IT IS A TRUTH THAT the people who start wars are very rarely the people who end up winning them. That should be remembered by the European Union (EU) politicians and officials who seem determined to start a trade war with the USA over the proposed merger of Boeing and McDonnell Douglas (MDC).
The EU can, according to its own rules, pull out all sorts of firepower. It could fine Boeing 10% of the value of its business in Europe. It could ban the import of Boeing aircraft by EU airlines.
There are flaws in those arguments, of course. No airline is going to abandon orders for Boeings simply because of a short-term import ban. It will leave the orders intact, and lease aircraft to cover any shortfall or (if the ban extends to leasing in Boeings as well) subcontract services to non-EU airlines unaffected by the ban. If Boeing were to effectively stop exporting aircraft to Europe, its EU turnover would drop, as would the revenue from a fine on its EU-based income.
The US arsenal is a little more powerful. Europe has chosen to pick a fight over aerospace, but the USA, as the wronged party, would have no reason to confine its response to that sector - it could pick on or ban any number of types of European import. Even if it confined itself to aerospace, however, the USA could wreak havoc on European industry.
Airbus Industrie alone has outstanding orders for 230 aircraft direct with US airlines, and a further 150 with US-based leasing companies (although they could no doubt find ways around a ban just as the Europeans could). European suppliers like Alenia (which manufactures fuselage sections for Boeing) and Snecma (a significant supplier/partner to General Electric in engine projects) would be at immediate risk. In short, Europe is risking a trade war in which there can only be one winner. Previous trade disputes between the two have shown that the winner cannot under any circumstances be Europe. So why risk the battle in the first place?
The noises from Brussels say that it is to protect Airbus. By some EU counts, an enlarged Boeing would have 84% of business surrounding the world airliner market - presumably a function of its massive installed base.
For the first six months of this year, Boeing and MDC have taken 76.2% of new orders between them, and hold 69.4% of the outstanding backlog. MDC accounts for only 2.7% of new orders, and 7.7% of the backlog, so in the current market, even before the merger, Boeing is twice as strong as Airbus. In terms of backlog that has pretty much been true for a decade.
Airbus has fought bitterly to demonstrate that it is not a poor relation and wins on average some 40%of new orders. So the Boeing/ MDC merger is hardly relevant to Boeing's domination of the airliner market. If Airbus needs protection, it is not from Boeing, but from the European politicians and state-industrial officials who will not let it become an independent commercial company.
Perhaps, therefore, the EC's desperation to start a trade war has another basis. Some of the officials who are now trying to destabilise world trade are still smarting from having lost the negotiating battle which led to the so-called transatlantic "large jet agreement" of 1992, which set out limits for (European) launch aid and (US) indirect support. It lost again when that deal came up for renegotiation during the setting up of the World Trade Organisation.
They seem to think that taking the USA to the brink over this merger could help them to wring more concessions on aid. If they want to renegotiate that deal then it should be on the basis of that agreement, not on some other pretext.
However they dress up their intentions, those who would take Europe to war over Airbus are doing that company and its products a disservice: in claiming that only by artificially restricting Boeing can they save Airbus from the market, they have already lost the war.
Source: Flight International
