Attributes statement to spokesman on behalf of trade commissioner, paragraphs 5-6

The World Trade Organization handed a report to U.S. and EU officials on Monday, which industry sources said found that plane manufacturer Boeing received billions of dollars in unfair subsidies from the U.S. government.

The report by WTO experts marked the latest stage in a dispute between the United States and the European Union over unfair and illegal support for each other's aircraft industry in a market for large passenger aircraft worth more than $1.7 trillion.

The WTO litigation has been in progress since 2004 and both sides periodically call for negotiations to settle the dispute.

The Boeing report is confidential and will not be published for several weeks or months, but its European rival Airbus said last week it would show the U.S. manufacturer had received massive illegal subsidies.

A spokesman for EU Trade Commissioner Karel De Gucht welcomed the report's confirmation of initial findings issued in September, also confidentially.

This solid report sheds further light on the negative consequences for the EU industry of these US subsidies and provides a timely element of balance in this long-running dispute, spokesman John Clancy said in a statement.

WTO experts have already found that Airbus received illegal subsidies from European governments and both sides have appealed against that ruling, with the WTO's appellate body expected to announce its findings later this year.

Boeing says the research and development grants it received pale into insignificance besides the support for Airbus, some of which amounted to export subsidies that are completely illegal under WTO rules.

In the Airbus case, WTO judges found the company had been able to launch a series of passenger aircraft only thanks to the government support and called for an immediate end to the export subsidies.

Airbus says the findings in the Boeing report undermine its U.S. competitor's business model.

The findings in the related cases could color a decision in the coming weeks by the U.S. Air Force on whether to award Boeing or Airbus parent EADS a $25-50 billion contract for refueling tankers. Both have support in the U.S. Congress as they would be assembled in America.

While each company argues about how many billions of dollars the other received, and what percentage of claims were backed or rejected by WTO judges, both have an interest in clarifying the rules for how governments can facilitate the development of new aircraft in a fair manner.

It could take until much later this year for the appeals process in both cases to run its course, but the two governments, aware that Brazil, Canada, China, India, Japan and Russia have en eye on the market, are eventually likely to negotiate a settlement.

(Reporting by Jonathan Lynn; editing by Andrew Dobbie)

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