Kevin O'Toole/LONDON
Guy Norris/LOS ANGELES
REPORTS THAT Boeing and McDonnell Douglas are exploring options for a mega-merger have raised pressure on the Airbus partners to accelerate their own sluggish restructuring efforts.
The Boeing-MDC talks came to light in a report in the Wall Street Journal on the 16 November. Negotiations appear to be at a preliminary stage, with no signs yet of whether they will result in a full-blown merger or stop at a more limited asset swap.
A full merger would create a powerful $35 million grouping, dwarfing even the largest of the new US giants which have emerged from the latest round of consolidation. It would face a tough fight to get a deal past US anti-trust rules.
Although a merger of the civil businesses would technically give the new group a dominant share of the world jet-airliner market, it is difficult to see how the two competing ranges could continue to be run alongside each other for long.
One possibility is for MDC to concentrate on the lower-capacity regional-aircraft sectors, while dropping its other products.
The potential for major rationalisation would help add to Boeing's plans to slash aircraft production costs, lead times and purchase prices.
The threat of such competition is already focusing minds within Europe on the issue of how to reform the Airbus consortium structure. Calls from the German and UK partners, now increasingly backed by pressure at Government level are for a commercial holding-company structure free to take greater control of its costs.
Sources close to the negotiations suggest that moves have so far been blocked by French hesitance over any change to the existing regime, but there are signals that France, too, considers change as inevitable.
Boeing has a clear lead in civil markets, and is more likely to be interested in getting its hands on MDC's valuable military business to sit alongside its own relatively small defence business.
If Boeing's fighter business, created to develop its one-third share in the F-22 with Lockheed Martin, were absorbed by the much larger MDC operation, the new grouping would hold half of the F-18 production and, potentially, two-thirds of the Joint Strike Fighter (based on the current teaming arrangements).
A more straightforward link could be forged on helicopters, where Boeing's CH-47 Chinook offering would fit wellwith the MDC AH-64 Apache and Explorer.
Boeing signaled a desire to rationalise the helicopter sector earlier this year, when it opened merger talks with Bell Helicopter Textron - its partner on the V-22.
The only major conflict between Boeing and MDC's space businesses would be on Space Station Alpha for which Boeing is prime contractor and MDC a major subcontractor.
Source: Flight International
