AIRCRAFT SUBSIDIES

Aircraft Subsidies

Aircraft Subsidies

Answer 1

I believe that the launch aid given to Airbus is unjustified as the case study clearly reveals that the US claims that Airbus hiss received at least US$15 billion in launch aid from the constituent governments. This took the form of loans that were offered at interest rates at below marketplace levels. Furthermore, these loans were repayable on the basis of future aircraft sales. There was a condition that if a product fail, the loan will not have to be repaid. As a result, Boeing claims that Airbus has avoided around US$3s billion of liability. Even though Airbus will have to continue paying royalties to governments long after the loan and interest on it have been repaid. The EU counter-claims that Boeing has received around $23 billion in aid since 1992, largely through defence and space contracts. These defence contracts have not only been deliberately overpriced but Boeing was also given privileged access to government procurement sources. The EU also plans to confront the tax reduction given to Boeing by Washington over the next 2O years to hold up the launch of new products. In addition, the EU claims that Boeing gets a financial assistance from Japan as the Japanese government has offered subsidies to three home businesses supplying Boeing with core components for its products.

Officials from the European Union (EU) said that the World Trade Organization (WTO) ruled that Boeing received unfair help from the U.S. government, while the aircraft manufacturer said that the amount was less than that received by rival Airbus. Both companies claim to have won the dispute and claim to have suffered greater damage than the opponent. The existence of a financial temptation for governments to resort to export subsidies is therefore not a generality, but rather related to exceptions. This is why the same industries always come back to the front of the stage. The competition is quite different on the market of civil aviation, dominated by two companies: Airbus and Boeing. Heavy production costs and program is also a special feature to this sector. These differences with conventional competitive situation imply that these firms are not as passive in graphic demonstration, but are strategic actors whose major decisions have a major impact on the entire industry (Irwin, 2004).

Answer 2

I agree with Boeing's claim that as market leader such support to Airbus is no longer warranted. Airbus which became the largest aircraft manufacturer in the world is exercising its monopoly over Boeing commercial aircraft. Boeing accuses Europe which have benefited in 1980's of about 16,600 million dollars of federal grants associated with investments in research and development, primarily through NASA and the Department of Defence. Supports have been designed in many cases and projects that favour their commercial aircraft (Baskett, 2010). In a 1000-page report released in Geneva, it is estimated that some European development aid for the Airbus A300 "export subsidies constitute" prohibited. Boeing said that in the context of the decision announced, Airbus must repay 4,000 million of ...