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Record U.S. Tariff Award Over Airbus Aid Could Fuel Trade Tensions

Record U.S. tariff award over Airbus aid could fuel trade tensions
Logo of Airbus is pictured at the aircraft builder’s headquarters of Airbus in Colomiers near Toulouse

BRUSSELS/PARIS (Reuters) – Transatlantic trade ties face renewed disruption this week when global arbiters are expected to grant the United States a record award allowing it to hit European imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute.

The World Trade Organization (WTO) has found that both European planemaker Airbus <EADSY> and its U.S. rival Boeing <BA> received billions of dollars of illegal subsidies in a pair of cases that have run for 15 years.

Both sides have threatened tariffs after the Geneva body found neither adhered fully to its findings. However, the United States has a head start, with the European Union having to wait until early in 2020 to hear what level of retaliation it can exact over Boeing.

The WTO is expected this week to reveal the amount of EU goods the United States can target. People familiar with the case say the three-person tribunal is expected to award it around $7.5 billion, a record for the 24-year-old watchdog.

Such retaliation rights are rarely granted by the WTO – most parties reach settlements – and in many cases complainants do not exercise their rights. The United States though has indicated it will target EU goods to the fullest extent.

It has already published a $25 billion list from which it will pick items to target from aircraft and aerospace parts to wine, cheese and luxury goods.

The WTO award in the world’s largest corporate trade dispute could fuel already strained trade tensions, diplomats say.

EU manufacturers are already facing U.S. tariffs on steel and aluminum and a threat from U.S. President Donald Trump to penalize EU cars and car parts. The EU has in turn retaliated.

Trade talks between the two, designed to ease tensions and ward off the threat of a tit-for-tat tariff war, have not gone well. The two sides have made some progress on regulatory cooperation, but a proposed deal to reduce duties is stuck, with Washington saying agriculture should be included and Brussels insisting it cannot.

The Trump administration has concluded that tariffs were effective in bringing China to the negotiating table over trade, and in convincing Japan to open its agricultural market to U.S. products. Washington is unlikely to skip the opportunity to implement tariffs in the case over aircraft subsidies, according to current and former U.S. officials.

Airbus has said this would lead to a ‘lose-lose’ trade war.

Some U.S. airlines have urged the administration not to go ahead with the tariffs, saying they could lead to layoffs.

NO SETTLEMENT IN SIGHT

The parties could still theoretically resolve the issue and stave off sanctions, but both sides accuse the other of failing to respond to invitations to reach a negotiated settlement.

U.S. officials say the decision about next steps will be up to U.S. President Trump.

The EU cannot retaliate immediately to any tariffs as it did following the U.S. imposition of metal tariffs in 2018.

It can either wait until a pronouncement in the parallel Boeing case or possibly revive an existing right to hit $4 billion of U.S. imports in a WTO dispute over U.S. tax breaks for exports, even though the two sides settled in 2006. Such a move would likely be strongly contested by Washington.

EU trade chief Cecilia Malmstrom has urged Washington to hold off sanctions and seek an overall deal on aircraft support, but Washington has shown no sign it wants to talk.

A U.S. government official said Washington has been willing since the very beginning to negotiate a solution, but that the EU gave more support to Airbus rather than fixing the problem.

EU-U.S. trade relations are likely to be a major focus in Brussels during a parliamentary hearing of the next trade commissioner, Irishman Phil Hogan, on Monday, and of national trade ministers meeting on Tuesday.

(Additional reporting by Andrea Shalal in Washington, reporting by Philip Blenkinsop; Editing by Elaine Hardcastle)

Record U.S. tariff award over Airbus aid could fuel trade tensions
FILE PHOTO: Boeing Co’s logo is seen above the front doors of its largest jetliner factory in Everett

FreightCar America Closing its Roanoke Manufacturing Facility

  • Closure represents next step in the Company’s long-term cost and footprint reduction strategies
  • When complete in early 2020, the Company is expected to save $5 million per year in fixed costs

CHICAGO, July 22, 2019 (GLOBE NEWSWIRE) — FreightCar America, Inc. (RAIL) announced today that it has started the process to permanently close its Roanoke, Virginia manufacturing facility. The Company will retain the necessary workforce to build cars at the facility through November.

“The closure of our Roanoke facility is another next step in our ‘Back to Basics’ strategy as we continue to streamline our manufacturing footprint and match it to our future product offering,” said Jim Meyer, President and Chief Executive Officer of FreightCar America. “Reducing our fixed costs and achieving world-class output from our much larger Shoals facility have always been core pillars of our turnaround strategy.”

Meyer added, “We have spent the last two years building our talent, processes and overall capabilities at Shoals and the plant is now in a position to accept the Roanoke models and volume. This action, when complete in the first half of 2020, is expected to save approximately $5 million per year.”

Meyer concluded, “Our people at Roanoke have consistently performed above all expectations. We are extremely thankful for everything they have given the Company.”

The Company will offer select employees the opportunity to relocate to other parts of the business.

About FreightCar America

FreightCar America, Inc. manufactures a wide range of railroad freight cars, supplies railcar parts and leases freight cars through its FreightCar America Leasing Company subsidiaries. FreightCar America designs and builds high-quality railcars, including bulk commodity cars, covered hopper cars, intermodal and non-intermodal flat cars, mill gondola cars, coil steel cars, boxcars and coal cars. It is headquartered in Chicago, Illinois and has facilities in the following locations: Cherokee, Alabama; Grand Island, Nebraska; Johnstown, Pennsylvania; Roanoke, Virginia; and Shanghai, People’s Republic of China. More information about FreightCar America is available on its website at www.freightcaramerica.com

Taiwan’s China Airlines Signs MOU for 11 Airbus A321neo Jet’s

Le Bourget, France, June 19 (Reuters) – Airbus unveiled an aircraft deal with Taiwan’s China Airlines on Wednesday, snatching the carrier’s medium-haul fleet renewal from Boeing a day after its U.S. rival made a shock entry into the single-aisle fleet of British Airways owner IAG.

The European planemaker said China Airlines had signed a preliminary deal to buy 11 A321neo aircraft, worth about $1.4 billion at list prices, while leasing another 14.

Although much smaller than the IAG letter of intent for 200 Boeing 737 MAX announced on Tuesday, the China Airlines deal signals intensified competition in Asia where Boeing this week predicted 40 percent of jets would be delivered over the next 20 years.

Airlines can rarely be persuaded to jump ship to rival suppliers because of the costs of training and parts, but this week’s Paris Airshow has witnessed two such announcements as sold-out planemakers mount incursions to continue their growth.

In a further competitive twist, Boeing announced on Monday it would take over the supply of spare parts for the remaining Airbus A320 fleet at British Airways.

China Airlines announced the leasing part of the deal in May and Reuters reported it would pave the way for the Taiwan carrier to switch its medium-haul fleet to the Airbus A320neo.

The rare deal to replace older 737s took years to complete and was drafted before the 737 MAX was engulfed by a crisis involving two crashes and a worldwide grounding, sources said.

(Reporting by Tim Hepher, Editing by Mark Potter)

Boeing to Supply Parts for Airbus A320 Jets for British Airways

LE BOURGET, France June 17 (Reuters) – Boeing Co said on Monday it would supply parts for A320 jetliners made by its competitor Airbus to supply British Airways, the first such agreement by the U.S. planemaker to support an Airbus aircraft.

Under the agreement announced at the Paris Airshow, Boeing will manage and maintain a global exchange inventory of parts for Airbus’ A320 and A320neo single-aisle aircraft.

The deal reflects a push by the world’s largest planemaker into the higher-margin services business that includes aircraft parts and analytics, which Chief Executive Officer Dennis Muilenburg aims to grow to $50 billion in revenue in a decade.

“We were happy to put our hat in the ring and give a choice to British Airways,” Boeing Global Services Chief Executive Stan Deal told reporters.

British Airways also signed a deal for three landing gear exchanges for its 777 widebody fleet, Boeing said.

Separately on Monday, Boeing signed an agreement through its subsidiary Jeppesen to provide United Airlines with analytics services to help the carrier optimize crew planning operations through its entire fleet.

(Reporting by Eric M. Johnson and Tim Hepher; Editing by Alexander Smith and Mark Potter)

Aeroflot Scales Back Superjet Flights After Fatal Crash

  • Sukhoi plane crash-landed on May 5, killing 41
  • Investigation into crash is ongoing
  • Aeroflot has flown at least 129 fewer Sukhoi flights since the crash
  • Petition to ground plane has over 200,000 signatures

MOSCOW, June 3 (Reuters) – Russian airline Aeroflot has scaled back the number of Sukhoi Superjet 100 flights it operates after one of its planes made a crash-landing last month, killing 41 people, according to data provided by a flight tracking website.

Flightradar24 data shows Aeroflot has also at times substituted Airbus or Boeing planes for the Superjet, the first new passenger jet developed in Russia since the Soviet Union collapsed.

Fallout from the crash risks undermining the aircraft’s reputation at a time when Russia is promoting another domestically made passenger plane, the M-21, as a rival to Boeing and Airbus.

Aeroflot and Sukhoi Civil Aircraft, the Superjet’s maker, declined to comment on the data or on the use of other aircraft instead of the Russian plane. Both the airline, Russia’s national flag carrier, and the manufacturer have said in the past that the aircraft meets all relevant international safety standards and will continue to be made and used.

The cause of the May 5 crash, the second deadly accident involving the Superjet in nine years of service, has not yet been established. Russian authorities said afterwards there was no reason to ground the Superjet.

Yet Aeroflot flew 129 – or about 7% – fewer Superjet flights in the two weeks after the crash than in the previous fortnight, the Flightradar24 data showed.

In one case, frightened passengers on a Sukhoi refused to continue their journey after an aborted take-off, forcing Aeroflot to lay on an Airbus instead, an airline industry source with direct knowledge of the matter said, a version of events corroborated separately by Russia’s RIA news agency.

Aeroflot after the crash began paying extra attention to safety checks and to scale back the Superjet’s usage to try to reassure passengers, the same source said.

More than 213,000 people have signed a petition demanding the plane be grounded since May 5.

‘WHO NEEDS IT?’

Some Russian and foreign operators have complained about the difficulty of servicing the Superjet due to delays in sourcing spare parts. Irish airline CityJet and Belgian carrier Brussels Airlines turned their back on the Superjet citing those reasons.

State officials and airline executives say the airliner spends about half its time on the ground undergoing maintenance, and can fly only about a third as much as foreign-made rivals in a 24-hour period when in use.

They blame a lack of readily available spare parts and the complexity of servicing its engines.

Vitaly Savelyev, Aeroflot’s CEO, told Russian news agency TASS in 2017 that his company, which is majority-owned by the Russian state, might not have bought the Superjet at all if it was a private company.

Aeroflot, which has promised to buy a further 100 Superjets on top of the 49 it has already, is in a difficult situation because of the project’s political importance for Russia.

There are signs however that even some allies of President Vladimir Putin are growing weary of the aircraft.

Valentina Matviyenko, speaker of the upper house of parliament, in November publicly rebuked the transport minister over the large sums she said had been pumped into the Superjet in vain.

Russian newspaper Novaya Gazeta estimated in 2012 that $7 billion had been spent on the project, while Sukhoi has put the figure at $2 billion.

“Who needs it? … It’s not good for anything,” said Matviyenko. “Aeroflot says we bought them and they sit on the ground. Nobody abroad is buying them … What have we achieved?”

Mexican low-cost carrier Interjet, citing maintenance and parts problems, told Mexican daily newspaper El Universal just over a week after the crash that it was trying to sell its 20 Superjets and favoured Airbus 320s instead.

Regional carrier Yamal Airlines, Russia’s second biggest Superjet operator after Aeroflot, said a day after the crash that it was cancelling its planned purchase of 10 of the planes. It cited high servicing costs.

And RusLine, another regional carrier, told Kommersant it was scrapping provisional plans to obtain 18 Superjets as part of a leasing deal. The paper cited RusLine’s owner Nikolai Ulan as saying he thought the plane was safe but that passengers would be afraid to fly on it, making it harder for him to break even. RusLine did not respond to a request for comment.

PASSENGER FEARS

The Superjet, which entered service in 2011, is predominantly operated inside Russia by regional airlines, corporations and government entities. Sukhoi had hoped to sell hundreds, but slack demand means only 138 of the planes are in use.

On the Moscow-Murmansk route, the one taken by the plane involved in the fatal crash, Aeroflot replaced the Superjet with either Boeing 737s or Airbus A320s in the five days after the accident, a practice it partially continued the week after.

This was done in direct response to the crash in order to try to calm passenger fears, the same airline source said.

There have been a spate of safety-related incidents and cancellations since May 5.

In one case, a Superjet flight from Moscow to Riga was held up after passengers noticed a burning smell and demanded a new plane. Engineers found nothing wrong, one of the passengers told state TV.

In another, on May 18, passengers on a Moscow-bound flight from the city of Ulyanovsk took fright after their Superjet aborted take-off because of a warning about the hydraulic system.

“Passengers were told that the flight was being delayed for technical reasons. Of course, after the catastrophe, they started to panic and refused to fly on the same plane. The psychological factor came into play,” the airline source with direct knowledge of the situation told Reuters.

Aeroflot flew the passengers to Moscow the next day on an Airbus A320 and engineers found nothing wrong with the Superjet involved in that incident either, the transport prosecutor’s office said.

Yevgeny Dietrich, Russia’s transport minister, said the situation was not “radically changed” from the pre-crash period.

“In fact, delays and cancellations occurred previously. You simply wrote about them less,” Dietrich told reporters.

His statement and the crash have highlighted the fact that many Superjets do not fly very often.

Flightradar24 data shows that 37 of 127 Superjets in commercial use globally did not make a single flight from April 22 until May 19, and that 45 did not make more than 10 flights during that period.

That tallies with expert reports, which have said foreign-made planes in Russia average nine hours flying time in every 24-hour period compared to between just three and four hours for the Superjet.

The same industry source said only about 50% of Aeroflot’s Superjets flew regularly and that Superjet pilots, who are paid for completed flights, had their salaries topped up to compensate for time spent on the ground.

(Writing by Andrew Osborn and Gleb Stolyarov; Editing by Giles Elgood)

FAA Mandates Changes to Boeing 787 Dreamliner

SEATTLE (Reuters) – The U.S. Federal Aviation Administration on Wednesday said it was mandating new flight control software and parts to Boeing Co’s 787 Dreamliner to address what it called an unsafe operating condition of certain products on the plane.

The FAA’s airworthiness directive to plane operators makes compulsory changes Boeing outlined in service bulletins in 2017 and early 2018 for certain areas in 787’s tire and wheel “threat zones” that may be susceptible to damage, the company said.

Boeing, which works closely with the FAA to monitor its fleet for potential safety issues, said: “This issue has been long since resolved with system improvements that have been incorporated into production for all 787 models.”

The FAA said damage to the 787’s tire and wheel “threat zones” could result in the loss of braking and steering power on the ground at certain speeds.

The FAA said it requires installing hydraulic tubing, a pressure-operated check valve and new flight control software.

(Reporting by Eric M. Johnson in Seattle; editing by James Dalgleish and Cynthia Osterman)

Denel May Wind Down Airbus A400M Manufacturing

JOHANNESBURG (Reuters) – South African state arms company Denel is in talks with Airbus about winding down production of parts for the European planemaker’s A400M military aircraft, Denel said on Saturday.

Denel, a cornerstone of South Africa’s once mighty defense industry, is battling to emerge from a financial and operational crisis. In February it said it could sell stakes in some divisions as part of a strategy to return to profits within two years.

The company has also been trying to renegotiate onerous contracts and exit parts of its business which are no longer viable, after making a 1.7 billion rand ($117 million) loss in the 2017/18 financial year.

Denel said it was yet to finalize terms with Airbus for the winding down of production for the A400M.

“The two companies agreed that the continued manufacturing of aircraft parts by Denel is no longer sustainable in its current form,” Denel said in a statement. “Alternative options are now being considered between the two parties.”

Denel will try to minimize the impact on jobs at its Aeronautics division, it added.

(Reporting by Alexander Winning; Editing by David Holmes)

UTC Beats Profit Estimates On Airplane Boom

(Reuters) – United Technologies Corp reported a better-than-expected quarterly profit and raised its full-year profit forecast on Tuesday as it benefited from higher sales of aircraft parts, driven by record production at planemakers Boeing and Airbus.

A boom in air travel on the back of an improving global economy has boosted profits at major suppliers United Tech and Honeywell.

United Tech said sales in its Pratt & Whitney aircraft engines business jumped about 24 percent to $4.79 billion in the third quarter ended Sept. 30.

Revenue at the company’s aerospace systems unit, which provides spare parts, overhaul and repair services to airlines, increased 8.7 percent to $3.96 billion.

The maker of Carrier air conditioners and Otis elevators also raised its 2018 adjusted profit forecast for the third time to a range of $7.20 and $7.30, up from $7.10 and $7.25, previously.

On an adjusted basis, the company earned $1.93 per share, beating analysts’ average estimate of $1.81 per share, according to Refinitiv.

Net sales rose 9.6 percent to $16.51 billion.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Saumyadeb Chakrabarty)

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