This assignment gives a general overview of the large civil aircraft market leaders: Airbus and Boeing. Further, the historical backgrounds will be analyzed.
The assignment examines the duopoly-position considering the economic backgrounds. A number of key issues arise especially from Boeing’s side. Boeing lost his dominant role on the market. Furthermore, Airbus delivered very high innovative technological standards, by keeping the costs low. It did not take long time until Boeing has responded by blaming Airbus to get subsidies from the government. All this led to the biggest dispute in history and has been a particular challenge for the World Trade Organization (WTO).
The results of this assignment point out, that there are new entrants on the aircraft market, for example China and Russia. Instead of negotiating for years about subsidies, Airbus and Boeing should concentrate on improving their technological standards.
The best way to summing up, is to say, that it is not a competition between aircraft industries, it is a competition between the world’s largest governments: The European Union and the United States.
Table of contents
1 Introduction
2 The large civil aircraft market
2.1 Boeing
2.2 Airbus
2.3 Comparing Airbus and Boeing
3 The competition between Airbus and Boeing
3.1 The history
3.2 Economic characteristic of the aircraft industrie
4 The Airbus and Boeing dispute in the WTO
4.1 The WTO and the General Agreement on Tariffs and Trade
4.2 The lawsuit
4.3 Current situation
5 Results and conclusion
Objectives and Topics
This assignment provides an analysis of the large civil aircraft market and the historical competition between the two industry leaders, Airbus and Boeing. It investigates the roots of their long-standing legal dispute over government subsidies and evaluates the economic impact of this duopolistic rivalry, ultimately proposing potential avenues for cooperation to foster future innovation.
- Market dynamics of the Large Civil Aircraft (LCA) industry
- Historical evolution of the Airbus-Boeing rivalry
- Economic characteristics and entry barriers in aircraft manufacturing
- Analysis of the WTO dispute regarding government subsidies
- Strategies for future market cooperation and innovation
Excerpt from the book
3.1 THE HISTORY
After Boeing noticed the great success of Airbus in the early seventies, it started to involve Airbus in their own projects, in order to stop Airbus’ in-house development. Boeing’s approach to cooperate with Airbus was a big failure and the beginning of the world’s biggest dispute. Airbus refused the suggested cooperation and continued to work on innovative aircraft. Consequently Boeing blamed Airbus infringing a US patent by using the same airplane wings. Due to Airbus’ innovative technology, the implementing of the matrix – management and the fact that Boeing did not use the competitive advantages of the “barriers to entry", Airbus receive accesse to the large US market in 1978. In a nutshell, Airbus signed the first contract with the American Eastern airline on leasing twenty-three airplanes and offered them a value-added service by sharing their training costs caused by the implementing of the delivered Airbus machines. The United States International Trade Commission (USITC) immediately started an investigation on this agreement.
From all this it follows that there has been few cases of unfair tactics directed specifically at Boeing, yet the US Company constantly insists unfair governmental backing and favoritism for Airbus. In the meantime Airbus continued to improve its technological standards and keep costs and prices low. This pressure forced also Boeing to improve its efficiency and innovation. Finally, both companies embarked on multi-billion dollar investments into the development of new aircraft, further raising the stakes. Other aircraft manufacturers were no longer able to compete successfully on the market, consequently they were driven out consequently. Because of this, in 2002, Boeing and Airbus were the largest competitors on the aircraft market and remain in this position to this date.
Summary of Chapters
1 Introduction: This chapter outlines the scope of the assignment, detailing the context of the LCA market and the objective to examine the causes and persistence of the Boeing-Airbus WTO dispute.
2 The large civil aircraft market: An overview is provided of the two dominant market players, Boeing and Airbus, comparing their historical backgrounds, revenue structures, and market positioning.
3 The competition between Airbus and Boeing: This section explores the historical development of the rivalry and identifies the specific economic characteristics, such as high barriers to entry and duopolistic constraints, that define the industry.
4 The Airbus and Boeing dispute in the WTO: The legal battle regarding government subsidies is analyzed, focusing on the role of international trade agreements and the ongoing impasse between the US and the EU.
5 Results and conclusion: The author synthesizes the findings, arguing that rather than pursuing a zero-sum legal battle, the parties should focus on cooperation and technological advancement in an increasingly crowded global market.
Keywords
Airbus, Boeing, WTO, Large Civil Aircraft, Subsidies, Duopoly, Trade Dispute, Aerospace Industry, Market Entry, GATT, Economic Characteristics, Innovation, Global Competition, Government Aid, Aircraft Manufacturing.
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment provides a comprehensive overview of the competition between Airbus and Boeing in the Large Civil Aircraft (LCA) market and analyzes the long-standing legal dispute at the World Trade Organization (WTO) regarding government subsidies.
What are the core thematic areas covered?
Key themes include corporate history, the economics of the aerospace duopoly, barriers to market entry, the legal complexities of international trade agreements, and the impact of government intervention on industry innovation.
What is the main objective of the research?
The study aims to investigate why the WTO dispute has lasted for so many years without a clear resolution and to identify potential solutions that move beyond legal litigation.
Which scientific methodology is applied?
The author conducts a comparative industry analysis, examining historical data, market economic factors, and existing legal frameworks to interpret the competitive dynamics and the origins of the subsidy conflict.
What topics are discussed in the main body?
The main body covers the company profiles of Airbus and Boeing, the history of their rivalry, the economic barriers to entry for new competitors, and the specific legal proceedings within the WTO and GATT frameworks.
Which keywords define this work?
The work is defined by terms such as Airbus, Boeing, WTO, LCA market, subsidies, and trade disputes.
How does the author characterize the entry barriers in the aircraft industry?
The author highlights high capital requirements, significant R&D needs, and economies of scale as major obstacles that make it nearly impossible for new players to enter the LCA market.
What is the author's suggested solution to the impasse?
The author proposes moving away from prolonged WTO legal battles toward private negotiations and a regular exchange of information between the US and the EU to limit, rather than entirely eliminate, various forms of subsidies.
How did new market entrants change the dynamic?
The growth of competitors from countries like China, Russia, Japan, and Canada during the Airbus-Boeing dispute serves as a catalyst for the author’s argument that continued litigation is inefficient compared to future-oriented cooperation.
- Quote paper
- MBA Irina Düsseldorf (Author), 2015, The WTO Dispute of Boeing and Airbus, Munich, GRIN Verlag, https://www.grin.com/document/339907
