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Brand Wars

Boeing and Airbus have been engaged in a long-running trade dispute, with each accusing the other of receiving illegal subsidies from their respective governments. Both companies receive various forms of government support for research, military contracts, and launch financing for new aircraft programs. The World Trade Organization has been investigating complaints from both sides but has struggled to resolve the complex issues around what constitutes permissible government assistance for the aircraft manufacturers.

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Robin Joseph Thomas
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63 views26 pages

Brand Wars

Boeing and Airbus have been engaged in a long-running trade dispute, with each accusing the other of receiving illegal subsidies from their respective governments. Both companies receive various forms of government support for research, military contracts, and launch financing for new aircraft programs. The World Trade Organization has been investigating complaints from both sides but has struggled to resolve the complex issues around what constitutes permissible government assistance for the aircraft manufacturers.

Uploaded by

Robin Joseph Thomas
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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BRAND WAR

GROUP
D2
AIRBUS BOEING
BOEING
• Founded in 1917, Seattle Washington
• The world's largest aircraft and aerospace
manufacturer .
• 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
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 to challenge
US dominance
• Since 1981, however, Airbus has confounded its critics by
gaining market share
• In 2000, Airbus made the transition from a consortium to a fully
functioning private entity
AIRBUS VS. BOEING
• Severe competition with each other in the
manufacturing of commercial jet planes
• Recent examples of airbus A380 and Boeing 787
dreamliner.
• A350xwb vs high end of 787 and 777
• A330-200 vs 747
SUBSIDY CONFLICTS
• Boeing has accused airbus for receiving subsidies from
European union
• Airbus has argued that Boeing receives illegal
subsidies through military and research contracts and
tax breaks.
• Airbus argues that the military contracts awarded to
Boeing, the second largest U.S. defence contractor, are
in effect a form of subsidy.
• NASA also provides significant support to Boeing

• In August 2010, the WTO ruled that the European


Union's funding to Airbus through the use of loans with
below market rates, and research grants and
infrastructure/runway funding initiatives were illegal
ORIGINS OF TRADE DISPUTE
• 1980’s:The dispute started when Airbus began to obtain
all its capital from European government to launch new
aircraft
• 1992: US.-EU agreement on large civil aircraft. It places
limits/ eliminate certain government support, including
limiting “launch aid” to 33% of the costs of developing a
new aircraft.
• Launch aid - - Financing with no or low interest and
repayment is tied to, and entirely dependent on, sales of
the financed aircraft.
• Support should be repaid at an interest rate no less than
the government cost of borrowing and within no more
than 17 years

• Prior to the agreement, 75% of development cost was


provided by European government for Airbus

• Boeing was a recipient of indirect support as well


• Tax breaks from states (Washington, Kansas, and so
on)
• Technological benefit from govt. sponsored R&D
programs
• Military contracts
• Since the 1992 agreement, Airbus captured larger and
larger market share (beginning 2003).
• Fall 2004, attempt to modify the 1992 agreement
• In October 2004, the United states withdrew from the
1992 agreement and filed a complaint in the WTO.
• EU responded by filing its own complaint
• Each side claims that a large amount of the other’s
subsidies has been channeled toward the launch of
new super-sized passenger jets:
• BOEING 787 “Dreamliner”
• AIRBUS 380 Super Jumbo
COMPARISON

AIRBUS 380 BOEING


SEGMENTATION AND
TARGETING
BOEING AIRBUS
• TARGETS THE NORTH • GEOGRAPHICAL AREAS
AMERICAN AND EUROPEAN CONCENTERATED ARE THE ASIAN
MARKET,MIDDLE EAST AND
MARKET.
SOUTHERN EUROPE.
• TARGETS MORE OF MATURE • TARGETING LONG HAUL FIGHTS
ECONOMICS. WITH A380.
• TARGET CHINA BECAUSE OF • TARGETED MORE OF LOW COST
VAST GEOGRAPHICAL AREA AIRLINE WITH A320

• ASIAN MARKET FOR SHORT


HAUL FIGHTS
BOEING

• TARGETS COMMERCIAL
AIRLINE
COMPANIES,GOVERNMENTAL
AND NON GOVERNMENTAL
ORGANIZATIONS.
POSITIONING
BOEING AIRBUS
• SHORT DISTANCE-BOEING • SUPER JUMBO OF ALL
737 MACHINES
• LONG DISTANCE- BOEING
777,787 • BOTH IN SHORT AND LONG
• LUXUARY AIRCRAFT DISTANCE FLIGHTS WITH A380
• FUEL EFFICIENT AND WHICH HAS NON STOP AND
ENVIRONMENTAL FRIENDLY A330,320 HAD TRANSIT STOPS
CHARACTERISTICS BOEING 787 AIRBUS 380

550 + PASSENGERS(DOUBLE
SIZE AND CAPACITY 200-300 PASSENGERS
DECKER)

RANGE 8200 NAUTICAL MILES 8000 NAUTICAL MILES

NUMBER OF ORDERS 235 178

ROLLS-ROYCE OR ENGINE
GENERAL ELECTRIC OR
ENGINE ALLIANCE
ROLLS-ROYCE TRENT 1000

FLYING SPEED 954 KMPH 945 KMPH

HEIGHT AND WEIGHT 55 FT, 380000KG 80.2 FT, 521000KG


TOTAL ORDERS FOR AIRBUS AND
BOEING
TOTAL DELIVERY FOR AIRBUS AND
BOEING
BOEING’S POSITION
• Case filed with WTO in 2005 in response to the $1.7 billion
“launch aid” for its new A350 aircraft, which violates subsidy
agreements

• Risk-free money – shifts risk from manufacturer to EU


taxpayers
• Repayment is contingent upon success of aircraft sales.
• EU claimed that launch aid was necessary to help an
infant industry compete against a mature company.
AIRBUS
• Airbus counter-filed against Boeing, claiming:
• Boeing has been receiving illegal government subsidies
through tax breaks and defense contracts
• Airbus contends that it has repaid over $6.4 billion in
loans, over 40% more than has received.
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 trade
disputes.
AIR TRANSPORT AND TRADE
• Both companies suffered after 9/11
• Airbus was the first to recover after 9/11 after orders of 375
planes had come
• Recession also had an affect on both the companies
• Airbus was severely hit because of the A380, a 380 needed
more runway space so the governments could not fund more for
airports
PRIMARY USERS OF A 380
• Emirates
• Singapore airlines
• Qantas
• Air france
CONCLUSION

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