EU, US Struggle to Prevent "Sky Wars"

The European Commission, speaking as a self-imposed deadline for a negotiated settlement passed, reiterated that it "currently" had no plans to launch legal action with the World Trade Organization (WTO) over the dispute.

"As long as no action is taken, there is a window of opportunity for negotiations," said Claude Veron-Reville, spokeswoman for European Union (EU) trade commissioner Peter Mandelson (photo).

"While there is a chance to negotiate and to avoid dispute we should try to make good use of this period," she said, but added: "This period cannot drag on for too long because there are important commercial interests at stake."

"Ceasefire" expired Monday

On Jan. 11, the US and the EU gave themselves 90 days to resolve their dispute over aircraft subsidies, agreeing in the meantime not to extend any fresh subsidies or to seek WTO arbitration. That deadline expired Monday.

The attempt to strike a negotiated accord came after both sides pulled back from the brink of action to the WTO, which both Brussels and Washington agree would seriously escalate the political significance of the row.

The EU commission spokeswoman declined to say how long further negotiations could continue, but insisted that the European bloc has no plans to take WTO action.

"Both parties are free to return to the WTO or provide WTO legal support to their manufacturers," she said, but added: "We've also said that we do not currently intend to initiate a dispute to the WTO."

Sour personal relations

Forging a breakthrough in the Airbus-Boeing row has not been helped by strained relations between the EU's Mandelson and Washington's negotiator Robert Zoellick, who got on famously with Mandelson's predecessor, Pascal Lamy.

Zoellick, the number two at the US State Department and until recently US trade representative, said he was "willing" to extend the 90-day cease-fire period to try to reach a deal.

But he also maintained the threat of bringing the dispute before the WTO if Europe refused to abandon aid for the launch of Airbus' new long-range, mid-sized A350, destined to rival Boeing's new 787 Dreamliner.

Veron-Reville said that discussions between Brussels and Washington were continuing, despite an abruptly-ended phone conversation between Mandelson and Zoellick two weeks ago.

"Discusions at official level are going on. They have never really stopped," she said. "When the time is right for it, we will resume discussion at official negotiator level."

Airbus suspends request for state aid

The EU commission spokeswoman sidestepped a report in Monday's Financial Times that the EU had offered to delay launch aid for the A350 to avoid what would be the biggest battle in the WTO's history.

"If Airbus makes a request to (EU) member states for launch investment this is for member states to consider," she said.

Asked how long talks could continue after the end of the 90-day deadline, she said: "There is no new standstill period," adding: "I will not get into the details of the length of this pause for further reflection."

Airbus officials on Monday meanwhile said they had suspended a request for state.

"For now, everything is suspended," an Airbus spokeswoman said when questioned about the date when Airbus would seek state aid. "Everyone is in a holding pattern."

The total cost of the program is estimated at 3 billion euros ($4 billion). Airbus chief executive Noel Forgeard said in late December that he would ask for reimbursable aid of up to 33 percent of the program from the four EU member states participating in the project: Britain, France, Germany and Spain.

US airports prepare for A380

The row has not stopped US airports preparing for the arrival of the A380 jet. Aviation authorities are getting Los Angeles, New York's John F. Kennedy airport, San Francisco and Miami airports ready for A-380 passenger flights in 2006, according to Dave Bennett of the Federal Aviation Administration's Office of Airport Safety and Standards.

"I don't see major safety or technical problems," Bennett said. O'Hare airport in Chicago and Dulles in Washington will be ready later. Memphis in Tennessee and Anchorage in Alaska should be ready for the cargo version of the A380 in 2008. Federal Express has ordered 10 of the planes. Each airport would have to spend about $80 million to rebuild or widen taxiways and runway bridges for the A380.