PARIS, France (AP) -- Airbus and its parent company, EADS, have launched a new plane to rival Boeing's 787 but agreed to put government aid on hold as Europe and the U.S. try to resolve their trade dispute on aircraft subsidies.

European Aeronautic Defence and Space Co., which owns 80 percent of Airbus, gave the go-ahead on Thursday to build the mid-sized A350 plane at a board meeting in Amsterdam. Britain's BAE Systems PLC, which owns the remaining 20 percent, also approved the launch.

"With the official industrial launch of the A350, Airbus will now be able to book firm orders and expects around 200 of these by the end of the year," EADS said.

The launch of the A350 program had initially been planned earlier this year. Airbus said in June that the trans-Atlantic trade row had delayed the decision.

European Union and U.S. negotiators are trying to work out a settlement to the dispute, which began last year when Washington tore up a 1992 pact on aircraft subsidies and filed a World Trade Organization complaint against EU government aid to Airbus.

Brussels retaliated in a countersuit citing tax breaks and research and development subsidies to Chicago-based Boeing and its suppliers, including Japanese companies working on the 787 Dreamliner, due to enter service in 2008.

Under pressure from Washington, Airbus and its supporting governments -- France, Germany, Britain and Spain -- have stopped short of committing government funds to the A350 program.

EADS said the governments had "provided letters of general support for the A350" but that no funds would be paid out throughout 2006, "as long as there is a credible prospect of negotiations and similar restraint being undertaken in the United States."

U.S. Trade Representative Rob Portman had warned EU governments that any commitment of funds to the A350 program would complicate efforts to negotiate a broader compromise on aircraft subsidies. Portman's representatives were not immediately available for comment on the A350 announcement.

Peter Power, spokesman for EU Trade Commissioner Peter Mandelson, said launch aid decisions are a matter between Airbus and its four supporting governments.

"However, we note that no such launch investment has been put in place for the A350, although there is general support for the plane," Peter Power said.

"This helps a possible negotiation in the dispute with Boeing, which we would welcome."

French Transport Minister Dominique Perben said France had agreed "in principle" to provide funding but that the funding application is still "in the process of being examined," in an interview with financial daily La Tribune.

Rolls-Royce Group PLC also announced Thursday it had reached a deal with Airbus to supply engines for the A350. Its new Trent 1700 engine will be available for deliveries from mid-2011, the company said.

Airbus plans to begin commercial deliveries of the long-range, fuel-efficient A350 in 2010, with engines first developed for the Dreamliner by General Electric Co.

EADS shares were 1.2 percent lower at euro29.15 (US$35.16) in late-afternoon Paris trading. Boeing shares were 0.9 percent higher at US$67.99 (euro56.37).