Recent market and organizational difficulties encountered by Airbus are dramatically changing world competitive conditions in the commercial aircraft industry. Facing costly delays in the completion of its jumbo A380 aircraft, and a recent decision to completely revamp plans for a new A350 to challenge Boeing’s hugely successful 787 Dreamliner, Airbus is set to request substantial new public subsidies in the form of “launch aid” from European governments. Such an appeal will undoubtedly raise the stakes in the already bitter dispute between the United States and the European Union over government support for the commercial aircraft industry. The United States. views “launch aid” as one-sided subsidies to Airbus for development, while the EU believes that Boeing gets implicit subsidies in its defense contracts and local tax breaks.

Over the past two years, both sides have taken their case to the World Trade Organization (WTO), while at the same time conducting desultory bilateral negotiations in an attempt to reach a compromise. Given the rapidly changing competitive situation, the slow pace of the WTO judicial process, and the increasingly hardened diplomatic position of the two sides, AEI has assembled a group of experts to assess recent economic and political developments, suggest likely scenarios for resolving the dispute, and discuss the chances that the situation will descend into an all-out trade war.