"The path of negotiations has been closed," Mandelson said, laying the blame for the new trade war at the feet of the Americans after the Bush administration decided late Monday to abandon negotiations that began in January and take the EU to a legal panel at the WTO.

The WTO confirmed yesterday that it had received complaints from both the United States and EU.

Mandelson said the WTO action could only rupture fragile EU-U.S. ties, adding that taking the talks to the WTO would accomplish nothing.

"America's decision will, I fear, spark the biggest, most difficult and costly legal dispute in the WTO's history," he said, adding that it would be "manifestly expensive and (involve) quite destructive litigation."

In announcing the U.S. decision late Monday, U.S. Trade Representative Rob Portman said the Bush administration had to act because of preparations being made by EU member nations to commit $1.7 billion (1.4 billion euros) to Airbus for developing a new airplane, the A350, which is seen as a direct competitor to Boeing's new 787 Dreamliner in the market for midsize, long-distance jets.

Mandelson said the U.S. move was ironic because the WTO action now opens the door for EU governments to feed Airbus the aid it needs to launch the new model.

"If the Americans had opted for a deal I offered on the table, and accepted a negotiated settlement, they would have immediately seen a sharp reduction" in launch investment, Mandelson said. "This will take years to resolve and in the meantime it's open to Airbus to receive any amount of launch investment from member states prepared to make that investment."

Analysts said any WTO-imposed cuts in aid to the two companies could result in higher ticket prices for travelers.

"If there are fewer subsidies for manufacturers, that will transfer into higher costs for carriers and, ultimately, the traveling public," said aviation analyst Richard Aboulafia of the Fairfax, Va.-based Teal Group.

Aboulafia said less financing from governments could mean fewer new cost-saving technologies and fewer new planes.

Airlines themselves "are keeping their heads down" as the Boeing-Airbus spat continues, Aboulafia said, because they don't want to step on the toes of their suppliers, from whom they also receive sizable financing.

Boeing spokesman Dick Dalton countered Aboulafia's claim by saying in an e-mail that an end to subsidies would "ensure true competition — to the ultimate benefit of airlines, passengers, parts suppliers and the airplane manufacturers."