The world’s biggest jetliner, the brand-new Airbus A380, is the undisputed star of the Paris Air Show next week but celebrations may be blown off course by a trade spat with Boeing over two jets that have yet to be built. French President Jacques Chirac will inaugurate the world’s biggest air show, which for 7 days turns Le Bourget airport into a cross between the cramped deck of an aircraft carrier and a summer garden party for the aerospace and arms industries.

The A380 will be present throughout the June 13-19 event, the last 3 days of which are open to the general public. It will fly on the first day for the dignitaries and on the last two days for ordinary aviation fans, but could add more take-offs. It will be the first air show display of the twindeck giant which created a global buzz when it began flight tests in April.

Those wealthy enough to afford a business jet can ogle at the new Falcon 7X from Dassault Aviation or other rivals. Above all, the air show will see intensified competition for billions of dollars of orders for big jets between Airbus, owned by Europe’s biggest industrial concern EADS, and Boeing as commercial aviation recovers from its worst recession.

In a double blow ahead of the show, Airbus announced a six-month delay in A380 deliveries to late 2006, drawing demands for compensation, and admitted it would lose the race for orders to Boeing in 2005 for the first time since 2000. The two are locked in a dispute over aircraft subsidies affecting the development of two mid-sized long-haul aircraft that have yet to be built – Boeing’s 787 Dreamliner, which is already selling well, and Airbus’s defensive response, the A350.

Yesterday, that battle moved to the World Trade Organisation in Geneva where an initial hearing will be held on competing lawsuits from the United States and European Union.

Both sides accuse the other of granting illegal government aid to their aerospace champions in what could become the most expensive trade dispute seen at the WTO. A full trade war could undermine recent efforts to restore transatlantic relations torn apart by disputes over Iraq. Yet while some aerospace experts are predicting collateral damage to the industry and its suppliers from the trade row, several in the industry talk of the dispute as a smokescreen.

“These are sophisticated folks who know they have more to lose than to gain. No-one truly expects this to lead to a major trade war,” said Jon Kutler, Chairman and CEO of Jefferies Quarterdeck, an investment bank focused on the industry. “There is a lot of politics and posturing. The reality on the ground is different,” said another aerospace industry source, asking not to be identified.

“Everyone is subsidised and everyone knows it, but no one is talking about it. Do they want to jump off the cliff together? The answer’s no. But both might be stubborn enough to do it.” Both EADS and Boeing are also in search of permanent chief executives, though Boeing has averted the infighting which has pitted German and French shareholders at EADS against each other and delayed appointments at both EADS and Airbus.

<B>Tactics </B>

In the interlocking worlds of aerospace and defence, trade is about politics but it is equally about tactics. Some suspect Boeing of putting pressure on Airbus to delay the A350 in order to build unstoppable momentum for sales of its 787 Dreamliner. Airbus last week delayed the next phase of the A350 by about three months to September while it revamps the design to match the 787’s fuel-efficient technology. But that could equally be a deliberate tactic to cool US anger about the way it is funded with state loans while Airbus bids for US defence contracts, a top aerospace executive said.

Next week marks the return of Pentagon top brass to the Paris Air Show after they boycoted the event in 2003 amid deep tensions between Washington and France over war in Iraq. Top defence themes at the show include the US market for refuelling planes, a $75 billion battleground that again pits Boeing against Europe’s EADS which hopes to use Airbus planes.

Singapore’s hunt for new fighter jets is another key contract in focus as Boeing offers its F-15 and France’s Dassault hopes for its first export deal for the Rafale. In Europe, relatively flat defence spending has encouraged talk of a second wave of restructuring following an ambitious cross-border merger that created Franco-German-led EADS in 2000. Buying patterns and the networking between generals and executives may also shed light on how the aerospace and defence industries will adapt to changes in the global security system to tackle specific missions and emerging new threats.

“No European nation can now keep pace with technological change in the US, especially in the numbers of platforms and the way they are linked together,” said Neil Hampson, an aerospace industry specialist and partner at

PricewaterhouseCoopers. “The superpower is getting more super and others are deciding they can’t fight a major engagement on their own any more. The smaller nations are trying to figure out a role.”

<B>Tim HEPHER</B>