The US side in unison fails to acknowledge basic finance terms and principles.
The WTO never said, that the Airbus RLI would be illegal. In fact they confirmed "the legality of repayable loans made to Airbus". The reason is obvious (if you are not blinded): this money will be paid back. Only the too low interest rates (below market standard) were considered as illegal subsidies. This is a fine, yet very important difference:
- Launch aid = will be paid back = the large numbers = legal.
- Lower than usual interest rates for the launch aid = a much, much, smaller number = illegal.
So it seems now that Airbus just did not pay back the delta between the interest rates they initially got and some market typical interest rates. How much would that be? In times of generally low interest rates? You can safely assume that these numbers will be very low, probably some dozens of millions. Airbus says “only tiny tweaks will be required to make the A350 launch-aid terms compliant with WTO rules."
If you compare this (whole mess) to Boeings sins, you immediately see that the illegal part must be much larger for Boeing: first e.g. there is no interest rate at all in the first place because the subsidies Boeing gets are just a gift and do not need to be paid back at all. In the tax break case, as well as the Japanese sponsoring of the 787, the big numbers are already illegal.
For this reason Enders said: "Muilenburg should be careful throwing stones at us while he himself sits in a glass house. Boeing might later be hit by a rock when the next WTO ruling comes”
The two quotes are from the seattle times article....
I agree that the WTO did in the previous case say that properly structured launch aid would be legal. I also agree that Boeing is not out of the woods on this either.
But, I do believe that you have missed the main impact of the ruling; and why that will affect Airbus a lot more than Boeing. The WTO did not base its damages on the incremental cost of Airbus's launch aid being "legal." They based their damages on the existence of the planes that launch aid assisted had on Boeing's market share and future profits. It is my understanding that in this case it is primarily the launch aid for the A350 in question. So, what impact on Boeing did the development and existence of the A350 have considering where Boeing was when the A350 was being developed with said launch aid.
In Boeing's case I believe that a good portion of the individual state subsides (which is different than a national government subsidy) will be found to be legal; but, perhaps 1/3 to will not be based on a review I did on this case several years ago (Keep in mind that this kind of aid was considered legal if properly structured in the first case; just as the EU kind of launch aid was legal if properly structured). I also believe that this case is mainly about the 787 subsidies, and perhaps a bit for the 777-10 (but, my memory is a good portion of 787 work was started under the previous case; so the 787 damages may be prorated down). So, what impact does the 787 have on Airbuses market share given that they did not have the A350 when the later 787 work was being done. I think that is a much smaller impact. What impact potentially does the 777-10 have on Airbus's market share?
I suspect we will see in a few months. But, please note that the WTO did not assign damages for the piddly millions it would have taken for Airbus to be legal. They assigned damages based on the effect on market share of the existence of the planes so subsidized.
Have a great day,