EU vs US over Open Skies

The aircraft market is special because of its huge size and level of concentration. It's also interesting for being at the center of a long-running feud between an American and a European company. The recently tested 787 Dreamliner by Boeing has been the American answer to Airbus A330, which has sold over 600 units to date and is being upgraded into the A350. The Airbus family has planned for an expansion of its offer, which includes the A380, the world's biggest airliner and direct competitor of the best-selling Boeing 747, which is also being upgraded. The transatlantic battle started in the 1980s when Boeing acquired McDonnell Douglas. The Federal Trade Commission approved the deal, while the European Commission did only very partially. Brussels wanted more transparency and less reliance on government support, especially for military procurements, in order to prevent the abuse of market position on the European market by the new player. After Airbus was born, it soon emerged that the tie linking Boeing to the US federal government was as tight as the budding relationship between the new aircraft company and major European governments, so much that a bilateral agreement in 1992 committed both parties to reductions in government subsidies: Airbus should not receive aid in excess of one-third of the production costs for the new models, while indirect government aid to Boeing should not exceed 4% of its receipts. This threshold has been surpassed by Airbus, Boeing claims, for the manufacturing of certain components of the A300 family, since various EU countries gave subsidies for $4.7 billion to the aircraft maker. On 6 October 2004, Boeing decided to take Airbus and the EU to the WTO court. This occurred at the moment when Airbus was surpassing Boeing both in terms of orders (256 more in the 1998-2004 periods) and deliveries of new planes (59 more in the 2003-2004 period). It is true that the public-private nature of Airbus is self-evident. It a company regulated by French law which is owned by EADS, a Franco-German group (with lesser Spanish involvement) in which private companies and public actors (including the French and Spanish governments) hold stakes. In September 2009, the WTO sent its confidential ruling to the EU and the US. According to media leaks, the WTO appellate body ruled in favor of the claimants, the US and Boeing, in 30% of the instances and against government aid received by Airbus. So at halftime, Boeing seems to be ahead in the game. But this could end up being a pyrrhic victory, because the US company is seriously behind schedule with its new projects, by two years in the case of the Dreamliner, which could cost heavy penalties on its 800 orders. But the second half still needs to be played and final ruling has not yet been made. The game could even go into overtime, if Airbus appeals. On the same day that the US deposited its complaint, the EU fought back by denouncing the subsidies that the federal government is giving Boeing through NASA, the Department of Defense, the Department of Trade, several other government agencies, and also through export subsidies (forbidden by the WTO), tax exemptions, and the financing of infrastructure and product development. The lengthy process to arrive at a final WTO judicial ruling could favor the renegotiation of the 1992 bilateral agreement, by making it more flexible. The new agreement could go beyond the transatlantic relation and set rules for other countries currently developing their domestic aircraft industries. For instance, Canada's Bombardier and Brazil's Embraer are winning market share in the regional aircraft segment hitherto dominated by Boeing and Airbus, while Japan, Russia, and China are developing ambitious projects. Summing up: the duopoly ruling over global skies is alive and well, but new players are coming to the fore on the political and economic scene.