Airbus aims to end subsidy tariff row at crucial time
In a chess game over tariff disputes in the aerospace sector in Europe and the United States, Airbus announced it made the “final step to stop the long-standing dispute” between the two countries at the World Trade Organization (WTO). The first move was made in 2004, when the United States Trade Representative (USTR) filed a case against the European manufacturer over unfair subsidies.
16 years later, the Toulouse, France-based aerospace giant shook hands with the French and Spanish governments to make changes to the Repayable Launch Investment (RLI) contracts dedicated to the launch of the Airbus A350 XWB.
“These additional amendments to the A350 RLIs demonstrate that Airbus has left no stone unturned to find a way towards a solution,” stated Airbus chief executive officer (CEO) Guillaume Faury.
The move to end the chess match, which rather looks like two toddlers throwing tantrums, could not come at a more crucial time, as from top to bottom, every part of the aerospace industry has suffered massively due to the COVID-19 pandemic.
“This is a clear signal of support to those who are suffering from the severe impact of the tariffs imposed by the USTR, especially at a time when industries are hard hit by the consequences of the COVID-19 crisis,” added Faury.
In a situation where every penny matters, the move to end the tariff dispute comes in crucial for both Airbus and its United States-based airlines.
Crucial United States market
Throughout its history, Airbus has always faced an uphill battle versus Boeing in the United States market. Starting with its first commercial aircraft product, the A300, the European aircraft maker exhibited its fair share of ingenuity to make sales over the other side of the Atlantic.
The first iteration of Eastern Air Lines was the first U.S. based airline that took the risky decision to purchase the Airbus A300 in 1978, after the manufacturer offered its first aircraft to the airline on a trial basis with no strings attached in 1977.
And still, throughout the history of the company, Airbus had little success in North America. Out of the total 16,214 narrow-body aircraft ordered, 2,267 of those orders came from North American airlines, including Canadian airlines. In the wide-body section, a total of 426 aircraft were ordered, out of the total 3,941 throughout Airbus’ history.
But securing crucial cash flow during the COVID-19 crisis, when almost every customer wants to defer their deliveries due to their lack of cash, is vital to the manufacturer.
An intake of aircraft
The two manufacturers have to face a harsh reality, as the pandemic ravages the aviation industry from the inside out. As airlines are unable to fly their full networks and passengers are unwilling to travel, whether it would be due to the associated risks or economic uncertainty, the result is that air transport companies are bleeding cash hard.
As a result, Airbus managed to deliver 196 during H1 2020, compared to 2019’s result of 389. For Boeing, which is in an even deeper crisis due to the situation with the 737 MAX, the COVID-19 crisis could not come at a worse time. In H1 2020, 70 aircraft left Boeing’s factories, while a year earlier, deliveries amounted to 239.
Nevertheless, a bright spot for Airbus was the fact that some U.S. airlines are still keen to take in deliveries. For example, JetBlue happily took in four new Airbus A321 aircraft throughout the year, three of which were delivered from March 2020 onwards, planespotters.net data shows. This is despite the fact that in Q1 2020, the New York-based airline negotiated with Airbus to revise its delivery schedule, resulting in a $1.1 billion capital expenditure reduction through 2022. It expects to take a further five new aircraft from Airbus, including four A321neos and one A220.
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