Europe backs away from Airbus aid commitment

PARIS -- European governments have blinked first in an aircraft subsidies dispute with the United States, agreeing to withhold funding commitments for a new Airbus plane set to be launched today while negotiations continue.

As Airbus parent European Aeronautic Defence and Space Co. prepared for a board meeting at which it was expected to give the green light for the A350 jet, officials said no government funding promises would be announced with the launch.

"The deployment of possible aid will not be immediate," French Transport Minister Dominique Perben said in an interview with financial daily La Tribune, published in today's edition.

France has agreed "in principle" to provide funding, Perben said, but the proposal is still "in the process of being examined."

Washington filed a World Trade Organization complaint last year against European government subsidies to Toulouse, France-based Airbus, and the EU countersued citing subsidies to Chicago-based Boeing Co.

Europe's conciliatory move follows warnings from U.S. Trade Representative Rob Portman that any government aid pledged to the A350 -- designed to rival Boeing's long-range, fuel-efficient 787 -- would jeopardize attempts to broker a compromise.

"Although we remain open to a negotiated solution to this issue, our negotiations will become much harder if the U.K., or any other EU member state, commits subsidies for the A350," Portman's spokeswoman, Christin Baker, said in a statement e-mailed to The AP.

But a spokesman for Portman's EU counterpart, Trade Commissioner Peter Mandelson, dismissed suggestions that the move would be seen as a European retreat.

"It's an example of Europe's continuing wish to be constructive," Peter Power said. "The European Commission continues to believe that there is a prospect of a negotiated solution to the dispute over civil aircraft subsidies."

EADS refused to comment on Thursday's board meeting or the expected launch of the A350 -- when Airbus gets the go-ahead to begin taking firm orders for the plane, slated to enter service in 2010.

But spokesman Rainer Ohler said the company's two joint-chief executives had "made it very clear that EADS is going to be very flexible" on government launch aid.

"We would never create a situation in which a negotiated solution would be excluded," Ohler said.

Airbus spokeswoman Barbara Kracht also played down the significance of a decision to launch the A350 without firm government funding pledges.

"We have launched planes in the past where things were not finalized at the time of launch," Kracht said. She declined to say when Airbus now expected a final decision on launch aid.

Airbus has applied for about 1.5 billion euros ($1.8 billion) in funding from its supporting governments toward the estimated 4.4 billion euro ($5.3 billion) program cost.

Negotiations with Washington should continue during the "delay between a decision in principle and payments" to Airbus, France's Perben said in his newspaper interview. "In any case, we have not made provision for any payments in the 2006 budget."

The trans-Atlantic trade row erupted after Washington announced it was canceling a 1992 bilateral agreement that set limits to aircraft subsidies in Europe and the United States.

The pact limited direct launch aid of the kind received by Airbus -- repayable with interest and royalties, but only if the plane is a commercial success -- to 33 percent of development costs. Indirect, non-repayable support, such as Boeing's research-and-development funding from NASA and the Defense Department, was capped at 3 percent of annual revenue.