In the event that the current trade war landscape was not annoying enough to navigate, the World Trade Organization has just opened a new battlefield ground. In a decision announced Wednesday and reported by CNBC the WTO has authorized the US to impose tariffs on Airbus aircraft in response to illegal state subsidies. It is expected that it will soon make a similar assessment of Europe's will to tariff Boeing aircraft. The WTO should decide in its case on the subsidization of Boeing by the US government in the coming months whereby similar duties are expected from this case.
S o, with both major aircraft manufacturers faced with tariffs due to the over-subsidization of these mega-enterprises by the governments it is difficult to discern who wins. If the WTO fines imposed on both are adequately weighted on the basis of the value of of the subsidies received, no company will receive an advantage. And for governments, tariff income is likely to be lower, in the first place, than illegal subsidies.
The only group I really can benefit from are airlines that are not headquartered in the US or Europe. If both Singapore Airlines and Delta Airlines wanted to offer a route from New York to Singapore with an Airbus A350 ULR, Delta might have difficulty competing with an airline that could get the plane for 10 percent less than any American airline ].
This generally highlights how ridiculous these disputes are. Make no mistake: this is not part of the trade war or any application of Trumpian's economic retaliation. This is the result of 15 years in which both companies publicly complained about subsidizing each other.
US. Airlines are understandably – understandably – that about half of their aircraft have just got 10 percent more expensive. Per CNBC:
"They will have to try to recover by charging higher fares," said Raymond James airline analyst Savanthi Syth. "It's like an increase in fuel or labor costs."
Delta Air Lines bought the Airbus A350 aircraft manufactured in Europe to revise their long-haul open-air fleet According to the Airbus airline based in Atlanta, "the US – inflicted serious damage on the millions of Americans employed by them and the traveling public ". The Airbus airline based in Atlanta has about 170 ordered Airbus jets to a spokeswoman.
JetBlue and Spirit have fleets of [mainly] Airbus Narrowbody Jets with dozens of new aircraft on the way.
"We are concerned about the detrimental effects that aircraft fares will have on the ability of low-cost carriers such as JetBlue to grow and compete, harming customers who rely on us to offer competitive, low-cost fares," said JetBlue , 19659014] Both companies are among the most heavily subsidized in the world. And despite their massive political capital, neither of them seems to be blocking their actions. Sure, Boeing is glad the US is pricing Airbus aircraft but if that means the already beleaguered company is having even bigger problems with its European customers, it's hard to be too excited.
But although I am usually a free trader, it must also be made clear that rampant anticompetitive subsidies must be punished if we ever want to see the duopoly crack. After Airbus took over Bombardier's flagship and Boeing entered into a joint venture with Embraer, there is really no mature competition left.
The only company that seems capable of breaking the duopoly is the Chinese Comac. However, if you are unwilling to punish the illegal subsidies of Boeing and Airbus, you will really have trouble taking over a Chinese state-owned manufacturer.