By the end of the 1960s, European aircraft manufacturers realized that continued competition among them could result in continued American dominance in the industry. While European airlines operated 25% of the global airliner fleet, the European aircraft manufacturers' global market share was limited to 10%. European firms and governments agreed that only a coordinated approach could bring about a product that could compete with American manufacturers. The goal of the Airbus project was thus to boost the European aerospace industry by creating a viable competitor to Boeing and McDonnell Douglas and to lessen the EU's dependence on US aircraft development. Among factors that make the aircraft industry important for governments of European countries one can list advanced technologies both in design and in manufacture, the relationship between civil and military work, and the value of international trade in aircraft. Firstly, launching a new aircraft requires a massive investment in R&D which represents the main barrier to entry to the market. Airbus, new entrant to the commercial aircraft market, thus needed high levels of government support to finance the development of new models.
[...] Moreover, Airbus also benefits from extra financial injections from the EIB and low or no interest loans. Airbus, on the other hand, argues that Boeing benefits from extensive government support as well, taking the form of indirect financial injections, substantial tax breaks and infrastructure support. On top of this comes the indirect financing of Boeing's civil arm via contracts with the US Department of Defense and NASA, as the improvements in those field can be transposed into Boeing's commercial ventures. [...]
[...] Q3) Is it fair competition between Airbus and Boeing or unfair competition Explain Since the arrival of Airbus on the scene of the major aerospace companies, mud has been flung from one side of the Atlantic to the other. Already in 1979 the Agreement on Trade in Civil Aircraft (ATCA) was signed to eliminate import duties and quotas and technical barriers in the aerospace industry. However, its impact was negligible. Therefore, in 1992 the two main trading blocs, the EU and the US, bilaterally negotiated a second agreement on Trade in Large Civil Aircraft. [...]
[...] The consequence is that subsidies still exist, but under indirect ways of distribution: for example through R&D expenses, through transfers between civil and defense sector, or through an initial reimbursable investment in Europe. Another difficulty is the shareholders problems. There are two main institutional investors in EADS : Daimler-Chrysler and Lagardère . The two of them want to withdraw from EADS capital, which leads to important credibility problems for the group. Moreover, more private investors are required. Industrial investors would be ideal to solve the problem of credibility. [...]
[...] Whether these governmental subsidies are or from the point of view of the international aircraft industry will be treated further in our document. Q2) How did European countries build a new aircraft industry in 1970's? The extraordinarily high research and development costs, the economies of scale and the level of commercial risk undertaken with each new airplane have led to a progressive reduction in the number of manufacturers. In 1960 there were 17 manufacturers of commercial transport aircraft in the Western world. [...]
[...] AIRBUS Cooperation to ban or Continuation of subsidies restrict direct and with a trade war as indirect state aid consequence BOE Cooperati State aid on both sides Airbus will reap the ING on to ban will be restricted or benefits of new plane or banned development without any restrict Competitive structure risk: direct will be restored Increase in market share and Resources will be devoted More R&D possibilities indirect to future projects More advanced technology state aid WTO will not be damaged Better corporate results Further global economic integration Continuat Boeing will reap the Trade war ion of benefits of generous Valuable resources tied subsidies state aid: up in futile dispute with a Increase in market share Overshadowing of other trade war More R&D possibilities economic EU-US relations as a More advanced technology Loss of focus, away from consequen Better corporate results Asian competitors ce Poorer corporate results Table Game theory application to Boeing-Airbus rivalry In conclusion to the question whether or not there is fair competition between these to giants, no clear cut answer can be given. [...]
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