EU-US seeking deal on air dispute

The EU and US have agreed to begin talks on ending subsidies given to aircraft makers, EU Trade Commissioner Peter Mandelson has announced.

Both sides hope to reach a negotiated deal over state aid received by European aircraft maker Airbus and its US rival Boeing, Mr Mandelson said. Airbus and Boeing accuse each other of benefiting from illegal subsidies. Mr Mandelson said the EU and US hoped to avoid having to resolve the dispute at the World Trade Organisation (WTO).

"With this agreement the EU and US have confirmed their willingness to resolve the dispute which has arisen between them," Mr Mandelson said. "I hope our negotiations in the next three months will lead to an agreement ending subsidies to development and production of large civil aircraft." Last year, the US terminated an agreement with the EU, reached in 1992, which limits the subsidies countries can hand over to civil aircraft makers. The US filed a complaint against Brussels with the WTO over state aid to Airbus, prompting a retaliatory EU complaint over US support for Boeing. However, both sides agreed to suspend their requests for WTO arbitration at the beginning of December, to allow bilateral talks to continue. EADS and BAE Systems, the European defence and aerospace firms which own Airbus, welcomed Mr Mandelson's announcement. "It has always been preferable that any differences between the US and Europe on this matter be overcome through constructive discussion rather than through legal recourse," the companies said in a joint statement.

Separately, the world's largest package delivery company, UPS, said it had placed an order for 10 Airbus A380 superjumbo freight-carrying jets, with an option to buy 10 more of the triple-decker aircraft. The US company said it needed to expand its air freight capacity following strong international growth, and would begin receiving deliveries of the A380s from 2009. However, UPS said it was cutting a previous order for smaller Airbus A300s from 90 planes to 53. So far, Airbus has delivered 40 A300s to UPS. Airbus overtook Boeing as the world's largest manufacturer of commercial airliners in 2003.