March 17, 2020 / 6:38 PM / 19 days ago

UPDATE 1-U.S. to boost tariffs on Airbus planes Wednesday, adding pressure on airlines

(Adds Airbus comment)

By David Lawder and Andrea Shalal

WASHINGTON, March 17 (Reuters) - The United States is expected to increase U.S. tariffs on Airbus planes by 50% on Wednesday, U.S. and European officials say, dealing a further blow to U.S. airlines already hammered by sharp drops in travel due to the coronavirus pandemic.

Tariffs on Airbus aircraft built in Europe are to increase to 15% from 10% at 12:01 a.m. Wednesday, as Washington pressures the EU to comply with a World Trade Organization ruling on illegal aircraft subsidies.

The EU is prepared to impose tariffs on U.S. goods once the WTO rules on a parallel case challenging U.S. government aid to U.S. planemaker Boeing later this spring.

Several EU officials said they had no indication that Washington would delay the tariff increase, despite calls by the Group of Seven rich nations for cooperation to battle the coronavirus outbreak that has devastated the global economy.

Airbus spokesman Clay McConnell in Washington also said there was no sign of a reprieve. He urged the U.S. government to work out an agreement with the EU and end a dispute over aircraft subsidies that dates back over 15 years.

“The evolution of the global COVID-19 pandemic and its impact on the aviation industry reinforces the need to put this outdated case behind us and find a sustainable way forward for our industry,” McConnell said.

The tariff increase will not be paid by Airbus, but by U.S. airlines that have been hammered as the virus outbreak has dried up bookings and the Trump administration imposed travel bans from China and Europe.

Major U.S. airlines are seeking more than $50 billion in government help as part of a financial assistance package being drafted by the White House.

U.S. Treasury Secretary Steven Mnuchin told a White House briefing on Tuesday: “This is worse than 9/11 for the airline industry. They are almost ground to a halt.”

The tariff hike would add to their woes, said one industry source, adding, “It’s yet another burden at a critical time.”

Without U.S. aid, airlines could run out of money by year-end - and even sooner if credit card companies start withholding payments, triggering furloughs of tens of thousands of workers.

A spokesman for the U.S. Trade Representative’s office said the U.S. government continued to seek a negotiated outcome and hoped the additional duties would spur Brussels to halt illegal government subsidies to Airbus.

“It’s important to keep in mind that the WTO determined the EU’s massive illegal subsidies to Airbus cost our aerospace companies and workers hundreds of billions of dollars in lost revenue,” said the spokesman.

EU Trade Commissioner Phil Hogan had hoped to meet with U.S. Trade Representative Robert Lighthizer during a visit this week, but the trip was canceled amid concerns about the pandemic.

The tariffs do not affect aircraft built by Airbus at its plant in Mobile, Alabama, which is building six aircraft in the A320 series a month, with plans to bolster production to seven planes a month by early 2021, an Airbus spokesman said.

The state of Washington, home to Boeing’s commercial aircraft production facilities, last week moved to formally repeal an aerospace tax break that benefited Boeing and avert looming EU tariffs on U.S. goods.

Boeing said the move would bring the United States into compliance with WTO rules, but Airbus said it marked only “initial steps” toward resolving the transatlantic dispute. (Reporting by Andrea Shalal and David Lawder, writing by Andrea Shalal; editing by Heather Timmons, Dan Grebler and Cynthia Osterman)

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