WTO to rule on Airbus subsidy appeal

GENEVA (Reuters) - European planemaker Airbus <EAD.PA> will find out later on Wednesday whether trade judges have upheld a ruling that it benefited from billions of dollars in illegal subsidies that punished its rival Boeing <BA.N>.

Attention will focus mainly on whether the European Union has managed to reverse a WTO panel's finding last year that Airbus received prohibited export subsidies to help it build and sell the world's largest airliner, the A380 superjumbo.

The three counts of export aid are the most serious examples of public aid which the United States says allowed Airbus to push past Boeing unfairly as the world's number one planemaker.

But the appeal court will also decide whether to back a key point appealed by the United States, which wants to prove that the subsidies are part of a continuous system that would allow it to challenge future loans for Airbus's next jet, the A350.

The panel rejected this part of the U.S. case, which has implications for some 4 billion euros of European funding at a time when both jetmakers are preparing for an upswing in demand.

If its case against A380 funding is upheld, the United States is likely to argue Airbus must pay back the difference between interest on ordinary market loans and government cash, something one source involved in the case said could cost a billion euros.

The U.S. says failure to comply could lead to reprisals.

But trade analysts say it could be years before appeals are exhausted and the case could lead to any trade sanctions.

The case is running in close parallel with a counter-suit filed by the EU against alleged U.S. subsidies to Boeing.

Together they have entered the record books as the world's largest and costliest trade dispute as both sides have entered appeals and counter-appeals, providing a bonanza to lawyers.

In March, a separate WTO panel rapped some $5 billion of U.S. payments to Boeing, including some already covered by an earlier trade dispute. Both sides have appealed the verdict, which the U.S. says is dwarfed by aid to Airbus.

(Reporting by Barbara Lewis; editing by Tim Hepher)