US official explains Airbus state subsidies

EADS demands a "fair playing field" to compete against American companies for Pentagon tanker and cargo transport contracts. But it hides its own huge subsidies from European gobernments - and thus misrepresents itself to the Department of Defense, Congress and the public.

Here's a summary of how EADS/Airbus unfairly competes with American aircraft companies. The following is an excerpt from testimony by Under Secretary of Commerce Grant T. Aldonas before a House panel in 2001:

"The single largest U.S. civil aircraft competitor is Europe’s Airbus, and the nature and scope of this competition is different from any other kind of competition that we encounter. In the United States, aircraft manufacturers have never been owned by the government. With the exception of military aircraft procured in the interests of national defense, the U.S. Government has not sought to direct what type of aircraft are produced, or when they are produced, or the price at which they are sold. Our industry is dynamic and shaped by market forces.

"European governments have a different orientation. Many governments in Europe view aircraft manufacturing in terms of its contribution to their national economic and engineering capability. These governments point to the aerospace industry as an engine of high technology growth and jobs.

"Airbus and other major aircraft manufacturers in Europe have a history of government ownership and control. Given this direct financial interest, European governments have undertaken steps to boost their industry’s competitiveness. Airbus’s corporate structure is telling. Airbus is owned by two companies: 20 percent is owned by British Aerospace Systems, and 80 percent by the European Aeronautics Defense and Space Company (EADS), which is the result a merger (of France’s Aerospatiale, Germany’s DASA, and Spain’s CASA) that was created at the behest of European governments.

"The Airbus consortium’s 'parent' governments have intervened in sales competitions in an effort to win orders for Airbus. Due to the fact that many foreign airlines are government-owned or substantially government-controlled, political rather than market forces can become decisive factors in purchasing decisions. In the past, some European governments have sought to influence these decisions by potentially offering increased airline landing rights for the purchasing airline, granting preferential trading rights in unrelated sectors to benefit the country purchasing aircraft, and demonstrating willingness to advance the status of countries interested in joining the European Union. The United States makes no such linkages."

Airbus is crooked, says North; US shouldn't patronize

The United States should not buy military aircraft from a foreign company that was "singled out for fraud and bribery on a massive scale" and still relies on palm-greasing to compete against American companies.

That's what Fox News's Oliver North argues in his weekly column. And he's talking about EADS/Airbus.

"In 2003, on the eve of the annual Paris Air Show, the Economist published an extensive investigative report detailing 'irregularities' in aircraft manufacturing and sales. Boeing, and others in the industry were cited for questionable practices," North writes.

"But EADS/Airbus was singled out for fraud and bribery on a massive scale designed to boost sales to airlines in Switzerland, Belgium, Saudi Arabia, Kuwait, India, Canada and Syria."


"Though new EADS/Airbus managers -- Thomas Enders and Louis Gallois -- vow they have improved the ethical culture in the European aerospace giant, others disagree. According to the Atlantic Times, an English language paper published in Germany, EADS/Airbus is still wracked by 'delays and turbulence.'

"One industry insider told me, 'If anything, the use of "Schmiergelder" ["grease monies"] to "facilitate" sales became more rampant as Airbus sales tanked in 2006 and the vaunted Airbus 380 white elephant collapsed amidst design flaws and faulty wiring.'


"Fair market competition on a level playing field is great - as long as everyone plays by the same rules. Apparently, that isn't how EADS/Airbus has played in the past. If Airbus is awarded the contract to build the KC-X, American taxpayers will -- for the next two decades -- subsidize a company whose practices and products are questionable at best.


"Boeing, an essential US exporter will be damaged and thousands of high-tech American aerospace jobs will disappear forever in Toulouse, France, and Hamburg, Germany. We ought to increase exports - of American products - not American jobs. When it comes to the KC-X, wouldn't it be better to simply 'Buy American?'"

Commerce Department says Airbus exaggerates support for US economy

Airbus exaggerates how much American-manufactured components are used in its aircraft and how much the company contributes to the US economy.

So says a senior Bush Administration Commerce Department official in a letter to a US Senator. Airbus appears to be exaggerating its number of American suppliers by more than 300 percent. And while Airbus claims to sustain 100,000 jobs in the US, the number could be closer to a mere 500.

Undersecretary of Commerce for International Trade Grant Aldonas tells Senator Patty Murray (D-WA) that the US cannot substantiate Airbus's claims of its positive effects on the American economy. (The graphic at left is courtesy Senator Murray.)

In his March 18, 2003 letter, Aldonas addresses Airbus's claim that it has as many as 800 American suppliers. However, based on official analysis, Aldonas says, "we believe that the number of US suppliers to Airbus is approximately 250. We have asked Airbus to account for the discrepancy between our supplier figure and theirs, but have not yet received a response."

Does Airbus sustain 100,000 American jobs? The Commerce Department official says, "It is exceedingly difficult to verify Airbus Industrie's claim of 100,000 US jobs sustained by its operations in the United States. . . . According to Airbus, the total number of workers directly employed in the United States by Airbus is fewer than 500 individuals. . . . Efforts to quantify the number of US jobs sustained by Airbus through US suppliers have produced varying results. The methodology that Airbus uses is difficult for us to understand because the calculations are based on imprecise terms."

Airbus objected to anti-bribery rules

Airbus objected to British anti-bribery rules in 2004, arguing that it would "boycott [British] export guarantee scheme unless tough new rules over bribery and corruption were relaxed," the Guardian reported.

Along with Rolls-Royce and BAE Systems, Airbus said it could not abide by the toughened rules against bribery. None of the companies would comment for the article.

Former CIA director says Airbus bribed foreign leaders

For years, Airbus has used bribery and other forms of corruption in unfair competition against American companies, according to President Clinton's former CIA chief.
In a March 17, 2000 Wall Street Journal op-ed titled "Why We Spy On Our Allies," former CIA Director R. James Woolsey addressed Europe's complaints that US intelligence services were spying on Airbus and another European company.

"Europeans flatter themselves if they think US intelligence is trying to steal their trade secrets," he wrote. "They don't have much worth stealing. Instead we're looking for evidence of bribery."

A European Parliament report objecting to the American electronic intelligence collection program called Echelon admits that American spies discovered that "Airbus agents were offering bribes to a Saudi official."


Airbus allegedly made lots of other bribes as well. "That's right, my continental friends, we have spied on you because you bribe," Woolsey wrote. "Your companies' products are often more costly, less technologically advanced or both, than your American competitors'. As a result you bribe a lot."


"When we have caught you at it," Woolsey continued in his address to European critics, "we haven't said a word to the US companies in the competition. Instead we go to the government you're bribing and tell its officials that we don't take kindly to such corruption. They often respond by giving the most meritorious bid (sometimes American, sometimes not) all or part of the contract. This upsets you, and sometimes creates recriminations between your bribers and your bribees, and this occasionally becomes a public scandal. . . .


"Why do you bribe? It's not because your companies are inherently more corrupt. Nor is it because you are inherently less talented at technology. It is because your economic patron saint is still Jean Baptiste Colbert, whereas ours is Adam Smith.


"In spite of a few recent reforms, your governments largely still dominate your economies, so you have much greater difficulty than we at innovating, encouraging labor mobility, reducing costs, attracting capital to fast-moving young businesses and adapting quickly to changing economic circumstances. You'd rather not go through the hassle of moving toward less dirigisme. It's so much easier to keep paying bribes. . . .


"Get serious, Europeans. Stop blaming us and reform your own statist economic policies. Then your companies can become more efficient and innovative, and they won't need to resort to bribery to compete.


"And then we won't need to spy on you."

Senator says EADS/Airbus use bribes to compete with Boeing

A US senator accused EADS and Airbus of systematically engaging in bribery to compete with Boeing.

"Airbus uses a series of incentives and threats to steal customers away from Boeing – everything from bribes and landing rights to discounts, value guarantees and trade threats and rewards," Senator Patty Murray (D-Washington) said in a powerful 2004 speech on the Senate floor. Boeing is headquartered in her state.

"Airbus has a history of graft and corruption," the senator said, citing a June 2003 article in The Economist titled, "Airbus' secret past – Aircraft and bribery."

"The Economist article details Airbus sales campaigns in India, Syria and Canada that involved corruption and bribes. The article notes that in 2001, the Undersecretary for Commerce for International Trade, Grant Aldonas, testified before Congress on US competitiveness in aircraft manufacturing. The Undersecretary warned that bribery remains a threat to US competitiveness.

"He said, quote: 'This is an industry where foreign corruption has a real impact. Bribery by foreign companies can have important consequences for US competitiveness. Because of the critical role governments play in selecting aircraft suppliers, and because of the huge sums of money involved in aircraft purchases, this sector has been especially vulnerable to trade distortions involving bribery of foreign public officials.'

"His remarks were directed squarely at Airbus and the European nations which aggressively back Airbus sales campaigns throughout the world.

"The article also notes that -- according to a 2001 European Parliament Report -- the US National Security Agency intercepted faxes and phone calls between Airbus, Saudi Arabian Airlines and Saudi government officials in early 1994. The NSA found that Airbus agents were offering bribes to a Saudi official to ensure that Airbus received a $6 billion order to modernize Saudi Arabian Airlines fleet. Bribes and corruption have long been part of Airbus' standard operating procedure for getting other countries to buy their airplanes."

EADS/Airbus waging 'deceptive' campaign in US, senator says

"'Today I am detailing my concerns before the full Senate because EADS and Airbus have launched a deceptive PR and lobbying campaign to convince the U.S. government that it is essentially an American company,' a US senator said in a landmark speech.

"'The Airbus campaign of half-truths is on full display as the company works overtime in Washington, DC to recreate a competition they already lost to build the next generation refueling tanker for the Air Force,' said Senator Patty Murray.

"The Democrat from Washington state could have been speaking today about the Airbus A330 tanker - propagandistically re-named the Northrop Grumman KC-30. But she delivered her words nearly three years ago, in May 2004." [Pictured: EADS North America CEO and lobbyist Ralph Crosby.]

Why this blog?

For quite a while I've been watching the safety record of certain EADS aircraft and the reliability of EADS as a defense partner of the United States. I started with my occasional CasaCrash blog as sort of an independent observer.

With EADS being much more visible and agressive recently, and more interest in the blogosphere about the French-dominated company, I thought it would be in the public interest to highlight reports alleging corrupt practices by EADS as a modus operandus of its business strategy against American companies.

I got inspired by the excellent new unofficial "Team JCA" blog, for example, and a very funny blog that makes fun of EADS, and created CrookedAirbus.

What influenced me most about starting this blog, though, was when EADS lawyers in Spain intimidated the company that provides privacy for domain name owners with GoDaddy.com, and pressured that company to expose the identity of the owner of www.c295.com. That person had kindly redirected his unused link to my CasaCrash blog. Since EADS jumped in, he removed the link, and I don't blame him.

The C-295 is an aircraft model number that EADS CASA builds in Spain, tried to sell to Venezuelan dictator Hugo Chavez, and is now trying to sell to the Pentagon as the new Joint Cargo Aircraft. The EADS lawyers alleged copyright infringement, but they had never sought to secure the domain name for themselves even though the plane has been around for years.

Anyway, the long and short of it is, foreign lawyers can now get away with intimidating American internet service companies to reveal the identities of American citizens who criticize their products and business practices.

A lot of us know that EADS and its Airbus subsidiary are bullies who will commit deeds both legal and illegal to push their business, which is why I started CasaCrash anonymously. I still have to exercise my First Amendment rights under a pseudonym - to keep foreign lawyers of a foreign company owned by the French and Russian governments from trampling my rights as an American citizen. Other bloggers are doing the same. It's pretty sad that our government is using our tax dollars that unintentionally reward EADS for its bully behavior.