(Washington, D.C.) – With Airbus hemorrhaging money and looking for handouts, U.S. Senator Patty Murray (D-Wash) today called for the United States to send a clear message to European governments that America will not tolerate another round of job-killing subsidies to Airbus.
"If we want to lead the world in commercial aerospace, our message to Europe must be strong and clear: No more illegal subsidies to prop up Airbus. Airbus must compete in the marketplace just like everyone else," Murray said. "Every time European governments underwrite Airbus with subsidies, American workers get pink slips."
Murray, a leading advocate for America's aerospace workers, said that recent problems with Airbus's A350 and A380 aircraft, along with financial and management problems, make it likely that European governments will decide by the July 17th Farnborough Air Show to provide Airbus with illegal subsidies.
"Airbus and EADS have been in a tailspin over unsuccessful planes, production delays, and management scandals. Airbus is finally beginning to see just how difficult it is to compete in the marketplace without the cushion of government subsidies, and it is floundering," Murray said. "But now, rather than letting Airbus compete on its own in the marketplace, European governments seem poised to once again rescue Airbus with market-distorting subsidies. If we want to keep a strong aerospace industry in America, we can't let that happen."
Senator Murray's full remarks follow:
Mr. President, in the coming weeks, we are entering an important crossroad in the future of commercial aerospace. I want to explain what's at stake for our country and for American workers.
Down one road, American workers will be left to fight for their jobs with one hand tied behind their backs. They'll face unfair competition, and our economy and our future could suffer.
Down the other road, our government will make it clear that we will fight for fair trade, and our economy and our workers will win as a result.
That is the crossroad we are approaching and which path we take will be determined by two things: Whether Europe decides to provide illegal subsidies to Airbus and EADS and whether the United States government works aggressively to keep that from happening.
For decades, Europe has provided subsidies to prop up Airbus and its parent company, EADS. Those subsidies have created an uneven playing field and have led to tens of thousands of layoffs here in the United States.
In the past few years, the United States has stood up to Europe, and I've been proud to work with the Bush Administration in that effort – first under U.S. Trade Representative Robert Zoellick, then under Rob Portman, and now under USTR Susan Schwab.
We've demanded that Europe stop the subsidies and play by the rules. With the threat of a WTO trade case, we got the Europeans to the negotiating table, and I was hopeful we would make progress.
But over the past few months, Airbus and EADS have been in a tailspin over unsuccessful planes, production delays, and management scandals. Airbus is finally beginning to see just how difficult it is to compete in the marketplace without the cushion of government subsidies. And it is floundering.
But now, rather than letting Airbus compete on its own in the marketplace, European governments seem poised to once again rescue Airbus with market-distorting subsidies.
If we want to keep a strong aerospace industry in America, we can't let that happen. Every time European governments underwrite Airbus with subsidies, American workers get pink slips. If we want to lead the world in commercial aerospace, our message to Europe must be strong and clear:
- No more illegal subsidies to prop up Airbus.
- Airbus must compete in the marketplace just like everyone else.
Mr. President, I first sounded the alarm on this important issue in March 2004 when I spoke about my concerns here on the Senate floor. For those who have not been following the debate, I want to provide some background.
Fundamental Differences in Doing Business
Only two companies in the world make large passenger airplanes: The Boeing Company, whose commercial air operation is headquartered in Renton, Washington, and Airbus, which is headquartered in Toulouse, France. Airbus is a division of the European Aeronautics Defense and Space Company, also known as EADS.
Mr. President, the distance between Airbus and Boeing’s headquarters is about as big as the disparity between how the U.S. and Europe view the commercial aerospace industry. For us here in America, commercial aerospace is a private industry, one that must respond to the needs of the marketplace and the demands of its shareholders. It is a difficult business, and many times manufacturers like Boeing "bet the company" on a new airplane.
In Europe, on the other hand, commercial aerospace is viewed as a job creation program. Airbus has been shielded from the dangers of marketplace by decades of government subsidies. In fact, Europe doesn’t seem to care if Airbus loses money, as long as it produces jobs – and those jobs come at the expense of American workers.
Subsidies Sustaining Airbus
Mr. President, the history of Airbus and EADS is a history of government subsidies that have sheltered it from the competition and the real pressures of the marketplace. It has allowed Airbus to develop new aircraft with virtually no risk.
This government assistance takes many forms, including launch subsidies, research subsidies, facilities subsidies, and supplier subsidies. These subsidies create an uneven playing field and allow Airbus to do things that normal, private companies can't afford to do.
Because of these subsidies, Airbus has grown to become a market power without assuming any of the financial risk and accountability that U.S. firms have to contend with every day. As a result of this government support, Airbus has been able to erode Boeing’s market share. Airbus’ market share was once in the teens. Today, Airbus claims to supply more than 50 percent of the industry.
But European government support of Airbus does not stop there. It includes everything from bribes to threats. There are reports of state airlines being promised landing rights at European airports if they buy Airbus planes, and we've seen countries threatened that they won't be let in to the European Union unless they buy Airbus planes. There are reports of Airbus using deep discounts and guaranteeing to airlines that Airbus planes will hold their value.
To date, Airbus has received more than $15 billion in launch aid. But despite this massive infusion of government cash, Airbus and EADS are still hemorrhaging money and are undergoing a crisis in leadership at the highest levels.
Airbus in Crisis
In fact, if anyone was to scan the newspapers this week you could read about any number of problems Airbus and EADS have been confronted with:
- The Airbus A350 model has been widely condemned by major airline purchasers. It requires an expensive redesign, which is estimated to cost about $9 billion to $10 billion.
- The A380 mega-jetliner, which Airbus spent more than $13 billion on developing, has secured only a small list of customers. Now it's plagued by delivery delays, which could result in cancelled orders and financial penalties for Airbus.
- In fact, according to recent reports, Airbus is facing the possible loss of orders worth more than $5 billion. The delays could reduce Airbus’ annual earnings by $630 million between 2007 and 2010.
- EADS also has a huge liability on its hands. It needs to buy out BAE Systems’ share of Airbus, which is estimated to cost about $4 billion.
- And on top of all that, the co-chief executive of EADS, Noel Forgeard, is under investigation for insider trading.
By all accounts, Airbus is struggling. It is also losing credibility with its customers. In fact, when news broke about the A380's production delay, Singapore Airlines cast a no-confidence vote in Airbus by ordering 20 Boeing 787 Dreamliners.
The Pentagon is Noticing
One important customer that is also taking notice is the United States Department of Defense. With Airbus' financial house of cards on the verge of collapse and no current U.S. manufacturing presence, it is becoming clear that EADS will not be able to give the United States Air Force the tanker of the future.
I am pleased that the Air Force asked the right questions. In its "request for information" for the tanker contract, the Air Force asked potential bidders to provide them with information about launch aid and subsidies, including details about any government support, tax breaks, debt forgiveness or loans with preferential terms they might have received. The Air Force clearly understands that need for transparency and a level playing field.
Any new subsidies to Airbus for tankers or other programs should end once and for all Airbus' campaign to access the U.S. treasury. To protect taxpayers and national security, the Air Force must exercise extreme caution if it continues to consider an Airbus tanker proposal.
Washington State & Boeing Progress
Mr. President, as many of my colleagues know, my home state of Washington has a very proud and long history of aerospace leadership. On July 15, 1916, Bill Boeing started his airplane company in Seattle, Washington. Since that day, Boeing and Washington state have shared the ups and downs of the commercial aerospace industry.
In fact, just a few years ago Boeing found itself struggling to keep up with Airbus. But through the sacrifice and hard work of more than 62,000 Boeing employees in Washington state -- and many more around the country -- the company pulled itself up by its bootstraps. It recovered to once again evenly share the market place with Airbus. And it did so by producing a plane, the 787, which was just what the marketplace wanted.
Airbus, on the other hand, ignored the market’s demand and produced a plane that few people want. Now, they are being punished by the marketplace for their mistakes. But rather than take their lumps, they are likely to seek an illegal government bail out that would negate the hard work and sacrifice of Boeing employees.
Recently, an EADS spokesman called launch aid "indispensable" and said, "Launch aid is the only available system right now" to deal with Airbus' floundering marketing and design problems. [Source: "Airbus looks likely to seek state assistance," International Herald Tribune, June 19, 2006.]
Mr. President, how can American aerospace workers compete with a competitor that never has to face consequences for its failures?
It is Time for Action
Last week, President Bush met with E.U. leaders at a summit. Before his trip, I wrote to the President and urged him to raise the issue with European leaders. Time is running out. We are quickly approaching the Farnborough Air Show on July 17th, when European ministers are expected to decide whether to provide EADS with more launch aid.
I have supported this Administration’s willingness to go the distance at the World Trade Organization in the fight for fair markets. They stood up for American aerospace workers after it became clear that negotiations with the Europeans were going nowhere. As a result, the WTO is now considering the subsidies case through its dispute settlement body.
The U.S. Senate Opposes Airbus Subsidies
The U.S. Senate is on the record against Airbus subsidies. On April 11, 2005, the U.S. Senate unanimously passed Senate Concurrent Resolution 25. That resolution called for European governments to reject launch aid for the A350 and for President Bush to take any action that he "considers appropriate to protect the interests of the United States in fair competition in the large commercial aircraft market." The Resolution also specifically encouraged the United States Trade Representative to file a WTO case unless the E.U. eliminates launch aid for the A350 and all future models.
Mr. President, the production of large civilian aircraft is now a mature industry in both the United States and Europe. It is due time that market forces – not government aid – determine the future course of the industry.
Mr. President, that crossroad I mentioned is coming up on us quickly. One road will leave Americans workers in a fight for their jobs with the game stacked against them. The other road will give us a fair playing field – where American workers can win through their hard work and ingenuity.
I hope for our country's future that we choose the right course. And it begins by sending a clear message from our government to Europe that the United States will not tolerate another round of illegal subsides that kill American jobs. The clock is running. The choice is ours.