KEY POINTS:
PARIS - Airbus today launched a preemptive strike against Boeing over subsidies, as it drew a veil over the funding of its own re-engineered A350 mid-sized jet, saying Boeing's rival 787 model was padded with government assistance.
Anxious to avoid fuelling a trans-Atlantic dispute over aircraft aid, the European plane maker refused to say whether it would apply for government development loans for the 10 billion euro ($19.61 billion) jet but said nothing had been ruled out.
The subsidiary of European aerospace company EADS also hinted at a possible capital increase among a number of market measures it said it was considering to help pay for the project, which overlaps with costly delays to its A380 superjumbo.
"We are all aware in our hearts that the 787 is based on highly subsidized spending. There is government funding on both sides of the Atlantic. We are discussing with governments future R&D funding, but other options are on the table," Airbus President and Chief Executive Louis Gallois said.
"We have no imminent (cash) needs. We are only asking for a level playing field. No decision has been taken or is imminent."
Boeing contends that the traditional practice of funding Airbus projects with development loans from the four governments that support Airbus -- Britain, France, Germany and Spain -- violates international standards on hidden subsidies.
Washington supports Boeing's case and has launched what could become the largest trade dispute at the World Trade Organisation, matched by a counter-suit from the European Union.
Airbus and Boeing snipe about funding on an almost a daily basis, but Monday's launch presentation for the latest version of the A350 represented a step-up in rhetoric from Airbus, which has previously taken a lower-key stance on government aid.
"We are not in a defensive attitude. We are clearly in an offensive attitude on the heavily subsidised 787," Gallois said.
Airbus says Boeing benefits from over US$3 billion in tax breaks from Washington state and fat defence contracts from the US government which reduce its costs on civil aircraft development. Boeing denies receiving any government assistance.
Pointing to alternative financing methods, the French government said it did not exclude participating in a capital increase. The government owns 15 per cent of EADS.
EADS shares closed 1.2 per cent higher at 23.15 euros ($45.75) after trading lower earlier in the session.
Talk of a capital increase comes at an uncomfortable time for EADS' biggest shareholder DaimlerChrysler AG, which wants to cut its 22.5 per cent stake to 15 per cent. It is in talks with German banks about transferring the shares.
A German government spokesman said talks over finding investors in EADS were continuing.
Monday's slick presentation signalled the start in earnest of a commercial dogfight between Airbus and Boeing for a rapidly growing segment of the US$50 billion world aircraft market, which saw record sales last year.
Boeing was first to spot opportunities for long-range air travel spanning 200 to 350 seats, as Airbus turned its back on the mid-sized market to bet on size with its A380 superjumbo. Airbus then came up with a cheaper A350 design that sold poorly.
The European planemaker responded in July by abandoning a 30-year-old fuselage design in favour of a wider shell.
Its new A350 XWB -- for "extra wide body" --- will enter service from 2013, a year later than it had stated in July. But it aims to leapfrog the 787 by also targeting Boeing's recently built 777-300ER, which has a US$40 billion order backlog.
Nonetheless, Airbus recognises it has much catching up to do, as the 787 outsold the earlier version of the A350 by over four to one. Airbus wants to hold on to as many of the old version's customers as possible but concedes some may cancel.
Airbus sales chief John Leahy said that while Boeing had the edge in the first wave of the "replacement" market -- the market for replacing old jets, which makes up 35 per cent of total demand -- Airbus would be ready in time for a second wave from 2013.
Airbus is delivering three models of the A350 -- starting with a 314-seat version in 2013, the A350-900; followed by a 270 seat version in 2014; and a 350-seat 777-challenger in 2015.
The 787 comes to market around five years earlier in two main versions -- the 210-250 seat 787-8 and the 250-290 seat 787-9.
Both the Airbus and Boeing planes are twinjets designed with fuel-saving materials for long trips such as Paris-Singapore.
Airbus meanwhile said its A380 project, hit by costly delays due to wiring installation problems which caused a huge profit warning, was making progress but the situation remained "tense."
But the future of a freight version of the plane was left hanging by a thread after powerful US leasing company ILFC switched an order for five freighters to five passenger versions.
The move leaves express service United Parcel Service Inc. as the freight version's only customer after rival FedEx Corp. cancelled.
- REUTERS
