European Union Reopens Suit Over Boeing Subsidies

Boeing officially launched its 777 freighter following an order from Air France, which already operates 777 extended range passenger aircraft. As if to add insult to injury for Airbus, the U.S. government said it would ask the World Trade Organization (WTO) to halt all government support for European aircraft builder Airbus (which plans to introduce its own super-jumbo A350/A380 aircraft at the Paris Air Show). European Trade Commissioner Peter Mandelson said the EU had no alternative but to resume action in the WTO to confirm the illegality of subsidies paid to Boeing. A report in the Financial Times, indicated that Boeing’s operations outside the U.S. could also be targeted. Concern was focused on production facilities in Japan where the manufacturer could be accused of receiving indirect subsidies.

The U.S. wants EU countries to cease providing launch aid to Airbus for its A350 and other aircraft. The A350 was scheduled to be launched in June followed by the A380, the world’s largest commercial airliner. Latest news is that the A380 launch will be delayed some six months.

The European Union, which has reserved the right to negotiate air transport agreements for all member states, had extended itself through Jacques Barrot, vice president of the European Commission and Commissioner for Transport, who came to Washington in March saying, “I want to develop closer cooperation in the field of aviation with the United States.” The EU has had an internal battle with various member states which have traditionally negotiated their own air agreements with the U.S. and other countries. The EU, supported by the European Court of Justice, holds that it alone can negotiate international air agreements.

The EU and U.S. negotiators had reached agreement on one of the most important aspects of the “open skies” agreement – for the U.S. to recognize the concept of an EU airline and allow EU airlines to fly between any city pairs in the EU and the U.S. U.S. officials point out that U.S. airlines have that right flying to Europe, but a nationality clause in bilateral agreements requires that for an airline to fly to the U.S. it must be owned and controlled by citizens of its home country. That would preclude Air France from flying to the U.S. from London. Under the terms the U.S. agreed to, that restriction would be dropped for EU airlines. But progress stalled over the issue of cabotage – the right to operate within a country’s borders. The U.S. was unwilling to allow foreign airlines the right to operate between U.S. city pairs. An EU airline’s flight originating in Los Angeles and flying to Amsterdam via New York, therefore, can only carry passengers or freight from Los Angeles to Amsterdam and New York to Amsterdam, it could not discharge either at New York.

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