We have written before on the way in which governments subsidise aircraft manufacturers. To build an aircraft requires huge investment and risk and both are beyond many companies. Governments also have an interest in continual innovation in aerospace because it is tightly linked to innovation in military aircraft. Thus, corporate welfare is never far away.
The problem is not so much the fact that governments subsidise companies. As we show at CWW, they do so all the time. The particular issue with aerospace is that subsidies are constantly chased upwards as governments, primarily the US and EU, are constantly asked for more support in order to allow the companies to survive.
Another problem is that, in aerospace as in other areas, major corporations want taxpayers to socialise risks while they privatise profits.
This latest episode involves Airbus and its now-abandoned plan to build its A380 superjumbo aircraft. This was supposed to cement Airbus’ future as the leading aircraft manufacturer, with huge potential sales to the Middle East and East Asia. The UK, along with Germany, France and Spain, agreed to support Airbus with a huge loan worth almost £2.9bn (€3.3bn). The UK contributed £530m. A lot of secrecy and ‘commercial sensitivity’ surrounds the loan, which is the usual excuse for a lack of transparency, but in the case of Germany it is reported that only one third of the total. Airbus appear to be shrugging their shoulders and stated that the governments involved knew they were engaging in a risky venture. Taxpayers must therefore take the hit.
Except they already have. Only a year ago, the four governments agreed to a restructuring of the outstanding loan amounts, saving the company €1.4bn.
Except that Airbus is no ordinary company. As our database shows, Airbus has received in excess of £35m in government support in the last couple of years. This is on top of the loan. And this doesn’t include subsidies paid to other parts of the supply chain, including to Rolls-Royce to support aircraft engine development and manufacturing. Germany has provided more than €15m and France over €87m according to the EUs State Aid Register. And governments make up a large part of the customer base for companies such as Airbus.
Airbus is not a private company going-it-alone. It is a company that is highly dependent on governments and, by extension, taxpayers. And it is a profitable company. As CEO Tom Enders stated last month:
“Though 2018 had plenty of challenges for us, we delivered on our commitments with record profitability thanks to a strong operational performance”
The company made net profits of €3bn and increased dividends to shareholders. Now governments should put in place measures to ensure that taxpayers, as significant stakeholders, are equally compensated for the investments they have made, and continue to make, in the company.