I'm rubber. You're glue.
Your lawsuit's gonna bounce off me, and stick to you.
A law school variant on the old kindergarten taunt, this nonetheless was the heart of Airbus' defense when it responded to Boeing's
Boeing received "massive subsidies," $16 billion worth of Pentagon and NASA contracts that were designed to help Boeing research the composite skin encasing its new 787 airliner. Another $4 billion worth of tax breaks from the states of Kansas, Illinois, and Washington. And unspecified billions more in "other types of aid."
Or so said Airbus. (And I'm certain it was sheer coincidence that the numbers Airbus tossed about -- 16 + 4 + X -- once added all together, came awfully close to offsetting the illegal aid that Boeing said Airbus had collected.) There was just one problem with Airbus's defense ...
Guess who's glue now?
When the WTO issued its first of two major rulings on the dispute back in March, no one was quite certain, at first, who had won. (The report was confidential, after all.) Fast forward a few months, though, and when the entire report was released to the public, it was all too clear that Airbus had suffered a major defeat:
- $15 billion in illegal "launch aid loans" attributed to the A380 and other Airbus jets.
- Another $5 billion in illegal supports of other flavors.
- A ruling that -- almost in so many words -- declared Airbus received loans at below-market rates, with no obligation to pay them back if the planes didn't sell!
Airbus tried to put a brave face on the news, but anyone with a lick of common sense knew: If Airbus's counterstroke didn't deal an equally scathing rebuke upon Boeing, Airbus was in big trouble. Now, the Boeing ruling has come down and ... Boeing is happy.
Once again, we don't know the details of this confidential report. Once again, we'll probably be kept waiting many weeks to see the full 1,500 page document. But according to Boeing CEO Jim McNerney, while some Airbus claims seem to have been acknowledged, the scale of the setback is "not as severe" as what Airbus encountered.
For one thing, McNerney avers that whatever punishment may be meted out in response to Boeing's receipt of Pentagon and NASA contracts, "there was nothing like direct launch aid that was found in their case." (So scratch the bulk of $15 billion from Boeing's potential losses.) For another, sources from both sides say the alleged "prohibited" subsidies from Washington aren't likely to stick (and seeing as that's the state where Boeing maintains the biggest presence, I'm guessing it means Kansas and Illinois are off the hook as well.)
Result: While I doubt very much that Boeing will escape from the courtroom unscathed (McNerney's ebullience wasn't quite evident enough for that result), it seems a mathematical certainty that when and if a bill comes due, Boeing's going to be on the hook for billions less than Airbus.
Obviously, this is good news for Boeing and key suppliers like General Electric
Don't look up, but ...
Answer: The airlines. I mean, think about it: What is a "subsidy," really?
It's government, footing the bill for part of a product's cost. It's a way to shift costs from the customers who buy the product, to the taxpayers who subsidize it. Ban those subsidies -- as the WTO will presumably require -- and who's going to pay the difference?
Or at least, that's the way I'm looking at today's news. But what do you think? Tell us about it below.
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