the A380 also gets the exact kind of logistical support aide as Boeing has received on top of the launch aide.

Airbus will loose this fight in the WTO.

Maybe. I'm not so sure that the WTO would rule against Airbus, even if the merits suggest they should.

Quoting Spartanmjf (Reply 5):
Again, the evidence that Airbus and, by extension, EADS is anything but a state-run manufacturing concern is bubbling to the top.

A normal company would have to reorganize itself and seek investment from private capital markets. This is what its primary competitor, Boeing, had to do. But then, Airbus is no Boeing.

Airbus supports like to say Airbus is no different from Boeing, but the fact is, it is.

When the A380, was unveiled, I seem to recall many European government officials present at the roll out, crowing about the achievement "the old Europe" had produced. Funny thing this, I don't ever recall seeing a President of the US attend the public unveiling of a Boeing, Douglas, or Lockheed commercial aircraft - or for that matter, at any new product introduced by a US company operating in the private sector. And that is the difference.

And yes, sometimes the US government steps in to support a US corporation, like they did with Chrysler. But recall that Chrysler repaid their loans to the US treasury, and left the dole. Unlike Airbus, which seems to have a continuing fixation on European taxpayer funds.....
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
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par13del
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:47 am

Reality check here, if Airbus needs launch aid or rescue package whatever you want to call it as a result of the A380 / A350 fiasco they will get it.

EADS is not a public company, so for the most part its books are not open to the public, so the "influx" could be hidden on their books and the public treasury of the govts. involved.

EU govts set up airbus and the only way it will fail is if the voters in all the involved countries demand it, and guess what, they won't as it is their jobs they would be voting out. So now what?

Even if the WTO votes against airbus, it will be the banana issue all over again. The WTO ruled against the EU in that case and still nothing has been done. The EU and airbus will decide that the penalties against them are out weighed by the national interest, so what can the US do?

I say stock it up, allow the EU to give the launch aid publically, everyone know when and how much. Demand the right for the US govt and or its state govt. to offset if they so wish. Essentially this means nothing because the US does not operate like that, but I'm certain some creative lawyers and accoutants in the US could find a way to level the playing field. How about offering discounts to US airlines if they bought Boeing a/c and penalities if they bought govt subsidized airbus a/c?

Would converting the entire US market to Boeing a/c be worth it to the US?
Correct me if I'm wrong here, but isn't the US the largest operator of airbus a/c?

Just a thought
 
Lumberton
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:49 am

Quoting Halls120 (Reply 7):
Maybe. I'm not so sure that the WTO would rule against Airbus, even if the merits suggest they should.

Unfortunately, and this is just my opinion, that no matter how the WTO rules, the "losing" side will most likely ignore the ruling, sparking a trade war that could ultimately threaten the WTO itself. The stakes here are very high. Neither side can back down politically without some sort of face saving "quid pro quo" that the politicians can proclaim as a "victory". I sense that the U.S. side is willing to take this to the extreme and the EU seems quite willing to do the same. The subsidies issue chafes on this side of the Atlantic and the EU politicians will eat ground glass before they see Airbus surrender ground that they have painstakingly won over the last three decades. These negotiations are extremely important and must produce a breakthrough or this will get very, very ugly. Again, just my USD $0.02....

[Edited 2006-06-19 02:51:19]
"When all is said and done, more will be said than done".
 
trex8
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:54 am

even if the WTO rules against Airbus, the US are in no position to enforce anything given they don't abide themselves most of the time by WTO findings against the US. Plus I can't see the WTO finding it kosher for tax subsidies which only come into effect essentially after one specific manufacturer makes a specific product and which would clearly only benefit that manufcaturer and not a competitor. The effect is likely both sides will lose and yes each side has shot the other but they also got hit and are bleeding.
Besides when all those US suppliers to Airbus start moaning after Airbus gets hit and Boeing gets more business, which they will send to Korea and China and not keep in the US - don't kid yourself one second that won't happen, it'll be like the steel debacle a few years ago. Help the big US steel makers and kill all the US manufacturers using the steel.
 
Lumberton
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:55 am

Quoting Par13del (Reply 8):
Even if the WTO votes against airbus, it will be the banana issue all over again. The WTO ruled against the EU in that case and still nothing has been done. The EU and airbus will decide that the penalties against them are out weighed by the national interest, so what can the US do?

Our posts crossed, but I completely agree with your sentiments. A parallel situation that Canadian A.netters never tire of pointing out is the soft lumber issue where the WTO ruled in favor of Canadian exporters and the U.S. has not complied. I can see the EU ignoring an unfavorable ruling against EADS; I can see the U.S. upping the ante if the ruling goes in favor of "launch aid". It will be ugly and the spill over could likely enter into agriculture, and many other areas. Unfortunate since there may be one last chance at the Doha round of trade negotiations to find a breakthrough in the agricultural subsidies issue that may assist third world economies. Again, these are my personal sentiments and reflections.
"When all is said and done, more will be said than done".
 
Jano
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 9:59 am

Quoting Par13del (Reply 8):
Correct me if I'm wrong here, but isn't the US the largest operator of airbus a/c?

It's gotta be one of AF or UA or NW. I do not think it is US.
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boeingbus
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:02 am

subsidies didnt help Airbus have good judgment, forcasting what airlines, or hire top shelf management.

I don't understand the reasoning behind why we get so fixated on Airbus being supported by several EU countries... BTW, I include myself in this group. I dont think its fare... but it seems that taxpayers money isn't really helping their cause??? so let it be...

Aibus is number one in orders and deliveries because Boeing was asleep at the wheel.
Airbus or Boeing - it's all good to me!
 
atmx2000
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:05 am

Quoting Par13del (Reply 8):
I say stock it up, allow the EU to give the launch aid publically, everyone know when and how much. Demand the right for the US govt and or its state govt. to offset if they so wish. Essentially this means nothing because the US does not operate like that, but I'm certain some creative lawyers and accoutants in the US could find a way to level the playing field. How about offering discounts to US airlines if they bought Boeing a/c and penalities if they bought govt subsidized airbus a/c?

Launch aid, which is essentially low risk capital funds beyond cash flow, is distorting the market by encouraging the launch of projects without adequate analysis of market size and the appeal of aircraft. I wonder if the A340NG and A380 would have been built if it weren't for launch aid and instead had to be funded through normal capital markets by commercial banks and investors who would require a solid business and understanding of the competition before shelling out money.

If governments continuously give dedicated funds for the purpose of designing new aircraft because the previous one failed to be competitive, no one is going to see a return on investment as the competition will be forced to respond by premature launch of new models. The danger is that these companies will end up being primarily in the business of designing new aircraft models rather than building aircraft. That is great for engineers who design planes, but does nothing to make a company a viable operating concern.

Tax breaks on the other hand don't distort the market like launch aid does, because the company has the choice of whether to invest in a new model, pay off debt, or return money to shareholders.

Quoting Trex8 (Reply 10):
even if the WTO rules against Airbus, the US are in no position to enforce anything given they don't abide themselves most of the time by WTO findings against the US.

The EU was the first to do so. If they continue to do so, then we can end the charade.

Quoting Lumberton (Reply 11):
A parallel situation that Canadian A.netters never tire of pointing out is the soft lumber issue where the WTO ruled in favor of Canadian exporters and the U.S. has not complied

WTO ruled in favor of the US recently. It's the NAFTA panel that ruled against the US. Anyway, the issue has been settled.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
11Bravo
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:06 am

Quoting Lumberton (Reply 11):
A parallel situation that Canadian A.netters never tire of pointing out is the soft lumber issue where the WTO ruled in favor of Canadian exporters and the U.S. has not complied.

Actually that dispute was resolved earlier this year with the US paying back some $4 billion to Canadian companies:

http://www.safnet.org/archive/softwoodJune2006.pdf
WhaleJets Rule!
 
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par13del
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:14 am

Lumberton, only way I see things like this getting sorted out is via people and economics. I mention the banana issue because in deference to my Eastern Caribbean cousin's, I believe the subsidies that they continue to receive from the EU keeps them tied to a crop which every hurricane season gets decimated. If they were not subsidized, we all know that they would have switched their economies a long time ago, especially in countries like St. Kitts.

If the US used its penalties assuming a US win to ensure that the US a/c industry only used Boeing a/c Airbus would be a big looser, more so than the US suppliers to airbus.

It's what so funny about the whole situation, US suppliers are hugh and very important to both airbus and boeing. I think American's are probably tired of the Europeans continually throwing in their face that they have the largest a/c manufacturer. Maybe if the US govt ensured that the playing field was always level when airbus was first set up this would not happen, but how could they not? They only started complaining when airbus started threating boeing position as number one, by then it was too late. If you don't complain at first don't start later.
 
halls120
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:43 am

Quoting Atmx2000 (Reply 14):
Launch aid, which is essentially low risk capital funds beyond cash flow, is distorting the market by encouraging the launch of projects without adequate analysis of market size and the appeal of aircraft. I wonder if the A340NG and A380 would have been built if it weren't for launch aid and instead had to be funded through normal capital markets by commercial banks and investors who would require a solid business and understanding of the competition before shelling out money.

Excellent question. One I'd like to hear a rebuttal on from our Airbus friends.
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
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par13del
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:52 am

Jano I apologize, when I type US I meant the country not the airline, as we were discussing the subsidy issue from a country and company point of view. I have to remember this in future and use America or United States.

Sorry about the confusion.
 
halls120
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 10:58 am

Quoting Par13del (Reply 18):
Jano I apologize, when I type US I meant the country not the airline, as we were discussing the subsidy issue from a country and company point of view. I have to remember this in future and use America or United States.

Sorry about the confusion.

I thought that you might be referring to the country, not the airline, and I would also be interested in how many airbus aircraft have been bought by airlines based in the US. I would suspect that Airbus has sold more aircraft outside the US than inside the US....
"Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself." Mark Twain, a Biography
 
11Bravo
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 11:18 am

Quoting Halls120 (Reply 19):
I thought that you might be referring to the country, not the airline, and I would also be interested in how many airbus aircraft have been bought by airlines based in the US. I would suspect that Airbus has sold more aircraft outside the US than inside the US....

Top five Airbus narrow-body operators:
Air France 140
Northwest AL 139
US Airways 138
Air Canada 105
United AL 96

Top five A300/A310 operators:
Federal Express 107
UPS 50
American AL 34
Japan AL Domestic 24
Thai AW Int 21

Other Airbus wide-bodies:
Northwest AL 20 (8th)
US Airways 9 (28th)
WhaleJets Rule!
 
mham001
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 11:21 am

What is infuriating about it all is this statement:

"As far as we can see, the negotiations have not led to anything," said Rainer Ohler, an Airbus spokesman. He stopped short of saying that Airbus would request the aid - which could run into billions of euros - but called the money "indispensable" for establishing what he called a level playing field with Boeing. "Launch aid is the only available system right now," he said.

Level playing field! What the hell is a level playing field to these people? Complete domination? And if they want to talk about taxpayer R&D, then they need to give back all the technology they got from NASA, starting with fly-by-wire,

Incredible.

[Edited 2006-06-19 04:22:42]
 
NAV20
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 11:46 am

Must admit that I'm more amused than infuriated by the EU/EADS side's various pronouncements, Mham001. They seem to have no sense of the tactics being employed on the US/Boeing side.

"Peter Power, a spokesman for the EU trade commissioner, Peter Mandelson, said that Brussels would continue to make "every effort" to resolve the dispute by negotiation.

"We remain ready to put launch aid on the table if there is a commensurate offer on the U.S. side," Power said."


There is absolutely no need for the US side to make any 'offers.' Their objective is to stop the EU giving 'launch aid' to Airbus. While the matter remains 'sub judice' at the WTO, that objective is achieved. For the moment, the US side doesn't need to do anything more.

And this part of the report suggests that if launch aid is delayed much longer, there is a risk that EADS will go broke. Which (among other things) would solve Boeing's problems for good and all.  Smile:-

"Inside EADS and Airbus, executives said that financial pressures had made the need to request aid more pressing.

"For Airbus, launch aid is becoming topical again," one executive familiar with the company's financial situation said. "When the coffers are empty the pressure rises."
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
spartanmjf
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 11:57 am

What is becoming clearer and clearer is that, by avoiding private capital markets, Airbus does not wish to play on anything resembling a level playing field.

By avoiding these markets, by avoiding risk, and by utilizing government 'aid' which is in reality a direct subsidy, Airbus is able to sell aircraft at a price that is lower than it would be given a level playing field.

"We are willing, within logical limits, to give sufficient support to EADS to help it through these problems," Prime Minister Jos� Luis Rodriguez Zapatero of Spain said after a European Union summit meeting on Friday.

At the French Transport Ministry, a spokeswoman, Laurence Lasserre, said the self-imposed freeze could not be expected to last indefinitely. "This situation cannot last beyond a reasonable time span," she wrote in an e-mail.


This is infuriating, the presumption that state aid is a given. Let Airbus and EADS make the personnel and program cuts needed to reduce unneeded expenditures and make their business case to the world's private investors.
"Nuts to the man in 21D!"
 
AerospaceFan
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 12:04 pm

I certainly hope that this dispute doesn't worsen relations between the U.S. and Europe. From a business standpoint, both continents need each other. As others have noted, there are many suppliers for Airbus products that are based in the Unied States, and there are important partners and subcontractors for Boeing products in Europe.

The introduction of intangibles, such as national pride, would inject something of an irrational factor into the operation of capital markets, and this is an issue that could retard the overall progress of the aviation industry.

I note that airlines in the U.S. did not hesitate to buy Airbus products, any more than European airlines, as far as I am aware, decided to support the "home team" over Boeing. I think that this historical approach has been overwhelmingly rational and beneficial. Rational economic actors provision their inventories according to what is likely to work to their own benefit, and not according to prejudice or whim.

Regarding the issue of launch aid, both Europe and the United States should realize that litigation over this issue has become something of a transactional cost that detracts from the benefits of healthy competition. If it is true that Europe has given launch aid in addition to the types of informal tax-break aid it accuses the hosts of Boeing plants of giving, and on top of cost-free government research by NASA and other public agencies, then surely in fairness no further instances of such aid should be provided.

NASA and ESA have freely shared much scientific information in the name of progress and the common benefit of mankind. NASA, in particular, has been historically open with the provision of the results of its aeronautical research, as far as I know. The concern military secrecy that surrounds projects such as the Joint Strike Fighter, as to which a controversy^1 developed with our British friends by reason of the withholding of high-level manufacturing data, is largely absent on the part of NASA. The question of whether benefits obtained by Boeing from government agencies constitutes a form of launch aid is essentially a wash, because such research is equally available to Boeing's competitors across the globe.

I believe that if the Airbus/EADS controversy at issue extends beyond its current scope, which appears likely if government launch aid is provided to the European consortiums, then relations between our respective continents will have taken a serious step backward. And this is something that benefits neither of us, temporary victories notwithstanding.

____________________________________
1. As I recall, this controversy has lately been resolved.

[Edited 2006-06-19 05:14:43]
What's fair is fair.
 
georgiaame
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 12:07 pm

I'm not quite certain what this big kerfuffle is all about... Seems like standard operating procedures out of the EU. Private enterprise refuses to back a gazillion Euro aircraft project, the State, insistent on showings its independence from the 900 kilo gorilla in the (board) room, (us, the USA that is), then taxes the EU citizen to death to redistribute the wealth of the Continent, and if the project succeeds, the citizens get their money back, (sort of), and if it fails, they get taxed again for a new project; dare I say, ahem, A370?

As our Israeli friends might wish to translate: "Mah nishtanah ha'lieleh hazeh, me chol ha lailot?"

Europe and N America have very fundamental differences when it comes enterprise, corporations, money, taxes and a whole lot more. This is reality. There are reasons, fundamental reasons why we here in North America irreparably broke away from Europe, in spite of our common heritage. Live with it. And let the best aircraft fly.

(I still think the 380 is butt ugly, but will be one hell of a great passenger ride, just like all Airbus aircraft are, assuming it ever launches...)
"Trust, but verify!" An old Russian proverb, quoted often by a modern American hero
 
dl021
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 12:09 pm

Quoting Aither (Reply 1):
The launch aid request for the A350 was postponed last year but it was always clear they would request some as the 787 benefit from large subsidies.

No more than Airbus gets when it builds a factory...look at the German wrangling for the A-380 assembly plant....'launch aid' is simply a no-risk loan offered by the government in addition to all the other stuff.

Quoting AirFrnt (Reply 4):
Quoting Aither (Reply 1):
The launch aid request for the A350 was postponed last year but it was always clear they would request some as the 787 benefit from large subsidies.

The Airbus cheerleaders are fond of repeating this, and then ignore the fact that the A380 also gets the exact kind of logistical support aide as Boeing has received on top of the launch aide.

precisely

Quoting Atmx2000 (Reply 14):
I wonder if the A340NG and A380 would have been built if it weren't for launch aid and instead had to be funded through normal capital markets by commercial banks and investors who would require a solid business and understanding of the competition before shelling out money.

I asked that question in a previous thread and it has still not been answered with any logic. I'm waiting for someone to show how no-risk money forces good business logic.

Quoting Mham001 (Reply 21):
Level playing field! What the hell is a level playing field to these people? Complete domination? And if they want to talk about taxpayer R&D, then they need to give back all the technology they got from NASA, starting with fly-by-wire,

Level means that if they start to fall behind they go get their parents to bail them out (sort of like getting the French airline to magically order airplanes at the last second so they could "win" the order-count race). It's a real ego issue with many there, just take a look at the number of politicos who showed up at Toulouse to take credit for the Whalejet's first flight. It was an event of national pride, and they.....I'm rambling but it's fairly obvious that there is a marked difference between the French and German managers and spokespeople at EADS/Airbus and the most smoke seems to come from the French (and ironically American) side of their company.

THey'll ask for state aid and get it approved, unless the WTO people put the kibosh, and even then there'll be efforts to get it done. Airbus is behind the eightball and has little experience in getting out of jams like this.
Is my Pan Am ticket to the moon still good?
 
douwd20
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 12:21 pm

What's amazing if this all plays out and Airbus is given state aid what is the point in reading the market correctly and developing the 777 and 787 and not the A380? What is the point of managing a project and cash flow correctly when the state can come in and bail you out if you do all the above wrong? There is no risk in betting the company because it's a SURE THING regardless.
 
N908AW
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 1:23 pm

Quoting Douwd20 (Reply 27):
What's amazing if this all plays out and Airbus is given state aid what is the point in reading the market correctly and developing the 777 and 787 and not the A380? What is the point of managing a project and cash flow correctly when the state can come in and bail you out if you do all the above wrong? There is no risk in betting the company because it's a SURE THING regardless.

There is no point.


This is the difference between Airbus and Boeing. The U.S. Government's "subsidies" aren't tax-deductible, or for those not subject to the IRS, that means the Gov't receives stuff for it. Doesn't matter that the money was supposedly all to Boeing (it wasn't), the exchange of goods and services is what drives the economy. Sure, Airbus gives the EU stuff in return too...but it would be naive to think the Airbus subsidies return as efficiently as Boeing's government purchases do.
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WingedMigrator
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 2:36 pm

I was curious about the EU's complaint against Boeing. It turns out the WTO website is an excellent resource... you can download the text of the actual complaints. Take a look:

http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds317_e.htm

In particular, I recommend a download of document 05-2305, which lists the EU's grievances in detail. Makes for interesting reading... outline goes as follows:

1) state and local subsidies
2) NASA R&D subsidies
3) Transfer of trade secrets and valuable data rights by NASA
4) Department of Defense R&D subsidies
5) National Institute of Standards & Technology R&D subsidies
6) Intellectual property rights waivers by NASA and DoD
7) US Department of Labor
8) NASA and DoD procurement contracts
9) NASA and DoD facilities
10) Federal Tax Incentives

Item #8 is interesting... to paraphrase, they claim NASA and DoD transfer economic resources to Boeing through the purchase of goods from Boeing for more than adequate remuneration.

I would suggest that us Americans read the EU's complaint before dismissing it. I mean, you can still dismiss it, but at least do so in an informed manner before  box 
 
dhefty
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 2:39 pm

Quoting 11Bravo (Reply 20):
Top five Airbus narrow-body operators:
Air France 140
Northwest AL 139
US Airways 138
Air Canada 105
United AL 96

Sorry, but according to Airbus' Orders Summary of May 31, 2006, narrow-body operators are ranked as follows:

    US Airways - 195
    Northwest - 143
    Air France - 139
    Air Canada - 107

Last year, US Airways and America West merged. The America West name is gone and the surviving entity is US Airways, even though AW actually took over USA. Doug Parker, the former chief of AW is now the CEO of USA.
 
blueflyer
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 2:42 pm

Quoting Lumberton (Reply 9):
Unfortunately, and this is just my opinion, that no matter how the WTO rules, the "losing" side will most likely ignore the ruling, sparking a trade war that could ultimately threaten the WTO itself.

If for one think there might not be just one "losing" side but two. The WTO is as keenly aware as anyone else of the possible consequences a one-sided ruling might have, and they may yet pull a trick out of their hat and somehow manage to find against both sides on different grounds, much like the dispute between Brazil and Canada (Embraer and Bombardier really) ended up.

Even if the EU ended up losing, it would be against their interest overall to ignore the ruling and risk an end to the WTO and its dispute arbitration mechanism, because the EU has won more than its faire share of disputes, including against the US. One that comes to mind is a ruling against a certain tax provision that allowed Boeing to "import" its profits from overseas without paying taxes.

Quoting Halls120 (Reply 17):
Excellent question. One I'd like to hear a rebuttal on from our Airbus friends.

I'm sure your Airbus friends will be happy to give you a rebuttal just as soon as you can explain to them (and the rest of us) why that very tax provision I just mentioned above keeps coming back under one form or another through the Congress, only to get shot down again by the WTO (just thought I'd mention that in case someone was under the illusion this was the perfect example of one-sided WTO compliance).

Quoting Halls120 (Reply 7):
When the A380, was unveiled, I seem to recall many European government officials present at the roll out, crowing about the achievement "the old Europe" had produced.

So? They would never think of holding an election rally or a fundraiser at an Airbus plant on the other hand, while Bush, or any other official running for office with a connection to Seattle and/or Boeing would. What does that mean? Absolutely nothing.

You also forget that these government officials are not supreme leaders either and have to contend with their own legislative bodies back home, all as pariochial as the House can be (and much like the Congress and the White House can be, not always from the same side of the political divide). In France, Airbus is essentially a Southern company, and Northen MPs are not about to commit fiscal suicide in the name of French pride alone. Germany's "landers" are even more fiercely independent. All that means that any tax break or launch aid Airbus might be getting has to gather the support of many elected officials for whom there is no direct benefit to granting it, in other words, Airbus has to earn it one way or the other, much like Boeing has to earn the support it gets in the Congress.

Quoting Spartanmjf (Reply 23):
What is becoming clearer and clearer is that, by avoiding private capital markets, Airbus does not wish to play on anything resembling a level playing field.

Not to pick on you personally, but there is no such thing as a playing field. For one thing, the so-called capital markets are different in Europe and the US, or for that matter even within Europe. Those of us who are asking that Boeing and Airbus be put on a totally even keel are pipe dreamers who need to stop smoking whatever it is that they are smoking because, no matter how hard we try, it just isn't possible. Does that necessarily justify the aide that Airbus is requesting? I don't know.

I for one would love to see the WTO tackle the issue and see what they make of it, but I wonder whether it'd get to that point because there is just too much at stake. What if I was wrong and it ended up being a one-sided victory for either side. Imagine what that'd do to the other manufacturer...

Bottom line is, Airbus is asking for more government money and because they can't quite come out and leave it at that, they add that it is intended to level a playing field that everyone in Toulouse, Chicago, Washington, Paris, Barcelona, Frankfurt and Geneva know cannot and will not ever be level, but it sounds a hell of a lot better than to say "we're asking for money just because."

[Edited 2006-06-19 08:10:07]
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atmx2000
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 2:53 pm

Quoting WingedMigrator (Reply 29):
2) NASA R&D subsidies

As has been noted before, Airbus has benefited from the published results of US government sponsored R&D activity.

Quoting WingedMigrator (Reply 29):

Item #8 is interesting... to paraphrase, they claim NASA and DoD transfer economic resources to Boeing through the purchase of goods from Boeing for more than adequate remuneration.

Then why isn't McDonnell Douglas still around as an independent company? Military procurement contracts suck up significant engineering and management resources. They are a distraction from commercial ventures and vice versa. That's probably why the Russian military has complained about Sukhoi's being distracted by commercial ventures and not dedicating resources to military development.

And let's not forget that a significant portion of US military expenditures were essentially required for US defense obligations to Europe.
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spartanmjf
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 2:55 pm

Quoting BlueFlyer (Reply 31):
For one thing, the so-called capital markets are different in Europe and the US, or for that matter even within Europe.

Great - then let's put the kind of import tarrifs on government-subsidized aircraft that would raise their prices to market levels and have US, NW, and any other airline who wanted Airbus aircraft respect these cultural differences.
"Nuts to the man in 21D!"
 
BoomBoom
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:00 pm

Quoting BlueFlyer (Reply 31):
They would never think of holding an election rally or a fundraiser at an Airbus plant

How do you know? Do you follow French and German politics that closely?
Our eyes are open, our eyes are open--wide, wide, wide...
 
blueflyer
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:01 pm

Quoting Spartanmjf (Reply 33):
Great - then let's put the kind of import tarrifs on government-subsidized aircraft that would raise their prices to market levels

Skipping over the whole issues of how to set market prices when you have only one reference to judge by (or so I assume from your post), you seriously don't believe that would be enough to create a level playing field, do you ?
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WingedMigrator
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:04 pm

Quoting Atmx2000 (Reply 32):
And let's not forget that a significant portion of US military expenditures were essentially required for US defense obligations to Europe.

Can of worms!!! Which is a great way of summing up the whole affair.  cool 

Let me point out that government business is hardly a "distraction" for Boeing. It nets them more revenue than the commercial aircraft unit.
 
blueflyer
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:08 pm

Quoting BoomBoom (Reply 34):
Do you follow French and German politics that closely?

Actually, close enough, yes. Not that it is that hard to do. My point was merely that one shouldn't infere too much from Chirac & Co's presence at the unveiling of the A380. Political cultures are different on both sides of the Atlantic and, although they would of course never admit to it, the main reason for their presence is to bask in the limelight that would otherwise be directed solely at the A380, but no, they wouldn't have a fundraiser there, it's way too... public and overt for European politics.

[Edited 2006-06-19 08:13:42]
Recep Tayyip Erdoğan has no clothes.
 
NAV20
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:13 pm

I don't think the rights and wrongs of the WTO case matter much.

'Bottom line', I reckon, is that without an injection of government cash in some form or other, EADS/Airbus can't afford to pay BAE for its Airbus stake next month - still less develop a convincing A370 design on top of its other commitments.

And all Boeing has to do is keep the WTO pot boiling, so that even if Airbus do eventually get some form of further 'launch aid', they don't get it IN TIME.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
atmx2000
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:25 pm

Quoting WingedMigrator (Reply 36):
Let me point out that government business is hardly a "distraction" for Boeing. It nets them more revenue than the commercial aircraft unit.

At the current point in time yes. But that has not been the case historically, and government revenue will probably contract while commercial revenue expands as deliveries increase from their post 9/11, SARS, and dot-com bust lows. We should also note that much of their government revenue is not military aviation, but rather space, systems, and armaments.

Quoting WingedMigrator (Reply 36):
Can of worms!!! Which is a great way of summing up the whole affair.   

Well it is true. There is a reason why the US has plenty of transport and tanker capacity and Europe doesn't.
ConcordeBoy is a twin supremacist!! He supports quadicide!!
 
blueflyer
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:30 pm

Quoting NAV20 (Reply 38):
without an injection of government cash in some form or other, EADS/Airbus can't afford to pay BAE for its Airbus stake next month

From the IHT article:
However, a senior Airbus executive, speaking on condition of anonymity, stressed that any decision to ask for the loans would be largely symbolic at first, since it would take at least a year before any such aid could be drawn upon. In fact, the recent delays in the A350 program could actually provide more time for a deal that could avert any payouts, he said, if the politicians decide to keep talking.
Recep Tayyip Erdoğan has no clothes.
 
dhefty
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:38 pm

Quoting Dhefty (Reply 30):
Sorry, but according to Airbus' Orders Summary of May 31, 2006, narrow-body operators are ranked as follows:


US Airways - 195
Northwest - 143
Air France - 139
Air Canada - 107

Oops, I forgot to include UAL at 152 in the number 2 spot just below US Airways.

Four out of the top 5 are in North America!
 
coa747
Posts: 380
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 3:46 pm

NASA has historically shared information with anyone willing to listen. From Cockpit Resource Management to advanced aerodynamic projects. The US government has also provided much technology to the rest of the world like the use of the GPS system which guide all of those new Airbus planes around. What has the EU provided to the US or the rest of the world for that matter???? The real reason Airbus doesn't want to disclose government subsidies in the USAF tanker contest is because then everyone would get a true picture as to just how much state aid they were getting. I just have one thing to say. If you want into the US defense market then you have to play by the rules the US set up, otherwise take your KC330 and hit the road. Oh and by the way if Airbus did win the contract they would be eligible for tax incentives from the local and state government just like Boeing did. Thing you have to understand is unlike Europe most states in the United States have different laws regarding tax issues and the Federal Government gives states great leway to do as they please. Some states like Texas have no state income tax while others do. So it would be very difficult for Airbus to argue the Federal government is providing illegal tax subsidies when most of these occur on the local or state level and have little to do with the Federal government. Tax incentives to lure new compaines is a very common practice here. I would hardly call it the same as launch aid.
 
Joni
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:01 pm

Quoting Dutchjet (Reply 3):
Is Airbus calling the loans a "Rescue Package" for public relations reasons or are things really that bad?

No, that was Richard Aboulafia.

WRT the launch-aid loans, they're standard practice and in-line with the 1992 bilateral agreement, and repayable unlike Boeing's and Mitsubishi's multibillion cash gifts. Enough said.
 
Parabolica
Posts: 74
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:08 pm

Quoting GeorgiaAME (Reply 25):
Europe and N America have very fundamental differences when it comes enterprise, corporations, money, taxes and a whole lot more. This is reality. There are reasons, fundamental reasons why we here in North America irreparably broke away from Europe, in spite of our common heritage. Live with it. And let the best aircraft fly.

Absolutely. As I have said many times, this is why the aerospace battle is of such paramount importance on both sides of the Atlantic : it is a fight not only about aircraft and money, but about a philosophy of living.


P-
oh please let there never be cell phones in airliners...
 
AerospaceFan
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:20 pm

Quoting Joni (Reply 43):
WRT the launch-aid loans, they're standard practice and in-line with the 1992 bilateral agreement, and repayable unlike Boeing's and Mitsubishi's multibillion cash gifts. Enough said.

I think you should probably specify which "cash gifts" these are, and why these "gifts" as they pertain to Boeing weren't also given, in effect, to Airbus.

Let's keep in mind the following: If Europe had funded its own defense inclusive of the extent that the United States funded it, European governments would have had fewer resources with which to fund its internal infrastructure and to provide any capital whatsoever for "prestige projects" such as Airbus. Britain, for example, did not have to expend money to conduct research and development into its nuclear deterrent (although France did). Germany was protected by U.S. nuclear forces even though Germany was officially a nonnuclear state (and remains so).

All Western European countries benefited from the "nuclear umbrella" that the United States deployed over NATO Europe and other parts of the Western World. All Western European countries benefited from the existence of American bases that helped deter conventional attack by the Soviet Union. These were all forms of aid for which the United States has never requested any kind of redress -- unlike specific loans for which European governments were specifically held liable. Is this aid quantifiable? I think that given some reasonable assumptions, it could be, and even if counting nuclear development alone, such valuation could range up to trillions of U.S. dollars distributed over the provision of defensive measures from the year 1945, peaking shortly before the close of the Cold War, to the the present.

Further, it may be seen, then, the development of military technologies for these purposes could have had a side benefit for U.S. industry, in that it helped American companies in one way or another. However, this kind of assistance -- even if, hypothetically, it had been exploited only by American companies and not European, which I think is questionable -- would not have been possible had Europe not required American protection in the first place. So, counting military research and development as a form of aid for American companies, in this sense, is double-dipping: Europe has benefited from American protection, and now some in Europe seem to want to turn around and use the side benefits accrued by American companies in the provision of Western European defense against the United States. Even assuming, hypothetically, that both the United States and Western Europe benefited equally from the protection provided by the United States during the Cold War that gave rise to military research and development, it is questionable whether the United States can be held to be at fault for merely being in possession of knowledge that facilitated this defense, when Europe neither offered nor was capable of contributing to that knowledge at the time.

As a consequence of the above, and in summary, I think that European critics of Boeing on the subsidy issue would have to prove, among other things, not just, (1) that Boeing could have benefited from government research and development, but, (2) that Boeing in fact benefited unfairly from this knowledge and, in addition, the information that was given to Boeing represented knowledge, (3) was not equally available to any other company, (4) would have otherwise been made available by European governments had the United States not been obligated under NATO to provide for Western Europe's defense, (5) could have been provided by European governments at the times relevant to the issues at hand, and logically, (6) the United States' possession of this knowledge itself amounted to an unfair trade advantage. I do not believe that all of this can be proved, and therefore I do not believe that, as relevant to the above factors, the subsidy case against Boeing is, in any way, a strong one. In fact, I tend to believe the opposite.

Of course, there might be other factors as well that I have not considered here that might convince me otherwise.

[Edited 2006-06-19 09:41:21]
What's fair is fair.
 
atmx2000
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:26 pm

Quoting Coa747 (Reply 42):
The real reason Airbus doesn't want to disclose government subsidies in the USAF tanker contest is because then everyone would get a true picture as to just how much state aid they were getting.

What it does is create a direct legal obligation for EADS to provide accurate and complete information to the US on a silver platter. If they fail to do so, they will be in legal trouble in the US if they continue to participate in the tanker bidding. I suspect Airbus and the EU has been counting on the language barrier to obstruct US discovery. It's a lot easier for Airbus and the EU to scour US government documents in English than for the US to scour English, French, German and Spanish documents.
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astuteman
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:26 pm

Quoting Dutchjet (Reply 3):
Is Airbus calling the loans a "Rescue Package" for public relations reasons or are things really that bad?

Airbus aren't calling the loans a "Rescue Package" - Aboulaifa is  Yeah sure

Quoting Lumberton (Reply 2):
Just to be clear...you disagree with Mr. Aboulafia's characterization of would be aid rendered to Airbus at this point as a "rescue package"?

When the parent company is STILL forecasting cE2.8Bn operating profit for 2006 and over E3Bn in 2007, even after the A380 delays, I'd have to say, yes, I disagree - for now

(I reserve the right to change my mind as the "fog" clears)  Wink

Quoting DL021 (Reply 26):
No more than Airbus gets when it builds a factory



Quoting AirFrnt (Reply 4):
The Airbus cheerleaders are fond of repeating this, and then ignore the fact that the A380 also gets the exact kind of logistical support aide as Boeing has received on top of the launch aide.

Don't lose sight of the fact that the "logistical support aid" (factories, roads etc), that Airbus gets (just like Boeing do...) IS the launch aid.
The "launch aid" is NOT revenue based - it's capital based.  Yeah sure

Don't fall into the trap of double-counting.......

Quoting Atmx2000 (Reply 14):
Launch aid, which is essentially low risk capital funds beyond cash flow, is distorting the market by encouraging the launch of projects without adequate analysis of market size and the appeal of aircraft

Spot on, Atmx2000, and that's MY gripe with the repayable launch aid - not because of the bare "money" impact (which I don't think is actually all that much) - low risk is the true objective of the aid, and it distorts the decision-making process.  checkmark 

Quoting Atmx2000 (Reply 32):
Military procurement contracts suck up significant engineering and management resources. They are a distraction from commercial ventures and vice versa

Spot-on yet again. I have to say from my own experience that I've never seen a major involvement in defence contracting as an aid to commercial work. In my experience, it's usually the other way around. Defence business invariably drives a high cost base into your oranisation that compromises commercial work.

Regards
 
atmx2000
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 4:49 pm

Quoting Astuteman (Reply 47):
Spot on, Atmx2000, and that's MY gripe with the repayable launch aid - not because of the bare "money" impact (which I don't think is actually all that much) - low risk is the true objective of the aid, and it distorts the decision-making process.

It's not just low risk, but rather the on demand nature of a surge of money targeted to delivering a commercial product. If Boeing received the same type of launch aid, we would see a constant flow of launch aid money to these companies as they try and one up each other. When would it stop? Would it ever get paid back? Airbus has launched a large number of large projects in the last 20 years and invested tens of billions of dollars

Quoting Astuteman (Reply 47):

Spot-on yet again. I have to say from my own experience that I've never seen a major involvement in defence contracting as an aid to commercial work. In my experience, it's usually the other way around. Defence business invariably drives a high cost base into your oranisation that compromises commercial work

Dealing with demanding monopsonies who also control law enforcement and a vast number of lawyers is a tricky business. And since at the end of the contract you have to deliver the contracted for item, you have to jump through a lot of hoops to get whatever commercial side benefit there is. A very innefficient way of getting subsidizing anything.
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NAV20
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RE: Article: Airbus Likely To Request State Aid

Mon Jun 19, 2006 5:06 pm

Couldn't agree more with 90% of what you say, Astuteman. Couple of additional points, though:-

Quoting Astuteman (Reply 47):
When the parent company is STILL forecasting cE2.8Bn operating profit for 2006 and over E3Bn in 2007, even after the A380 delays, I'd have to say, yes, I disagree - for now

EADS tends to forecast profits on the most favourable basis ('EBIT,' earnings before interest and tax - and lately before deducting BAE's share). The 'out-turn figures' AFTER deductions are much lower - net profit for 2005, for example, was only Euro 1.7B.


Quoting Astuteman (Reply 47):
the "logistical support aid" (factories, roads etc), that Airbus gets (just like Boeing do...) IS the launch aid.

Not sure about that. That's the basis on which regional (development area) incentives are paid, not sure if the same applies to 'launch aid' from central governments. The latter would appear to be 'long-term risk capital at super-low interest rates', which makes no commercial sense at all.

In support of your general views, though, its effect would appear to be thoroughly cock-eyed since it makes it easier to start projects than to stop them. Suppose it had been paid out on the A350, and AFTER spending E1.5B. of taxpayers' money on preliminary design, they had found out (as they did, in that case) that it was a non-starter.

How could they possibly have announced a 're-think' in that situation, after having already blown the taxpayers' share of the development costs going up a blind alley?
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci