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Home | Update | Latest Issue | Gallery | FR Profile | Datafiles | FR 10/97 WHAT HAS EUROPE TO FEAR FROM THE BOEING MEGA-MERGER? by Norbert Burgner After months of clash, the European Competition Commission finally agreed to the mega-fusioning of Boeing and McDonnell Douglas on 23 July. Some last-minute concessions from the future truly global Boeing company prevented the horror scenario of a trade war which was already rising on the horizon. The US negotiators agreed to the following demands of the EU Commission "in the long-term interest of our stock-holders, customers, suppliers and more than 200000 employees", as Boeing head Phil Condit put it. To avoid speculations that Boeing's airliner business might profit from McDonnell Douglas' defence division, the company will give patents, which have been granted in the frame of government contracts, to airliner manufacturers in licence and on a non-exclusive basis; give locking patents in a licence exchange on a non-exclusive basis to airliner manufacturers; over a period of ten years, submit an annual report to the European Commission, listing Boeings valid patents from government contracts and from governmental funded aerospace projects. Furthermore, Boeing has ensured the Commission not to influence the relation between their own suppliers and other commercial aircraft manufacturers. Also, Boeing plans to offer a customer service for McDonnell Douglas airliners on a similar level as for Boeing jets, at the same time ensuring that    - this service will not be used to acquire an advantage for selling new jets,    - the McDonnell Douglas airliner division will be a legally independent company for ten years, reporting annually about its activities to the commission. Until August of 2007, Boeing will not sign any new exclusive contracts with buyers of airliners unless, another manufacturer is offering such contracts. With this in mind, Boeing will not insist on the exclusive paragraphs in the existing contracts with the US carriers American, Delta, and Continental Airlines. Summed up a victory of european trade politics? Not really. The control of so called spill-over effects from military (governmental!) contracts to civil projects has always been difficult and, will most likely not be any easier through promises and annual confessions. The significance of Boeing's statement concerning the legal independence of the civil Douglas Aircraft Division is highlighted by the reaction of the market on the original EU commission's demand for Boeing to sell the unit. Supposedly, even Airbus Industrie wasn't interested in the left-over of the world's former second largest aircraft manufacturer. Concerning the exclusive contracts with above mentioned airlines, the US side rightly comments that especially these three carriers are the absolute regular customers from McDonnell Douglas and Boeing. Furthermore, the fact that even the financially strongest airlines are not able to restructure their fleets from one day to the other is reason enough to think that these orders would have been posted even without the addition of exclusiveness. Considering that the orders concern up to 500 aircraft per airline, the European complaints concerning Boeing's low-price politics must be seen as an automatism rather than a moral flaw. The problem of not being able to compete with Boeing's prices has always been due to all of the competitors' own product scales and not due to the meanness of the market leader. This also applies to Airbus. If the European consortium really wants to achieve its goal of gaining 50 percent of the world airliner market, it can't be wasting time by hindering the anyway autarchic giant Boeing with bureaucratic maneuvers. It needs rather to improve its own efficiency. German Minister of Economics, Dr. Günter Rexrodt, commented on the issue by saying that the European aerospace industry can only cope with this challenge by setting up efficient integrated company structures. A restructuring of Airbus Industrie into a truly joint company could be the first step, along with expanding AI's product scale to overcome Boeing's 747 monopoly. The Aerospace Coordinator of the German government, Dr. Norbert Lammert, in his report about the situation of the European aerospace industry, emphasizes this by saying that it will be necessary to strive for integrated European solutions in civil aviation, spaceflight, and defence technology with much more pressure. Quite a few experts feel that the restructuring of Airbus should be the basis for a later integration of the entire civil and military European aerospace industry. With this in mind, the history of the world's largest aerospace concern Boeing of course gives an example of brilliant marketstrategic chessmoves, but most of all it turned out to be the mirror for the disorderly situation in the "European House". From page 22 of FLUG REVUE 10/97 Home | Update | Latest Issue | Gallery | FR Profile | Datafiles | FR 10/97 Copyright 1997 by Motor-Presse Stuttgart. All rights reserved. Last updated September 5, 1997 FLUG REVUE, Ubierstr. 83, 53173 Bonn, Germany