An ugly trade row has blown up between Europe and the United States over a decision by France, Germany and the UK to give Airbus launch aid for its latest aircraft.

Airbus is seeking €3.5 billion in repayable aid to help it offset the estimated €11 billion it will cost to develop the A350XWB, which is due to enter service in 2013.

However, the US government attacked the decision claiming it was “a major step in the wrong direction”.

Sources familiar with the US government’s policy added that Europe’s decision to give Airbus launch aid would strain trade relations and could lead to penalties against European companies.

The World Trade Organisation is due to rule on whether aid to Airbus breaches international competition law within a couple of months and the Americans are angry that a decision on A350 support has been made before this judgement.

Jim McNerney, the chief executive of Boeing, told The Times: “I’m disappointed Airbus is going to take that stuff on the eve of a WTO ruling on its appropriateness. It seems to me a step backward and suggests that they think the WTO process is irrelevant.” Speaking at the Paris Air Show, Tom Enders, the head of Airbus, countered that it was Boeing that unfairly benefited from government subsidies in the form of military research grants.

He called Boeing “hypocrites” and said that the 787 Dreamliner, which will compete with the A350, is the most heavily subsidised commercial aircraft ever. Europe has brought a separate WTO case against Boeing over its alleged state aid.

France and Germany said on Monday that they would invest a combined €2.5 billion in Airbus’s A350 to help the European manufacturer get the project flying. The UK also said it is committed to the A350 but is understood to be haggling over how much it will invest due to budget constraints.

The wings for the A350 will be built by Airbus at its factories in the UK, which will help to secure about 11,000 jobs in North Wales and Bristol.

Spain is also likely to contribute to the A350 but appears to have fallen out with the management of Airbus over work commitments and it has not revealed its intentions. Final details of the contributions to be made by the European governments will be announced within a month.

A spokeswoman for the US Trade Representative said: “The commitment of launch aid by any EU member would be a major step in the wrong direction. We want to resolve the problem of WTO-inconsistent aircraft subsidies, but the commitment of billions of euros of additional launch aid would make that even harder to do.” As well as being a recipient of financial aid, Airbus is also expected to offer aid this year as the downturn in the aviation sector takes its toll on airlines around the world.

The company said it would make up to €1 billion available to airlines needing financing to purchase the aircraft they have on order. Boeing will make $1 billion available to its customers this year and slightly more next year after the aircraft financing market was almost wiped out by the credit crunch.

Airbus also said that it now expects to introduce a successor to the A320 single aisle aircraft between 2020 and 2022 - up to six years later than previously indicated. Boeing has a similar timeframe to replace its single aisle model, the 737. Both companies said that the technology did not yet exist to make a sufficiently big improvement on the A320 and 737, which are the workhorse aircraft for airlines such as Ryanair and easyJet, so would delay their replacement.

Mr McNerney also indicated that he was willing to consider locating a second production line for the 787 outside of Boeing’s traditional base in Seattle because of an on-going battle with unions.

He said that all sites would be considered but a US factory was most likely. Boeing’s Seattle union shut down production for about six weeks last year in a dispute over pay costing the company several billion dollars in lost earnings and compensation payments.

Mr McNerney said: “We had delays because of union problems and that has been very costly to us and our customers and that has to change.”

Separately Rolls Royce won orders worth $1.8 billion at the Paris Air Show yesterday. It will supply engines to Etihad, the Abu Dhabi airline, and to Air Asia X, which is based in Malaysia. Air Asia X also placed orders with Airbus for 15 A350s in a deal worth about $2.2 billion yesterday.

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