Boeing's griping leaves a sour taste

Financial Times 09/09/04
author: John Gapper
(c) 2004 The Financial Times Limited. All rights reserved

Harry Stonecipher was in London last week. Boeing's hard-nosed chairman had come to complain about Airbus, its main competitor in civil aerospace. His gripe was that the European company has been getting billions of euros in launch aid from the British, German and French governments for new aircraft development.

That is only one of Boeing's criticisms of Airbus. It constantly insists to anybody who will listen that there is not a large enough market for the A380, the "super-jumbo" which Airbus intends to launch. Boeing is developing the smaller 7E7 instead, which it says fits the emerging needs of airlines better. "I think the A380 is the dumbest thing anyone has ever done," said Mr Stonecipher.

Boeing is not alone in criticising, and lobbying against, a competitor. Many companies invest plenty of time and effort in trying to undermine their rivals. But the way Boeing has gone about the task is counter-productive. Instead of damaging Airbus, it makes itself look like a sore loser: a once-powerful company that cannot cope with being overtaken by a rival it used to dominate.

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Boeing's complaints about Airbus have some merit. The arrangement under which European governments lent Airbus $3.7bn to underwrite the development of the A380 made its life easier. The company would have been unable to develop a range of aircraft as rapidly without backing from governments that wanted to create a European rival to Boeing.

It is also onto something in its critique of the A380. Airbus may well be over-estimating the potential market for very large aircraft. Airlines will like the idea of getting more from scarce take-off and landing slots, but passengers think differently. Most would probably prefer to fly direct routes on smaller aircraft such as the 7E7, given the choice.

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It is hard to get too exercised about Airbus being pampered when Boeing has gained $3.2bn in tax incentives, as well as other financial perks, from the state of Washington in return for guaranteeing to build 7E7s in the state. Meanwhile, the wings are to be built in Japan by a group of suppliers that have received public subsidies. Boeing insists that this is wholly different, but you could have fooled me.

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The result is that Boeing ends up looking both weak and grumpy about a European rival making aircraft that customers like. This grousing is less than one expects from a US company with a history of independent thought and risk-taking. It is unconfident. It is unattractive. It is, well, un-American.

Yet Boeing seems to be publicly pursueing this approach. I'm not sure what we get out of it though. Obviously Europe is going to help Airbus, and obviously the U.S. is going to help Boeing. They are each too important to the local economies to ignore. Boeing needs to move on towards a strategy of "how to win more market share."