There is a veritable duopoly in the international airplane manufacturing industry, being dominated by two of the giants of the aircraft world – United States’ Boeing, and Europe’s Airbus. What makes the situation between these two manufacturers more complicated is that their respective governments have vested interests in both of these companies since they have been granted significant subsidies by each other. These are financial contributions which are monumental in keeping these companies afloat during times of trouble, and in pushing forth innovation during times of growth. The money which each company has gotten in the form of investments has primarily led to the considerable rivalry between these two giants.
The Cold War Between Boeing And Airbus
History
The large jet airliner market was formerly composed of more than these two giants, however, a series of mergers made things as they are today. Airbus began as a European consortium while Boeing absorbed its former American arch-rival, McDonnel Douglas in 1997. Other aircraft and aerospace manufacturers such as Lockheed Martin and Convair from the U.S., and British Aerospace and Fokker in Europe withdrew from the large jet industry, as they were all unable to effectively compete against Boeing and Airbus. The sheer number of large jet orders to each company in the past two decades have been staggering, with each company receiving around 1000 orders of large jets each year, and being able to deliver roughly 50% of the ordered amounts. A period of intense competition, known as the “Cold War” between Boeing and Airbus happened due to both companies regularly accusing each other of receiving unfair state subsidies from their respective governments.
Airbus and the E.U.
Boeing has continually protested over aid received by Airbus in the form of credits from the European government. In return, Airbus has said that Boeing has received illegal subsidies through military and research contracts from the U.S. government, including tax breaks which no other company was getting. Airbus was said to have gotten “launch aid” from the European Union, which are also called launch investments. These are amounts of money which have been injected into the coffers of Airbus from several European governments with the money being paid back with interest, including indefinite royalties, if the planned aircraft to be launched is a success. Airbus has said though that these types of investments are fully compliant with current trade and investment rules, as per the World Trade Organization (WTO). They argued that up to 33% of the costs of the aircraft program being funded could come from government loans which are to be fully repaid within 17 years with interest and royalties as part of the package.
Boeing and the U.S.
On the other hand, Airbus has argued that military contracts that have been funded through the public money being set aside for use by U.S. politicians, or pork barrel, were being hidden through subsidies by the U.S. government. The U.S. also supports technological development via NASA, which in turn provides financial and technological support to Boeing. Airbus contends that these types of funding are against trade law, as it inevitably links a country’s entire government to a privately-owned aircraft manufacturing corporation. The U.S. and Boeing however have denied this, and have said that what they have is a beneficial form of partnership in which both parties are able to benefit from any research and developments done by Boeing. In the long run, the people themselves who would use any new technology or aircraft developed would be the recipients of these innovations, and this would align the use of government funding since it would involve the welfare of its citizens.
Boeing And The US