UPDATE 1-U.S. says receives Airbus A350 loan funding documents

* A350 jetliner will compete with Boeing's 787 Dreamliner

* European Union says loans for A350 will comply with WTOrules

* Nine-year-old WTO aircraft subsidies case strains U.S.-EUtrade ties

(Recasts with U.S. government confirmation, adds WASHINGTONdateline, byline)

By Andrea Shalal-Esa and Tim Hepher

WASHINGTON/PARIS, Oct 6 (Reuters) - The U.S. government saidon Saturday it had received European Union documents on fundingfor the Airbus A350 after requesting them from theWorld Trade Organization over a month ago in an ongoingtransatlantic dispute over aircraft subsidies.

"The compliance panel directed the EU to provide documentsand briefing upon a request made by the United States more thana month ago, and we received the documents just yesterday," aspokeswoman for the U.S. Trade Representative's Office said.

It is the first time the funding of Europe's answer to theBoeing 787 Dreamliner, due to make its maiden flight nextyear, has been drawn directly into the world's largest tradedispute but it remains to be seen how the WTO will act on thedata.

Both sides are pressing for major trade sanctions after theGeneva-based WTO found that Airbus and U.S. rival Boeing hadbenefited from billions of dollars of unfair subsidies in a pairof trade complaints now in their ninth year.

Washington has called on Airbus to stop receiving loans fromits host European nations - Britain, France, Germany and Spain -and argues that the WTO should take loans for the A350 intoaccount when evaluating penalties for earlier support.

The EU says the carbon-composite jet lies outside the caseand that its funding will comply with the latest WTO decisions.

A U.S. source told Reuters that outside estimates placed theloans paid to Airbus for the A350 at around $4.5 billion.

According to the U.S. source, who asked not to beidentified, the A350 funding numbers were supplied on Friday aspart of a WTO compliance procedure. Both sides claim to haveobeyed WTO rules while saying their adversaries have not.

A European source said the WTO panel merely wanted to seethe funding papers to assess whether they were relevant. It hasso far declined to address the A350 payments directly.

No official European comment was immediately available.

The new move comes at a sensitive time for Airbus parentEADS as it ponders a merger with Britain's BAE Systems, which has significant interests in the United States.

Recent rumblings in the WTO dispute could offer further baitto U.S. opponents of the $45 billion merger, which would besubject to thorough vetting by U.S. authorities, including theU.S. Trade Representative's office, and is expected to drawclose scrutiny from Boeing and its supporters in Congress.

Critics of EADS fear the combination of BAE's extensive U.S.operations and suspected ongoing subsidies to Airbus might givethe group unfair pricing power and damage the U.S. industry.

But most trade specialists doubt the WTO dispute will bedrawn into the merger approval process and say the Committee onForeign Investment in the United States (CFIUS) generally sticksto a pure security mandate. It is not known to have rejectedinvestment in U.S. companies on WTO-related grounds.

The United States seeks up to $10 billion in sanctions onthe EU for not eliminating illegal European government supportfor Airbus.

The EU last month asked the WTO for the right to imposesanctions worth up to $12 billion annually in retaliation forU.S. subsidies mostly in the form of research.

Analysts say it could be years before the huge dispute playsitself out in sanctions or a settlement, while hanging overU.S.-European relations as a sporadic irritant in other issues.

(Editing by Eric Walsh)

((tim.hepher@thomsonreuters.com)(+33 1 49 49 54 52)(ReutersMessaging: tim.hepher.thomsonreuters@reuters.net))

Keywords: TRADE/AIRBUS A350