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Boeing Versus Airbus :Two

decades of trade disputes


Group No. 7
IB
Introduction
This case deals with the trade disputes between
two leading commercial aircraft manufacturers
Boeing & McDonnell Douglas accounted for 2/3
rd

of the worlds market share between 1980s till
mid 1990s
Boeing was the largest net contributor to the
balance of trade, largest exporter and employed
a large amount of americans.
Airbus industrie Consortium of 4 European
aircraft manufacturers
Industry Competitive Dynamics
Key factor which drives competitive dynamics in
the commercial aircraft industry is the cost of
developing (Boeings 777 v/s Airbuss A380)
Long period of time incurred to break even as
well as swelled up volume of sales required
Significance of experience curves
Boom & bust cycles of commercial airlines
business Volatile Sales
Market can support only two to three major
producers


Trade Frictions Before 1992
Allegations of unfair Competitive advantage
garnered by Airbus through subsidies by GB-F-
G-S
Airbuss response good product & strategy
Boeings US govt. support (DoD , NASA)
Boeing rejects claims of the European
Commission report.

The 1992 Agreement
1992 pact overseen by EU - limited direct govt.
subsidies to 33% - repaid with interest within 17
years 3-4% indirect subsidies
In 1993, President Clinton criticized EU for
allowing subsidies but the US industry did not
react
Engines and avionics of Airbus was sourced from
the US
Danforth & Baucuss launch of a trade case
against Airbus & aerospace consortium
Aerotech fail to materialize

The Boeing-McDonnell Douglas
Merger
Merger between Boeing & ailing McDonnell Douglas

US FTC & Competition Commission of EU

Karl Van Miert and objections laid by CC of EU
- Restriction of competition in commercial jet aircrafts
- Reverting Defence funds to commercial jet aircrafts
- Supplier agreements with American Airlines, Delta &
Continental

FTC locks horns with European Commission

Boeing bends its knees to Van Miert
Back to the Future : 2005
The late 1990s were turbulent to Boeing, but by 2000s
it slowly started getting back on track
Boeing introduces 787s
Airbus introduces A380
Robert Zoellick renounces the 1992 pact
Boeing & Airbus starts lashing out on each other again
and finally the problem is taken to the WTO
USs request to WTO states to resolve the issue
EU files a countersuit claiming that USs aid to Boeing
exceeded the limit prescribed in the 1992 agreement.