England (Reuters) – EADS (EAD.PA) Chief Executive Louis Gallois said he was “enormously frustrated” about another delay by the World Trade Organization in ruling on the European Union’s case against the United States over alleged illegal subsidies to the company’s arch-rival, Boeing Co (BA.N).
“I think it’s not a fair situation,” Gallois told reporters ahead of the Farnborough air show, noting that a preliminary ruling from the WTO on the EU case had been postponed three times now, and the delay could affect an aerial refueling plane competition in the United States valued at up to $50 billion.
EADS and Boeing have been battling for a contract to build 179 refueling planes to begin replacing the aging U.S. fleet of Boeing-built KC-135 tankers, which are nearly 50 years old on average.
The competition is a key part of EADS’ drive to expand its foothold in the United States, which accounts for half the world’s defense spending.
News of the delay in the WTO panel decision on the EU countersuit came shortly after the WTO released a final ruling in the U.S. case, which said EU export subsidies to Airbus had hurt Boeing and must be scrapped. [ID:nL8377482]. The European Union is widely expected to appeal the WTO panel ruling.
EADS had hoped the decision on the EU case would take the sting out of Boeing allegations that the A330 being offered to the Air Force was only made possible by illegal subsidies.
A preliminary ruling in the EU countersuit had been expected on Friday, but has now been put off until September.
Pentagon officials have said they will not consider the WTO ruling at all in the tanker competition, which has angered some U.S. lawmakers supporting the Boeing competition.
EADS still felt that it had a fair chance to win the U.S. tanker competition, Gallois said, noting that the U.S. government was treating the European company fairly and EADS remained convinced it was offering a better plane.
The 8,800-page EADS bid was submitted to the Air Force last Thursday, Gallois said. A third competitor, U.S. Aerospace Inc (USAE.OB), submitted a last-minute bid together with Antonov, the state-owned Ukrainian plane builder.
Gallois said the tanker competition was clearly “a big deal” for EADS and a victory would make the European company, with big factories in France, Germany, Spain and Britain, “a citizen of the U.S.” in terms of manufacturing aircraft.
But he said EADS planned to expand its U.S. presence whether it won the tanker deal or not, given the huge size of the U.S. defense market.
“We have to be in the U.S. It is a huge market and clearly, we need to win in this country,” he said, although he noted the tanker order would involve production of just 15 to 18 planes a year, a small fraction of the 500 planes EADS builds each year for commercial and government customers.
EADS is also keen to build a new plant in the dollar zone to hedge against currency fluctuations, but Gallois welcomed the euro’s move to what he called “a more reasonable rate.”
“We know we have to adjust the company to a weak dollar so if the dollar is stronger, it’s upside for us,” he said. “We don’t think that the euro is weak at 1.20 (dollars).”
Gallois also rejected speculation by some U.S. critics that EADS had submitted a money-losing proposal. “We prefer to lose (the competition) than not to get money,” he said.
He said EADS was also still looking for acquisitions, after its board backed away from a deal valued at around $1 billion in late 2008 after the start of the global economic crisis.
The board was now more supportive of acquisitions, he said, given EADS’ strong cash position and the improving economy.
Gallois said EADS was ready to spend “a reasonable amount” on an acquisition in the United States, but declined to give details about any kind of price target.
Marwan Lahoud, chief marketing and strategy officer for the company, which is based in Munich, Paris and Madrid, said EADS was focused on several areas for possible acquisitions, including services and unmanned aerial vehicles.
“We need to find those targets that make the difference, whatever the size,” he said.
(Reporting by Andrea Shalal-Esa and Matthias Blamont)