Before Boeing and McDonnell Douglas go much further with merger talks they will need to assess their chances of overcoming antitrust concerns. A merger of the defence divisions may succeed because of Boeing's limited exposure and US policy favouring strong defence companies over competition. But a commercial aircraft merger would face serious hurdles.
If the antitrust review was limited to present market shares, a merger of commercial jet divisions would stand no chance, according to antitrust specialists. Some reports put the two manufacturers' combined global market share in the medium and large jet segment at 83 per cent measured in 1995 orders to mid-November. But the big dilemma for any lawyer is measuring the true market presence of each player. In 1994, for instance, Airbus had a 51 per cent market share of the net orders, but based on all jet aircraft in service at the end of 1994, Boeing and MDC dominate the market with a joint share of 77.1 per cent.
But whatever Airbus' success last year, there is little doubt that any antitrust assessment will put the two US manufacturers' combined market share well beyond the 50 per cent limit. Lawyers specialising in this area suggest three possible ways around this hurdle.
A typical antitrust analysis would attempt to define markets for individual products and only Boeing has a presence in the 400 and 200 seat sector. But subdividing the market into individual aircraft types runs counter to the fleet commonality principle.
The other arguments start from the premise that the combined market share of a Boeing-MDC merger does not reflect the real level of future concentration as other manufacturers could enter the picture or one of the merger partners could be about to fail.
There are a number of potential new entrants in the jet market, mainly concentrated in Asia-Pacific, but combined, they still may not satisfy US antitrust guidelines.
That leaves merger proponents with the so-called 'failing company' doctrine. The US Supreme Court has previously ruled that 'evidence of past production does not . . . necessarily give a proper picture of a company's future ability to compete.' The courts or government officials may therefore approve the merger if the company is too weak to survive on its own and has tried but failed to find a buyer that would pose less danger to competition than the proposed merger.
Any number of analysts will predict its ultimate demise for failing to develop new models, but after Douglas Aircraft won $3 billion in orders during October, it is hard to see how failure is imminent. And whether MDC has really tried to find a buyer less threatening to competition is harder to judge.
David Knibb
Source: Airline Business
