The Economist October 20, 2020 pp42-55 |Business|Aerospace|”Not boxing clever” “A ceaseless subsidies scrap between Boeing and Airbus ends. Maybe.”
CNBC reports that 737MAX delivers will start again early 2021 at a low level. Image Source CNBC.COM
Bottom line Boeing (BA) and Airbus (AIR.BE) have been battling whether or not the playing field is level with BA claiming Airbus has receive illegal government subsidies and Airbus claiming that BA has had unfair tax breaks and R&D support from NASA and the Pentagon. On “October 13th…WTO ruled that the EU can impose tariffs on $4bn-worth of American goods annual.” “Last’s years decision…America is allowed to slap duties on $7.4Bn in European goods.” Essentially WTO “determined that both firms had received illegal subsidies.”
Now BA says favorable tax breaks from Washington state, where BA assembles all aircraft, are no longer in effect making the WTO ruling unfair and the upcoming “EU tariffs are unjustified.” Airbus faces 15% tariffs. This inequity may bring the Americans to the negotiating table. BA, besides demand off related to COVID faces ongoing issue of getting the 737MAX recertified. As a result, buyers are allowed to cancel orders with impunity. Airbus too is struggling having announced more layoffs after letting 15,000 of 130,000 workers go in June as it adjusted capacity to 40%. Like BA, Airbus has lost about half of its market value since the pandemic.
Airbus looks to take advantage of the MAX issue by ramping up A320 production early next year and is boosting a “hydrogen-powered net-zero-emission aircraft by 2035. Airbus assembles a broader line of jets than BA and avoids tariffs for those assembled in Alabama.
Image source airwaysmag.com