The World Trade Organization ruled on Friday that European loans for Airbus were illegal subsidies under world trade rules, U.S. lawmakers said, but European sources said Washington did not win a sweeping victory.

The findings, which came in a confidential 1,000-plus page ruling, are the latest chapter in a decades-old battle between U.S. manufacturer Boeing and European rival Airbus for dominance of the global aircraft market, a major source of jobs on both sides of the Atlantic.

The decision, which will not be made public for months, was handed out to the United States and the European Union at WTO headquarters in Geneva.

Lawmakers from Washington state, where much of Boeing's production work is done, said the WTO agreed with the United States that European launch aid loans to help Airbus develop the A380 and other top-selling planes violated global rules.

I applaud the WTO's decision that government subsidies of Airbus are illegal, said Senator Maria Cantwell. When finalized, this long-awaited ruling will help restore true competition in the commercial aviation market.

Representative Norman Dicks also welcomed the ruling, which he said definitively confirms the U.S. argument in the case.

But what is discouraging is the damage that has been done to America's premier airline manufacturer, which has suffered the loss of 20 percent of the market share -- representing hundreds of billions of dollars in value and tens of thousands of jobs -- since our concerns were first raised with the Europeans, Dicks said.

Dicks and Cantwell were briefed on the ruling by U.S. trade officials, their spokespeople said.

European sources said the ruling was not as clear-cut as the lawmakers and U.S. private sector sources claimed.

'NOT A GREAT VICTORY' FOR U.S.

The ruling is not a black-and-white case. It is simply not a great victory for the United States, one EU source told Reuters on condition of anonymity.

The assertion that the WTO report says that all 380 funding is a prohibited subsidy is wrong. The findings are much more nuanced than that. The panel did not find that launch aid is a program, a second European source said.

The latter point is significant because it means the ruling does not have implications for some $4 billion in planned European government loans for Airbus' latest project, the A350 wide-body jet, the second European source said.

U.S. sources took issue with that interpretation, arguing it would be inappropriate for European governments to provide loans for the A350 on the same terms ruled illegal by the WT0 for earlier projects.

The reason the report did not directly address A350 loans is because they were only announced recently and therefore were not included in the U.S. complaint, which dates back several years, an Obama administration official said.

The Airbus case, and the European Union counterclaim about U.S. support to Boeing, the United States' biggest single exporter, represent the most complex and commercially significant dispute in WTO history.

Washington says Airbus, a subsidiary of EADS, received a $205 billion boost from advantageous loans and other perks from France, Germany, Spain and Britain over two decades, giving it an unfair edge.

Brussels argues the Airbus loans were fair and says Boeing got big illegal subsidies from U.S. agencies including NASA plus state tax breaks worth some $24 billion.

'HALF THE STORY'

Northrop Grumman, EADS's partner in a drive to deny Boeing a projected $35 billion, 179-plane, U.S. Air Force refueling-fleet deal, said the WTO ruling, whatever it said, should not affect the coming aerial refueling tanker purchase.

Those who try to inject the WTO issue into the tanker competition are doing our warfighters a major disservice, said Randy Belote, a Northrop spokesman.

Boeing, asked about the tanker impact, said it sought a level playing field where everyone is held to the same high standards and transparency.

Washington state lawmakers had a different view.

If DoD (Department of Defense) wants a truly fair competition, it needs to start with competitors that play by the rules. DoD needs to answer to how this violation of WTO rules will be considered in the competition for the vital aerial refueling tanker, said Senator Patty Murray, who was also briefed by U.S. officials on the ruling.

The three-member WTO panel has been widely expected to agree with complainant Washington that billions of euros of launch aid loans Airbus received to develop aircraft was anti-competitive and broke trade laws.

While not commenting on Friday's findings, Brussels stressed a full picture of the aircraft subsidy dispute would only become clear after the initial ruling was released from the case against Boeing, expected in six months.

It is important to recall that this report is only half the story and must be read together with an interim report on the EU case against the U.S. over aid to Boeing, said Luiz Guellner, spokesman for EU Trade Commissioner Catherine Ashton.

The Office of the U.S. Trade Representative also declined to comment on the specifics of the ruling, while repeating its view that the European governments have provided unfair subsidies to Airbus that harm U.S. interests.

It could take years for the WTO aircraft litigation to run its course, and for definitive rulings to be issued on the kinds of government financing acceptable in the sector.

Most industry analysts expect Boeing and Airbus to negotiate a settlement in their long-running dispute before it reaches the WTO's top court.

The extent to which Airbus or Boeing makes out better than the other in the twin preliminary rulings will affect the dynamics of those talks, which both sides have said they eventually want to hold.

(Additional reporting by Sven Egenter, Kerstin Doerr, Tim Hepher, Laura MacInnis, Darren Ennis, Doug Palmer, Jim Wolf and Jonathan Lynn; Editing by Tim Hepher and Peter Cooney)

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