March 4, 2019 / 11:03 AM / 17 days ago

Germany in talks with Airbus on 600 million euros of A380 loans

BERLIN (Reuters) - Germany is in talks with Airbus about 600 million euros ($680.10 million) in outstanding loans advanced for development of the A380 superjumbo, which the European planemaker now plans to scrap, the Berlin government said on Monday.

A logo of Airbus is seen at the entrance of the Airbus A380 final assembly line site at Airbus headquarters in Blagnac, near Toulouse, France February 14, 2019. REUTERS/Regis Duvignau

The loans are at the centre of a longstanding trade dispute about mutual claims of illegal aircraft subsidies between the European Union and the United States.

A spokeswoman for the German economy ministry confirmed the value of the outstanding loans, first reported by Funke Mediengruppe newspaper chain, but said it was premature to discuss how the issue would be resolved.

“We are analysing the consequences and discussing the issue with the company,” she said.

Airbus last month said the production line for the world’s largest passenger plane would shut down prematurely from 2021, after just 14 years in service, because customers preferred smaller jets.

It said it would no longer need to repay any outstanding state loans on the A380 because governments had agreed to share risk in the roughly 15-billion-euro project.

The loans are part of a practise of development support extended to Airbus by France, Germany, Britain and Spain, with France and Germany representing the lion’s share because of the way industrial work has historically been shared between the company’s factories.

The World Trade Organization has ruled that the loans gave Airbus an unfairly subsidised advantage while rejecting U.S. claims that they constituted banned export subsidies - the most severe category of subsidy under global trading rules.

The WTO has ruled that Boeing too benefited from harmful subsidies.

The two sides are now arguing about the extent to which the 15-year-old trade dispute - the largest ever handled by the WTO - should lead to tit-for-tat transatlantic sanctions.

European sources argue that A380 subsidies in effect no longer exist because the aircraft has been taken off the market and that the loans should therefore not spark sanctions at all.

However, the United States says that subsidies, in the form of government loans, paid to develop the A380 have already irreparably caused lost sales to Boeing and that sanctions remain justified.

Berlin originally loaned Airbus 942 million euros in 2002 for the development of the A380, of which only a third has been repaid, the Funke Mediengruppe group said.

Airbus has declined to say how much money has still to be repaid in total in connection with the A380 but Reuters reported last month that it was estimated to be around 1 billion euros.

Writing by Andrea Shalal, Tim Hepher; Editing by Michelle Martin and Kirsten Donovan

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