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| Europe | |
| Airbus thrown off stride by Boeing | |
| 2005-06-15 | |
When the Airbus A380 superjumbo took to the skies at the Paris Air Show, executives from Boeing crowded an observation deck here to gawk at the plane, the new flagship of a European company that is embroiled in a trade battle with Boeing. As the A380 traced swooping circles above the airfield on Monday, the Boeing delegation was plainly impressed. But after it touched down with a thud, the spell was broken. "Look for the dent in the runway," said one of the executives, referring to the A380's chronic weight problems. rather a serious problem when fuel prices are so high Boeing can afford a few wisecracks. After several years in which the company seemed in danger of being flattened by the Airbus juggernaut, it has stormed back into contention. Boeing's new midsized plane, the 787, is selling briskly, while the A380 has been dogged by production glitches. Airbus says it will announce more than 110 orders this week for the A350, its response to the 787. But that plane, too, is being slowed because of changes in its design and doubts about how it will be financed. Those questions have been fueled by a lawsuit the United States has filed against the European Union at the World Trade Organization, alleging that Europe has damaged Boeing by illegally financing the development of new planes like the A350 with low-cost government loans. While the European Union insists it will fight the suit - and has filed one of its own alleging that Boeing also receives improper subsidies - there is mounting evidence that Washington's unbending stance has thrown Airbus off balance in one of the world's epic commercial rivalries. "Boeing's original strategy was purely defensive: to protect the 787 program," said Richard Aboulafia, vice president of research at the Teal Group, an aerospace consulting firm in Fairfax, Virginia. "Now it's switched from defense to offense. They want to disrupt the A350." The stakes are enormous. Medium-sized planes - those with 200 to 300 seats - will generate more revenue than any other market segment, according to recent industry forecasts. It is also a segment where Airbus first eroded Boeing's franchise, with its popular A330. Airbus typically finances one-third of the development cost of its planes with refundable aid from France, Germany, and Britain. The United States says this has allowed Airbus to end Boeing's dominance of civil aviation, forcing it to cut its commercial production by 60 percent over the past five years and pare its work force by 40,000 people. For the European Union, which is still reeling from the rejection of its proposed constitution by French and Dutch voters, the dispute threatens to expose fissures within its commercial establishment about the future of Airbus, one of Europe's most successful industrial collaborations. To some Airbus backers, particularly in Germany, the WTO case is viewed as an impediment to the far bigger goal of winning military contracts from the Pentagon. European companies are eager to compete for a $20 billion contract to supply aerial refueling tankers to the Air Force. "We believe this case was pushed by Boeing not only because of the A350, but because they want to cut us out of the tanker," said Thomas Enders, a German who has been appointed co-chief executive of Airbus's key shareholder, the European Aeronautic Defense & Space Co., or EADS. The board of EADS voted last week to put off formal approval of the A350 until the end of September, in part to give negotiators from Brussels and Washington another chance to settle the dispute. A meeting of European transport ministers here this week to consider the issue of state loans for the A350 broke up without a resolution, according to an executive who attended. There are differences of opinion between France, Germany, and Britain over how to proceed, he said. EADS, a military contractor controlled by France and Germany, said it would consider forgoing $1.7 billion in state loans, known as "launch aid," for the A350. In return, it seeks cuts in what it says are Boeing's indirect subsidies from the Pentagon; from Japan, which is building parts of the 787; and from Washington State, where the plane is to be assembled. "This is as a dramatic step," said Manfred Bischoff, the co-chairman of EADS. "We are proposing to give up the way Europe has historically supported this industry. But we're asking for fairness." Boeing dismisses the EADS overture, which was outlined in a recent letter sent to the European Union's trade commissioner, Peter Mandelson, as old news. Boeing says the only issue is the $15 billion in launch aid that Airbus has received over the past 30 years. It has no plans to budge from its position that the Europeans must abandon that aid for the A350 and future planes. "It's very hard to imagine a quid-pro-quo," Lewis Platt, the chairman of Boeing, said in an interview. "To me, their position seems to be, 'we'll give up launch aid if you give up something.' We think we've made our position clear that we have no launch aid to give up." Platt denied that Boeing's intention in pushing the trade campaign was to shelter the 787 or the scuttle the A350. "It's not about confusing the market," he said. "We just want a level playing field." Boeing executives say their recent success in orders can be attributed to having a better plane, not more aggressive trade lawyers. Airbus executives admit they underestimated the 787, which uses composite materials to achieve very high fuel efficiency. Airbus has had to retool the A350 several times, after trying with little success to peddle a plane derived from the A330. Boeing's steadfastness, analysts say, is also driven by a remarkable unanimity of political support in the United States. In a year noteworthy for Democratic challenges to nearly every aspect of the Bush administration's trade agenda, the two political parties have been able to agree on only one issue: the suit filed against the European Union over its subsidies to Airbus. Congress did not want the United States to stand by and watch another major manufacturing industry undermined because of what it considered unfair trading practices from overseas competitors. "Boeing is more than one company, it is a critical industry and it was being eroded because of the subsidies given to Airbus," said Senator Patty Murray, Democrat of Washington State, which is granting tax incentives to Boeing to assemble the 787 at its manufacturing base there. The decision by Boeing to pursue the case against Airbus grew out of both a sense of weakness and opportunity. Boeing had fallen well behind Airbus in the overall number of planes delivered to airlines. But with the 787, Boeing felt it had a chance. "The issue had been there for many years, but with Airbus getting the majority of contracts, Boeing took another look," said Peter Allgeier, the deputy United States trade representative. In January, however, the United States agreed to another three months of talks, after Mandelson was named trade commissioner. Officials hoped to negotiate a deal with him that had proven elusive with his predecessor Pascal Lamy. Yet those talks faltered as well. Lamy is now the director-general of the WTO, which puts him in the odd position of overseeing a trade dispute to which he was once a party. Lawyers for Boeing said that did not trouble them because WTO would appoint a panel to hear the cases, and Lamy would play only a small role. The question is whether Boeing and Airbus will ever get to that point. The United States insists it is ready. "We are totally comfortable taking our case to the WTO," Allgeier said. "The playing field is so unlevel now." | |
| Posted by:too true |
| #1 MEMO From: Boeing To: Airbus Subject: Compitition HAHAHAHAHAHAHAHAHAHAHA!!! cc: Jacques Chirac George Bush |
| Posted by: mmurray821 2005-06-15 12:00 |