Boeing plans to start its merger with McDonnell Douglas (MDC) from 4 August after constructing a last-minute deal to gain approval from the European Commission(EC). The EC Competition Commissioner Karel Van Miert announced approval in principle for the deal on 23 July, proclaiming victory after having secured a series of conditions from Boeing which include an end to exclusive airline supply deals and the promise to operate MDC's civil airliner arm as a separate company. Europe is due to sign off the deal formally by the end of July.
Akey part of the deal, however, is to put in place safeguards on the "spill-over" benefits of the MDC defence operations, which the EC believes could give Boeing an unfair advantage in civil-aircraft business. Boeing has agreed to supply an annual report to the EC over the next ten years laying out patents gained with the help of US Government-funded programmes and to license such technology to other commercial-aircraft manufacturers for a royalty.
Despite claims from Boeing chairman Phil Condit that the civil business receives no benefits from US Department of Defense work, there have been growing complaints from Europe over such subsidies. Van Miert calls the deal "spectacular", and some within the European aerospace industry are counting the deal as an unprecedented breakthrough. "It's an area in which they would never make a concession on in the past," says one senior academic.
Van Miert also confirms that the EC had considered forcing Boeing to sell MDC's civil Douglas Aircraft arm, but failed to establish any potential buyers. The US Federal Trade Commission (FTC) in its earlier approval for the merger had already concluded that Douglas was no longer considered a viable competitor in the commercial-aircraft business.
Instead, the EC has secured agreements from Boeing that it will retain Douglas as a separate legal- entity company for ten years. Boeing also addressed the EC's concerns over the extent of the Douglas installed fleet, by promising not to leverage customer support on these aircraft to gain an advantage in new-airliner sales.
Boeing has also agreed to not interfere with potential alliances between its suppliers and other commercial-aircraft manufacturers such as Airbus Industrie. Accusations surfaced in Europe earlier this year that Boeing had put pressure on major supplier Northrop Grumman not to sign up for a risk-sharing role in the A3XX.
"We have obtained assurances that Boeing will not abuse its extremely strong position," says Van Miert. "This is essential for Airbus, since Boeing would have been able to profit from its position by dissuading suppliers from co-operating with the consortium."
As widely anticipated, Boeing was prepared to drop its use of exclusive deals. The group will not enter into any new pacts with airline customers for ten years and has pledged not to enforce the exclusivity provisions in its existing agreements with American, Delta and Continental. Condit says that the price of the aircraft remain unchanged, and the US carriers say that Boeing's EC deal would have little effect on their purchases.
Questions remain about the fate of the MD-95. Condit says that "-there are a number of things about the MD-95 that I find very attractive. It offers opportunity for some derivatives that are exciting in the area of 100 seats and below. We will look at the data, and try to go forward," he adds.
Source: Flight International
