Dogfight

13 June 2005 By Marianne Brun-Rovet

The FrancoGerman aerospace group is locked in a bitter battle with its US rival for dominance of the commercial aircraft market. But EADS is fighting on two fronts: it’s also trying to break into the US defence market. It will be hard to win on both.

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Airbus is set to announce more than 100 new orders for its midrange A350 aircraft at the Paris air show, which starts on June 13.

The orders will help the European aircraft maker redress the balance with US rival Boeing, whose 787 Dreamliner has helped to rack up a total of 255 new orders so far this year, compared with Airbus's 196. Boeing is set to beat Airbus in new aircraft orders for the first time in four years.

Boeing stepped up its attack on the subsidies received by Airbus from European governments in the runup to the air show. Airbus like Boeing has received research and development funding and tax breaks from the US government, whereas Boeing did not receive launch aid – the government loans Airbus has received from EU governments – Michael Jenkins, Boeing's UK president, wrote in a letter to the Financial Times.

The Aerospace Industries Association, the US aerospace industry's most powerful lobby group, accused Airbus of launching the A350 with improper government aid and warned pressure was growing in the US Congress to punish European

companies if the trade dispute escalates.

The attacks came ten days after the US took its suit against the EU's launch aid to Airbus to World Trade Organisation. The EU immediately countersued.

Meanwhile, a letter obtained by the Wall Street Journal showed EADS was willing to relinquish subsidies, even for the A350, in exchange for concessions from Boeing and an opening of the US market.

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