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.