Boeing V Airbus
Boeing versus Airbus
1. Do you believe Airbus could have become a viable competitor without subsidies?
Given the competitive dynamics in the commercial aircraft industry, it is not likely that Airbus could have become a viable competitor without subsidies. These dynamics include investment costs in the billions for research and development of a new airliner, long break-even times, significant experience curve on the manufacturing side, and the highly volatile demand for aircraft. Due to a lack of market share, if Airbus entered the market without this support they would have suffered many years of losses resulting in a possible bankruptcy. However, Airbus credits its success to a good product and a good strategy instead of the subsidies.
2. Why do you think the four European governments agreed to subsidize the establishment of Airbus?
In 1970, four European governments began subsidizing Airbus with the explicit goal of diminishing the US dominance in the international aviation market. The four founding European nations, Great Britain, France, Germany and Spain saw from the beginning the need to subsidize Airbus operations. At the time, all four countries were either owners or part owners of domestic airlines and wanted to conduct business with domestic companies. The only other major competitor at the time was the US based company, Boeing. The European governments took this opportunity to take part in the competition in order to surpass Boeing to become a leader in sales orders. This prevented Boeing from any emerging monopoly in the aircraft industry. There was also a potential for more jobs to come to these European countries. If they did not agree to this, their countries would have lost the possibility for many new direct and indirect aircraft related jobs. Furthermore, parts would be cheaper when manufactured in Europe. When you have to import parts for your aircraft, the prices begin to go up. For example, Eurocopter
1. Do you believe Airbus could have become a viable competitor without subsidies?
Given the competitive dynamics in the commercial aircraft industry, it is not likely that Airbus could have become a viable competitor without subsidies. These dynamics include investment costs in the billions for research and development of a new airliner, long break-even times, significant experience curve on the manufacturing side, and the highly volatile demand for aircraft. Due to a lack of market share, if Airbus entered the market without this support they would have suffered many years of losses resulting in a possible bankruptcy. However, Airbus credits its success to a good product and a good strategy instead of the subsidies.
2. Why do you think the four European governments agreed to subsidize the establishment of Airbus?
In 1970, four European governments began subsidizing Airbus with the explicit goal of diminishing the US dominance in the international aviation market. The four founding European nations, Great Britain, France, Germany and Spain saw from the beginning the need to subsidize Airbus operations. At the time, all four countries were either owners or part owners of domestic airlines and wanted to conduct business with domestic companies. The only other major competitor at the time was the US based company, Boeing. The European governments took this opportunity to take part in the competition in order to surpass Boeing to become a leader in sales orders. This prevented Boeing from any emerging monopoly in the aircraft industry. There was also a potential for more jobs to come to these European countries. If they did not agree to this, their countries would have lost the possibility for many new direct and indirect aircraft related jobs. Furthermore, parts would be cheaper when manufactured in Europe. When you have to import parts for your aircraft, the prices begin to go up. For example, Eurocopter