The battle between Airbus and Boeing enters a new phase today when the European Commission will reject US accusations that the European aircraft manufacturer has benefited from billions of pounds of illegal subsidies.

The Commission’s defence will be presented in a written submission to the World Trade Organisation (WTO) in Geneva 12 weeks after the US formally set out its case.

EU lawyers reject Washington’s central argument that the public funds which governments have injected to co-finance research into new Airbus aircraft are an unfair subsidy. American opponents say that the practice is “pernicious”, and gives Airbus an unfair competitive advantage.

But the EU insists that the practice is in line with the 1992 EU/US bilateral agreement, which sets out the terms and conditions for launch investment for large civil aircraft.

The Commission rejects the claim that much of this launch aid is never repaid. It maintains that since 1992, Airbus has repaid more than €7 billion (£4.6 billion) and paid back 40 per cent more than it has received from EU governments.

In a counter argument, the Commission maintains that Boeing benefits to a far greater extent than Airbus from government help towards research costs. It estimates this at $15 billion (£7.6 billion) from Nasa and the Pentagon since 1989, compared with €50 million a year that Airbus receives.

The EU’s defence also relies on the fact that it will be difficult for Boeing to prove that it has suffered economic damage from any support to Airbus, given that it has just had a record year.

Both sides took the dispute to the WTO in May 2005 after last-minute attempts by Peter Mandelson, the EU Trade Commissioner, and Rob Portman, then US Trade Representative, to defuse the dispute failed.

Battlefield

May 30, 2005: US launches case v EU

May 31: EU starts case v US

Nov 15, 2006: US files formal complaint v EU

Feb 9, 2007: EU replies

Mar 20-21: First hearing on US v EU

Mar 22: EU files case v US

June 5-6: Second hearing on US v EU

July 11-12: First hearing on EU v US

October: WTO due to rule on US v EU

April, 2008: WTO due to rule on EU v US.

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