Microsoft Corp. chief executive officer Steve Ballmer (centre) and CFO Chris Liddell (left) ring the opening bell of the Nasdaq with NASDAQ President and CEO Robert Greifeld (right) as they announce the business availability of the Windows Vista operating system, the 2007 Microsoft Office system and Exchange Server 2007, in New York November 30, 2006. This is the first simultaneous release of Microsoft's flagship products since the joint launch of Windows 95 and Office 95 more than a decade ago. - reuters

paris, (reuters)

Airbus launched a pre-emptive strike against Boeing Co. over subsidies as it drew a veil over the funding of its own re-engineered A350 mid-sized jet on Monday, saying Boeing's rival 787 model was padded with government assistance.

Anxious to avoid fuelling a trans-Atlantic dispute over aircraft aid, the European plane maker refused to say whether it would apply for government development loans for the 10 billion c ($13.3 billion) jet but said nothing had been ruled out.

The subsidiary of European aerospace company EADS also hinted at a possible capital increase among a number of market measures it said it was considering to help pay for the project, which overlaps with costly delays to its A380 superjumbo.

"We are all aware in our hearts that the 787 is based on highly subsidised spending. There is government funding on both sides of the Atlantic. We are discussing with governments future funding, but other options are on the table," Airbus President and chief executive Louis Gallois said.

"We have no imminent (cash) needs. We are only asking for a level playing field. No decision has been taken or is imminent."

Boeing contends that the traditional practice of funding Airbus projects with development loans from the four governments that support Airbus — Britain, France, Germany and Spain — violates international standards on hidden subsidies.

Washington supports Boeing's case and has launched what could become the largest trade dispute at the World Trade Organisation, matched by a counter-suit from the European Union.

Airbus and Boeing snipe about funding on an almost a daily basis, but Monday's launch presentation for the latest version of the A350 represented a step-up in rhetoric from Airbus, which has previously taken a lower-key stance on government aid.

"We are not in a defensive attitude. We are clearly in an offensive attitude on the heavily subsidised 787," Gallois said.

Airbus says Boeing benefits from over $3 billion in tax breaks from Washington state and fat defence contracts from the U.S. government which reduce its costs on civil aircraft development. Boeing denies receiving any government assistance.

Pointing to alternative financing methods, the French government said it did not exclude participating in a capital increase. The government owns 15 percent of EADS.

EADS shares closed 1.2 percent higher at 23.15 C after trading lower earlier in the session.

Talk of a capital increase comes at an uncomfortable time for EADS' biggest shareholder DaimlerChrysler AG, which wants to cut its 22.5 per cent stake to 15 per cent. It is in talks with German banks about transferring the shares.

A German government spokes-man said talks over finding investors in EADS were continuing.