European Comment: Canada twist to aerospace row

Boeing and Airbus are clearly relieved by Bombardier’s decision to scrap plans to build a new family of 110-130-seat aircraft. After all, the Canadian company would have directly challenged them in a key sector of their market.

But the shelving of the Bombardier jetliner could have wider implications by underscoring the need for Boeing and Airbus – and their respective governments – to settle their long-standing subsidies dispute. Time is fast running out: litigation procedures at the World Trade Organisation are due to begin in March.

Although one-third of the C$2bn-plus (US$1.75bn) cost of developing the new Canadian airliner would have come from government subsidies, Bombardier dropped its plans because commercial market conditions did not justify the launch.

Lawyers involved in the Boeing-Airbus dispute say this is important. Had Bombardier pressed ahead, it would have been yet another example of government aid putting aircraft on the market that simply do not belong there.

At the same time, it raises another longer-term issue. Unless the US and Europe can reach a negotiated settlement to establish new industry rules, they risk facing additional disruptive forces entering and distorting the market.

The large civil aircraft market may well have turned into a Boeing-Airbus preserve, but the Canadian experience shows that other countries also have sights on the market. Brazil, Russia and especially China all appear to be nurturing similar ambitions. And unlike the Canadians, their decisions may not be dictated purely by commercial considerations.

Bad connections

Pity Didier Lombard. The avuncular head of France Télécom is in a jam because his company, unlike his big European rivals, has already risen to the technological challenge of upgrading its network for new broadband telecoms services.

So successful has France Télécom been that Mr Lombard is having to speed up his strategy of rolling out new services to offset falling revenues in his traditional telephone business.

The company was forecasting that new voice-over-internet services would account for 15 per cent of its residential market by the end of this year. It is now likely to be about 40 per cent.

Worse, competition is getting fiercer, and the French regulator seems in no mood to adopt the more benign UK or German regulatory approach to for- mer telecoms incumbents.

What can Mr Lombard do? Since it will inevitably take time to put into place new value-added services to replace dwindling voice income, the obvious move is to cut aggressively his company’s bloated workforce, just as Deutsche Telekom is doing and BT has done.

This is probably the last thing his largest shareholder, the government, with 32 per cent, wants to hear in the country’s increasingly heated pre-electoral climate.

Own goal

Paris has finally bowed to pressure from Brussels to allow French soccer clubs to raise money on the bourse.

High time, say leading clubs. For although France can claim some of the world’s best players, many clubs have found it difficult to keep stars from being lured by far richer European rivals offering extravagant transfer fees.

Clubs such as Lyon or Marseille have been clamouring for stock market listings to boost their finances in a sport increasingly governed by money.

The government resisted until now, claiming that clubs lacked transparency and their accounting standards were insufficient for a public listing.

But club owners argued they faced an increasing competitive disadvantage that risked becoming even bigger as revenues from television rights become squeezed by recent French pay-TV consolidation. TV rights currently account for half their revenues.

Yet the proposals risk turning into an own goal. For Paris says clubs will only be entitled to a full listing if they own their grounds. The problem is that most want to go to the market to raise funds to buy or build their own facilities.

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