Europe's aerospace executives left for their summer break amid the high drama of the European Commission threatening a trade war over the Boeing/McDonnell Douglas merger. As they now return to their boardrooms, the drama is over and the temptation is to enjoy the calm. It is a temptation which they should doggedly resist.
The merger battle and the eventual concessions wrung from Boeing may have provided some good headlines. Yet ultimately they have done little to resolve Europe's fundamental concerns over the scale of support funding that will be channelled into the new giant via NASA and the Department of Defense (DoD). Nor have they resolved the fact that the same opportunities are not open to Airbus.
Those issues have simmered beneath the surface for much of the last decade, and will continue to do so unless Europe now takes the initiative in bringing its grievances out into the open. At the heart of the discontent sits the Large Commercial Aircraft (LCA)agreement of 1992, itself signed as a compromise to end a brooding trade war, which has ultimately caused as much aggravation as it has cured. Virtually from the day it was signed, the LCA deal has been producing howls of complaint from Europe and it is not difficult to see why.
On paper the deal was designed to achieve a balance between European and US funding. It places a 33% cap on the type of direct launch aid which has helped to get many Airbus programmes off the ground. In return, the USA agreed to a 3%limit the levels of indirect aid which goes to its civil champions, Boeing and McDonnell Douglas.
In reality the agreement was destined to cause confusion and resentment from the start. While the cap on direct support is easy enough to monitor and enforce, the level of indirect support, by its very nature, is near impossible to police.
The EC has made a stab at attempting to put some figures on the sums, with a series of confidential reports commissioned from analysts. The latest of these puts the annual support going into Boeing/MDC at anything up to $3 billion. Some of this is easy enough to pin down, such as NASA's spending on its supersonic programme or the tax breaks and credits which are on offer for civil research programmes. Other sources of funding such as civil spin-off from the DoD's massive research budget can be little more than educated guesswork.
The US industry, perhaps genuinely and perhaps not, refuses to acknowledge that any of its current civil programmes are benefiting from such US Government spending. That is almost certainly untrue. If any- thing, the current US administration has stepped up funding for defence conversion and dual-use technologies, while NASA too is having to trumpet the direct commercial benefits of its programmes to justify its budget requests in Congress.
Ultimately, it is an argument with precious few hard facts and much room for interpretation - not made any clearer by the vague generalities contained in the LCA agreement itself. In short, if Europe wants a more equitable and enforceable deal it will almost certainly have to tear up the existing agreement and start again - and it should do it now rather than wait.
There may seem to be no immediate hurry. The agreement is not at present posing many constraints on Airbus. Its partners are now paying back more launch aid than they are receiving. They are seeking more for the A340-600, but that will not come near breaching the LCA ceiling. The issue will become critical in a year's time, however, when the consortium finally launches the A3XX. Airbus can rest assured that Boeing will be checking every dollar going into the programme for signs of state hand-outs.
Europe and Airbus would be very foolish indeed to reach that point without having resolved the subsidies issue. Since the LCA requires a year's notice of cancellation, that means acting now while Europe still has the initiative. That may mean a potentially bruising set of negotiations in the short term, but if it does nothing there will be the prospect of an even nastier trade war to come.
Source: Flight International