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AIRBUS BOEING

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BOEING

Founded in 1917, Seattle Washington

The world's largest aircraft and aerospacemanufacturer .

The second-largest defense contractor in the world

$ 63.6 billion in revenues (2009)

The largest exporter in the world for commercial jets Latest addition to the family is Boeing 787 dream liner

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AIRBUS

Airbus was founded in 1970 as a consortium of four European aircraft manufacturers

British (20%), France (37.9%), Germany (37.9%), Spain(4.2%)

It was originally a marginal competitor and unlikely tochallenge US dominance

Since 1981, however, Airbus has confounded its critics bygaining market share

In 2000, Airbus made the transition from a consortium to afully functioning private entity

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AIRBUS VS. BOEING

Severe competition with each other in themanufacturing of commercial jet planes

Recent examples of airbus A380 and Boeing 787dreamliner.

A350xwb vs high end of 787 and 777

A330-200 vs 747

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SUBSIDY CONFLICTS

Boeing has accused airbus for receiving subsidies fromEuropean union

Airbus has argued that Boeing receives illegalsubsidies through military and research contracts andtax breaks.

Airbus argues that the military contracts awarded to

Boeing, the second largest U.S. defence contractor, arein effect a form of subsidy.

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NASA also provides significant support to Boeing

InAugust 2010, the WTO ruled that the EuropeanUnion's funding to Airbus through the use of loans withbelow market rates, and research grants andinfrastructure/runway funding initiatives were illegal

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ORIGINS OF TRADE DISPUTE

1980s:The dispute started when Airbus began to obtainall its capital from European government to launch newaircraft

1992:US

.-EU

agreement on large civil aircraft.Itplaces limits/ eliminate certain government support,

including limiting launch aid to 33% of the costs ofdeveloping a new aircraft.

Launch aid - - Financing with no or low interest and

repayment is tied to, and entirely dependent on, salesof the financed aircraft.

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Support should be repaid at an interest rate noless than the government cost of borrowing and

within no more than 17 years

Prior to the agreement, 75% of developmentcost was provided by European government for

Airbus

Boeing was a recipient of indirect support aswell

Tax breaks from states (Washington, Kansas,and so on)

Technological benefit from govt. sponsoredR&D programs

Military contracts

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Since the 1992 agreement, Airbus captured larger andlarger market share (beginning 2003).

Fall 2004, attempt to modify the 1992 agreement

In October 2004, the United states withdrew from the1992 agreement and filed a complaint in the WTO.

EU responded by filing its own complaint

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Each side claims that a large amount of the otherssubsidies has been channeled toward the launch ofnew super-sized passenger jets:

BOEING 787 Dreamliner

AIRBUS 380 Super Jumbo

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COMPARISON

AIRBUS 380 BOEING

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GEOGRAPHICAL AREASCONCENTERATEDARE THEASIANMARKET,MIDDLEEAST AND

SOUTHERNEUROPE.

TARGETING LONG HAUL FIGHTSWITH A380.

TARGETED MOREOF LOW COSTAIRLINE WITH A320

TARGETS THENORTHAMERICANANDEUROPEAN

MARKET. TARGETS MOREOF MATURE

ECONOMICS.

TARGET CHINABECAUSEOFVAST GEOGRAPHICAL AREA

ASIAN MARKET FORSHORTHAUL FIGHTS

SEGMENTATION AND

TARGETING

BOEING AIRBUS

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TARGETSCOMMERCIALAIRLINECO

MPANIES

,GO

VERN

MEN

TA

LANDNONGOVERNMENTALORGANIZATIONS.

BOEING

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SUPER JUMBOOF ALLMACHINES

BOTH INSHORT AND LONGDISTANCE FLIGHTS WITH A380WHICH HASNONSTOP ANDA330,320 HAD TRANSIT STOPS

SHORT DISTANCE-BOEING737

LONGDISTANCE- BOEING777,787

LUXUARYAIRCRAFT

FUEL EFFICIENT ANDENVIRONMENTAL FRIENDLY

POSITIONING

BOEING AIRBUS

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CHARACTERISTICS BOEING 787 AIRBUS 380

SIZEANDCAPACITY 200-300 PASSENGERS 550 + PASSENGERS

(DOUB

LE

DECKER)

RANGE 8200 NAUTICAL MILES 8000 NAUTICAL MILES

NUMBEROF ORDERS 235 178

ENGINEGENERAL ELECTRIC OR

ROLLS-ROYCE TRENT 1000

ROLLS-ROYCEORENGINEALLIANCE

FLYINGSPEED 954 KMPH 945 KMPH

HEIGHTAND WEIGHT 55 FT, 380000KG 80.2 FT, 521000KG

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TOTAL ORDERS FORAIRBUS AND

BOEING

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TOTAL DELIVERY FORAIRBUS AND

BOEING

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BOEINGS POSITION

Case filed with WTO in 2005 in response to the $1.7 billionlaunch aid for its new A350 aircraft, which violates subsidyagreements

Risk-free money shifts risk from manufacturer to EUtaxpayers

Repayment is contingent upon success of aircraft sales.

EU claimed that launch aid was necessary to help aninfant industry compete against a mature company.

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AIRBUS

Airbus counter-filed against Boeing, claiming:

Boeing has been receiving illegal government subsidiesthrough tax breaks and defense contracts

Airbus contends that it has repaid over $6.4 billion inloans, over 40% more than has received.

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CURRENT STATE OF AFFAIRS

WTO will set up panel to investigate E.U.s claims that the U.S.Government is subsidizing Boeing

Both sides playing blame game accusing one another of not

cooperating Complexity of case may result in further delays in resolving this

issue - brings to question the ability of WTO to handle tradedisputes.

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AIR TRANSPORT AND TRADE

Both companies suffered after 9/11

Airbus was the first to recover after 9/11 after orders of 375planes had come

Recession also had an affect on both the companies

Airbus was severely hit because of the A380, a 380 neededmore runway space so the governments could not fund more forairports

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PRIMARY USERS OF A380

Emirates

Singapore airlines

Qantas Air france

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CONCLUSION

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