Airbus could still afford to develop the A350 mid-size jetliner to compete with Boeing's 7E7 even if it loses government launch subsidies in a US-European aircraft trade row, analysts said on Thursday.
The two aircraft, still on the drawing boards, are at the heart of the US and European Union cases brought before the World Trade Organisation on Wednesday.
Aerospace analysts see the US case as instigated by Boeing partly as an attempt to quash development of the A350, a new plane under consideration based on Airbus' existing A330, by denying launch aid to the programme.
But they also said Boeing risks losing big tax breaks for the 7E7, which could push up its own costs.
Boeing, which last year was overtaken by Airbus as the top commercial aircraft maker, is seeking airline orders for the efficient 200-to-300-seat 7E7, its first all new jetliner in a decade. But Airbus' talks with airlines about the A350 has caused some potential customers to postpone their orders.
The worst-case scenario was that both sides would lose billions of dollars in government subsidies and be forced to plug the gaps with alternative borrowings at higher rates.
"The only people who are going to benefit in the near term are going to be the lawyers," said Chris Tarry, aviation analyst at industry consultancy Ctaira.
Airbus is co-owned by European aerospace group EADS and Britain's BAE Systems Plc.
Analysts said the removal of aid would force Airbus to self-finance all the A350's development costs, which they estimate at $2 billion to $4 billion, which would increase costs and make it a riskier business proposition.
Under the 1992 agreement each side accuses the other of violating, EU governments can fund up to a third of the cost of developing new aircraft by Airbus
"Airbus is actually in pretty good shape. There are a lot of ways they can substitute for the loss of launch aid," Banc of America aerospace analyst Harry Breach said.
Airbus could use its own reserves or seek suppliers to share some of the development costs. But it would lose the safety net of government advances which de-risk new aircraft programmes as it does not have to repay loans until it achieves healthy sales volumes.
"This may influence the decision to go with the cheaper and quicker option of an upgraded A330, rather than a riskier but more competitive new-build," ABN AMRO told clients on Thursday.
There was no threat to Airbus' current development focus, the double-decker A380 superjumbo, as the plane would be flying before the removal of state aid took effect.
Analysts were surprised at Boeing's decision to escalate the dispute, warning the 87-year-old US giant's 7E7 programme was also heavily subsidised.
"Clearly people wonder at Boeing's choice of this as an issue given that Airbus is very prepared to counter any argument, also given you have a significant proportion of the 7E7 funded in Japan and also a significant tax break," Tarry said.
Washington state has promised Boeing tax breaks and other incentives for agreeing to assemble the 7E7 there, and Japan is expected to help Japanese manufacturers finance their portion of the 7E7, about 35 percent of the aircraft's structure.
The US says Airbus company also received about $3.3 billion in illegal state aid for the A380.
In its countercomplaint - both were filed at the WTO on Wednesday - the EU said Boeing had received some $23 billion in aid since 1992, including $3.2 billion in tax breaks from Washington state.
Shares in both companies were largely unaffected by the dispute. EADS stock fell 0.9 percent to 22.82 euros on Thursday, while BAE gained 0.2 percent to 233 pence. Boeing was 0.8 percent weaker at $51.92 by 1405 GMT.
Dan Solon, a Barcelona-based analyst at consultants Avmark International, said the dispute highlighted the pressure both companies faced to boost orders from an industry which has been hit by new fears about high oil prices and still competition from low-cost carriers.
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