Airbus vs. Boeing

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Airbus vs. Boeing
E10, Group 4 David BECKER Bruno CHERON Marita
HEMMELSKAMP Wendy LAM Abhishek SUDHIR Gerald
WIEGAND
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Aircraft Manufacturing is a strategic industry
due to market imperfections
Evidence
Case for intervention
Break the monopoly Competition at customers
benefit
Externalities cannot be captured unless
government intervenes (KEY IN THE US AND EUROPE)
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Boeing is a major recipient of support

• Airbus
• The subsidies that Airbus received were aimed at
• Entering the market
• Protecting from market
• volatility during early stages
• Forcing competition,
• pushing the industry to
• lower prices (benefit to the
• customers)
• Airbus receives few subsidies most are loans
  from governments
• A380s sales will provide royalties to the
  governments, and in case of low sales, Airbus
  will have to reimburse the loans

Boeing Direct subsidies from NASA Indirect
(hidden) subsidies cross-subsidies
from B-747 through Pentagon contracts
spillover from military programs A
lack of transparency concerning these indirect
subsidies Lobbying from US government has more
impact than from EU.
1992 agreement

• Limit direct indirect subsidies
• Implicit acknowledgement of malpractice
• Goal is convergence to fair competition

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Boeing is a major recipient of support

• Airbus
• The subsidies that Airbus received were aimed at
• Entering the market
• Protecting from market
• volatility during early stages
• Forcing competition,
• pushing the industry to
• lower prices (benefit to the
• customers)
• Airbus receives few subsidies most are loans
  from governments
• A380s sales will provide royalties to the
  governments, and in case of low sales, Airbus
  will have to reimburse the loans

Boeing Direct subsidies from NASA Indirect
(hidden) subsidies cross-subsidies
from B-747 through Pentagon contracts
spillover from military programs A
lack of transparency concerning these indirect
subsidies Lobbying from US government has more
impact than from EU.
1992 agreement
5
Conclusion

• Boeings accusations are unjustified.
• we can even revert these accusations of unfair
  competition!

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Back-up
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Airbus alleged subsidies

• Aerospatiale (France) no subsidies since 1970
  only loans (advances reimbursable)
• Deutsche Airbus (Germany) only loans
• British Aerospace (UK) only launch aids
  repayable! (also only get loan for 60 of what
  is requested)
• CASA (Spain) Got 100 for A320, but 60 for
  A330/340. They represent only 4.2 of Airbus
  (minority shareholder)

French subsidies
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Aircraft Manufacturing is a strategic industry
due to market imperfections
Evidence
Case for intervention

• Break a monopoly
• Fairer trade at customers benefit
• Rents cant be competed away due to high BTE

• These externalities cannot be captured unless
  government intervenes

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