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Background Boeing Airbus

Background Boeing Airbus

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Background Boeing Airbus

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  1. versus BackgroundBoeing Airbus Hendrik Becker (Germany) Victor Cruz Silva (Brazil) Susanna Yu Su Qian (Australia) Enrique Parra Arce (Spain) Rajkaran Singh Kharbanda (India)

  2. Country: USA Headquarters: Chicago, Illinois Overall Revenue: $68.3 billion (2009) Revenue of Commercial Airplanes: $34.1 billion (2009) Overall Employees: 159,856 (2010) Employees at Commercial Airplanes: approx. 60,000 (2010) What they do: Design, assemble, and support commercial jetliners Design, assemble, and support defense systems Design and assemble satellites and launch vehicles Integrate large-scale systems; develop networking technology and network-centric solutions Provide financing solutions focused on customer requirements Develop advanced systems and technology to meet future customer needs

  3. Timeline Boeing

  4. Countries: France, Germany, UK, Spain Headquarters: Blagnac (near Toulouse), France Revenue: €27.45 billion in (2009) Employees: 52,000 (2010) (approx.: France 40%, Germany 37%, UK 17%, Spain 5%) Airbus draws on a global network of more than 1,500 suppliers in over 30 countries. What they do: Manufacturer of commercial aircrafts

  5. Timeline Boeing vs. Airbus

  6. Orders and Deliveries of and

  7. Boeing vs. Airbus Controversies 1992 Bilateral EU-US agreement • Mid 1992 The United states and the four European governments involved agreed to a pact in the hope of ending the long-standing disputes between Airbus and Boeing. • The agreement limited direct government subsidies. It states that commercial airplane companies can receive repayable government loans for up to one-third of the development cost for a new airplane and that such subsidies had to be repaid with interest within 17 years (6). • The agreement also limited indirect subsidies such as government supported military research programs to 3% of total revenues (5). • The main objective of this agreement was to create more transparency in an industry that has a past of being unclear.

  8. Subsidies BOEING ATTACKS July 2004 Harry Stonecipher, CEO of Boeing at the time accused Airbus of abusing the 1992 bilateral EU-US agreement in regards to large civil aircraft support from governments. (5) Boeing claims that Airbus has violated the agreement in a number of ways. The Europeans haven't repaid the loans or the interest that has accrued on those loans. They have manipulated the accounting that takes advantage of the loopholes and allows them to avoid repayments (5) They have failed to issue annual progress reports that spell out clearly where and when government money was received and paid back (5). AIRBUS BITES BACK In retaliation Airbus argued that the military contracts awarded to Boeing (the second largest U.S. defense contractor) were in effect a form of a subsidy. They claimed that the significant U.S. government support of technology development provided significant support to Boeing, as well as the large tax breaks offered to Boeing were also in violation of the 1992 agreement.  They point back to Boeing, charging the U.S. company has never fully complied with the other key provision of the agreement, which limits the indirect subsidies Boeing receives from defense and other government research agencies, for instance.

  9. BOEING – MCDONNELL DOUGLAS MERGER • December 1996: Boeing announced it’s merger with McDonnell Douglas. • By this time McDD accounted for less than 10% of the market and 3% of the orders. • EU commission investigated a possible infringement of the EU competition law. • Situation got worse with Boeing’s success in negotiating long-term exclusive supply contracts with AA, Delta and continental. Airbus complains.

  10. BOEING – MCDONNELL DOUGLAS MERGER • US-Federal Trade commission concluded McDD was no longer a competitor in the plane market. • EU commission decided to rule against Boeing implying restricting it’s business in Europe and a fine. • To stop EU commission to rule against them Boeing stopped his agreement with the major American companies. As a result of that the EU commission authorized the merger. • For Airbus and EU commission this was a huge victory. In fact, Delta airlines uses Airbus planes nowadays.

  11. Background Behind Current Disputes • After cooling off with the signing of the 1992 subsidy agreement, the longstanding dispute between Europe and the United States over government subsidies for the commercial jetliner industry heated up again in 2004. • European governments had been providing launch-aid subsidies that amounted to as much as an estimated 75 percent of development costs for a new aircraft. This amount would now be substantially reduced. While Boeing has not been the recipient of this of launch-aid support from the U.S. government, it has been the recipient of indirect support in the form of technological benefits resulting from government sponsored R&D programs and plentiful military contracts. • The Japanese government is helping Boeing by providing loans of $1.5 billion to Japanese subcontractors making wings for the new 787. The Italian government is providing similar support to Boeing suppliers to the tune of $600 million. Repeated Allegations: A Vicious Cycle • Boeing gets preferential treatment and support from the US, Airbus gets partiality from the EU. • The recent 179 aircraft bid to replace US Air Fuel Tankers worth $40 billion intensifies competition. Serious rivalry issues regarding winning the contract. “Contract of the Century”, both companies have submitted an 8000+ page report.

  12. Range Overlap and Aircraft Orders Range Overlap Defines Competition: • Though both manufacturers have a broad product range in various segments from single-aisle to wide-body, manufacturers' offerings do not always compete head-to-head. As listed below they respond with slightly different models. • The A380, for example, is substantially bigger than the B747. • The A350 XWB competes with the high end of the B787 and the low end of the B777. • The A320 is bigger than the 737-700 but smaller than the 737-800. • The A321 is bigger than the B737-900 but smaller than the previous B757-200. • The A330-200 competes with the smaller B767-300ER. • Airlines can use this as a benefit since they get a more complete product range from 100 seats to 500 seats than if both companies offered identical aircraft. In the decade between 2000 and 2009 Airbus received 6,083 orders, while Boeing received 5,927. Airbus had higher deliveries between 2003 and 2009, but fell slightly short of Boeing's deliveries, delivering 3,810 aircraft compared to Boeing's 3,950.

  13. Thank you!!!Questions?

  14. References (1) Boeing general information: (2)Boeing Orders and Deliveries: (3) Airbus general information: (4) Airbus Orders and Deliveries: (5) (6)