Boeing Sees Tax Incentive Remaining Despite WTO Ruling

Boeing (BA) declared “victory” in a dispute with the European Union and Airbus (EADSY) even though the World Trade Organization found that Boeing’s tax benefit on its new widebody breaks international trade rules.

The WTO said Monday that Boeing received illegal state subsidies for its new 777X and should withdraw the subsidy with 90 days. But the U.S. can appeal the ruling.

“After any appeal we fully expect Boeing to preserve every aspect of the Washington state incentives, including the 777X revenue tax rate,” J. Michael Luttig, Boeing’s general counsel, said in a statement.

Boeing said the 777X tax incentive is worth $50 million a year. The EU argued the benefit has provided Boeing with a $5.7 billion subsidy.

While the WTO ruled in favor of the EU on the Washington tax incentive, it rejected six other incentives, prompting Boeing to call the decision a “complete victory” for the U.S. and the company.

Bernstein analysts predicted “little material impact” on either company from the WTO ruling.

Boeing shares fell 0.4% to 149.50 in afternoon trading on the stock market today. Airbus’ U.S.-listed shares dipped 0.5% to 15.84.

IBD’S TAKE: On the commercial side, 777 weakness and competition from Airbus’ A320 line are major risks for Boeing. But the defense side is strong with Donald Trump’s victory and increasing foreign sales. Canada ordered 18 Boeing F/A-18 Super Hornets last week. 

The ruling is the latest between Boeing and Europe’s Airbus over subsidies. In September, the WTO ruled that the European Union didn’t fully remove illegal subsidies to Airbus.

After Monday’s WTO ruling, Airbus called for the two aircraft giants to come together and negotiate.

“I continue to think that the only way out of the ridiculous series of disputes initiated by the U.S. is to agree on a set of globally applicable rules for the support of the civil aircraft industry, which would benefit both sides of the Atlantic,” Airbus Group Chief Executive Tom Enders said in an emailed statement, according to Reuters.

But Boeing said it wouldn’t come to the table until the EU followed the earlier WTO ruling and removed the Airbus subsidies.


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