Airbus is reportedly in a dispute over 600 million Euros (roughly $680 million) of unpaid loans. The loans were provided by Germany and used by Airbus to develop its A380 aircraft.
What are the details?
The German government loaned Airbus 942 million Euros in 2002. Airbus has repaid about one-third of the loans; however, the aircraft manufacturer still owes Germany 600 million Euros.
According to Reuters, Airbus claims that “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.” As we all know, Airbus announced the end of the A380 program at last month’s Annual Airbus Press Conference. The last A380 is scheduled to leave the final assembly line in Toulouse, France in 2021.
Airbus had agreed to repay the loan successively as aircraft were delivered. At this time, however, only 17 more A380s will be delivered before the project comes to an end. As a result, a large portion of the loan amount will remain outstanding.
The German newspaper Die Zeit reported that Ulrich Nussbaum, the State Secretary at the German Federal Ministry for Economic Affairs and Energy, confirmed that more than 600 million Euros of the original loan amount are still outstanding. He further stated that his office will analyze the consequences of the end of the A380 program and discuss the topic with Airbus. At this time it is not clear, however, how much of the outstanding loan amount, if any, Airbus will pay back.
Airbus does not only owe money to Germany though. France, Britain, and Spain also provided loans to Airbus. These loans have not been paid off either. The total of all outstanding loans is estimated at 1 billion Euros.
The aforementioned loans have been heavily criticized by Boeing. The company views them as highly subsidized loans that gave Airbus an unfair advantage. Interestingly, Boeing states on its website that “in the event a product does not hit a pre-determined sales target, remaining loans on the product are forgiven.” If this is indeed the case, German taxpayers will most likely end up paying a pretty penny for Airbus’ A380 project.
Anyhow, the World Trade Organization has ruled that the loans did indeed give Airbus an unfair advantage.
The European Union, on the other hand, alleged that Boeing had also received illegal subsidies. These illegal subsidies, however, were in the form of tax breaks provided by the State of Washington.
After Airbus officially ended the A380 program last month, the European Union stated that the A380 subsidies were basically no longer in existence. As a result, sanctions against the European Union would not be warranted.
What do you think the outcome will be? Will Germany end up losing the outstanding loan balance?