Boeing vs. Airbus Jaime Cuervo Kaushik Kumar Priyanshi Patel Sotonye Ogan Thais Gaspar

The creation of Airbus Airbus was founded in 1970 as a consortium of four European aircraft manufacturers British (20%), France (37.9%), Germany (37.9%), Spain (4.2%) It was originally a marginal competitor and unlikely to challenge US dominance Team 5 - Airbus Prespective2

The creation of Airbus Since 1981, however, Airbus has confounded its critics by gaining market share In 2000, Airbus made the transition from a consortium to a fully functioning private entity Team 5 - Airbus Prespective3

The Dispute In the 80’s and 90’s Airbus, was obtaining subsidies from the euro goverments. Then, the U.S.Goverment supported Boeing and McDonnell Douglas agreement: US and EU, limited subsidies to 33% of total costs of developing a new aircraft. Team 5 - Airbus Prespective4

In the year 1993, Bill Clinton wanted to renegotiate the 1992 agreement because he thought that this was creating job losses in the US. In 2005, USA and EU appealed to the WTO. EU argued that Boeing broke the deal of 1992 and USA argued that Airbus had received aid and loans from the European Union Team 5 - Airbus Prespective5 The Dispute

Why Airbus is healthy competition for Boeing Boeing spent a reported $5 billion developing and tooling up the 777 wide-bodied jetliner that it introduced in The development cost of the Airbus A380 “super-jumbo” cost between a reported $10 billion and $15 billion. A direct competitor to boeing’s profitable 747. Team 5 - Airbus Prespective6

Why Airbus is healthy competition for Boeing In terms of pricing, the A380’s list price is significantly higher than the 747’s list price, $220 million vs. $185 million, yet Airbus claims the combination of increased capacity and reduced operating costs provides superior economics. According to company documents, the operating cost per flight will be 12% more than the 747’s cost, but given the plane’s 35% greater capacity, it will provide almost 25% more volume for free. The greater competition leads to more efficiency in the production of planes and more innovative ideas in relation to the speed of travel, capacity of planes and also ways of reducing pollution. The greater capacity of the Airbus will inevitably lead to less flights per day as planes are able to carry more travelers therefore reducing the amount of flights to preferred destinations each day. Until the 1980’s the U.S manufacturing firm had a virtual monopoly accounting for two-thirds of the world market share after the buyout of McDonnel Douglas. Team 5 - Airbus Prespective7

Why Airbus is healthy competition for Boeing Boeing with their supreme world market share were able to sell a lower quantity of goods at a higher price than would firms under healthy competition. Improved price discrimination allows a monopolist to gain more profit by charging more to those who want or need the product more or who have a higher ability to pay. The healthy competition now faced by Boeing has reduced the possibility of them becoming ‘complacent giants’. Boeing has dominated the market for so long with no worthy competitors that it creates the uncertainty of whether they will continue to be innovative and progressive, however, Airbus’s entry into the market ensures that Boeing faces stern competition. Team 5 - Airbus Prespective8

The Anti-Competitive Merger In 1997 Boeing announced that it would merge with his longtime rival McDonnell Douglas The merger would allow Boeing to increase its presence in the defense and space business Approved by the U.S. Federal Trade Commission (potential personal interests involved) Team 5 - Airbus Prespective9

The Anti-Competitive Merger Restrict competition in the market Increase of US government funding to the new company Supplier’s agreements with important airlines would also restrict competition Team 5 - Airbus Prespective10

Conclusion Different strategies for the future The WTO report will make changes in the way that Airbus is supported by European Governments, and will potentially make adjustments on Airbus´s business The EU was disappointment with certain parts of the WTO report, and is considering an appeal on certain elements Team 5 - Airbus Prespective 11

Conclusion The reaction on stock exchanges was relatively muted If Boeing thinks it has a case, then round three of the funding dispute may be just around the corner. Team 5 - Airbus Prespective 12

Sources is-in-airbus-and-boeing-both-claim-victory/page1 is-in-airbus-and-boeing-both-claim-victory/page ers1.png ers1.png content/uploads/2009/11/airbus_logo1.jpg content/uploads/2009/11/airbus_logo1.jpg Team 5 - Airbus Prespective13