In 2006, after attempts to negotiate a bilateral agreement, the U.S. Government (USG) filed a case with the World Trade Organization claiming Airbus had received $22 billion in illegal subsidies. U.S. officials estimated the economic benefit of those subsidies (in 2006 dollars) at more than $200 billion.
The biggest and most impactful of the subsidies is known as launch aid – highly subsidized loans to Airbus for the development of new products. Repayment is tied to airplane delivery targets, so typically does not begin until several years after a program is launched. What's more, the interest rates on the loans are significantly less than commercial lenders would charge, and in the event a product does not hit a pre-determined sales target, remaining loans on the product are forgiven.
Launch aid provides significant advantages to Airbus, among them artificially low cost of capital, lower program risk, and the ability to price its products lower than the competition. It also enables Airbus to introduce new products faster than it would be able to do otherwise. The continuation of launch aid and other European subsidies to Airbus poses a significant risk to America's ability to compete successfully in the global commercial airplane market.
The WTO Decision against European Subsidies
In June of 2010 the WTO ruled in favor of the United States on 80% of the total alleged subsidy amounts, and in May of 2011 a WTO appellate panel upheld all of the key findings of the earlier panel. The WTO ruled that Airbus had received $18 billion of illegal subsidies, including $15 billion of launch aid. Airbus-sponsor governments were given until December of 2011 to remove the harmful effects of all illegal subsidies. On September 22, 2016, the WTO confirmed the European governments not only failed to meet the compliance deadline to remedy $17 billion worth of past subsidies provided to Airbus, but that an additional $5 billion in illegal launch aid has since been provided to support the A350. In a last ditch effort, the EU has appealed that ruling. Once the appellate process concludes later this year, the USG expects to be in a position to initiate the WTO process for imposing tariffs on European exports to the United States to mitigate these violations.