Boeing and Airbus Corporation - Essay Example

Introduction One of the biggest industries in the world that is imperative for the movement of people and goods across the world is the aircraft industry. Two of the biggest players in the game are Boeing and Airbus. These two companies are currently disputing the subsidies each of them is receiving from local governments. A subsidy can be defined as monetary assistance granted by a government in support of an enterprise regarded as being of public interest (Answers, 2009). The answers to the six questions of this paper discuss different aspects of the Airbus vs. Boeing controversy. 1. Airbus Corporation was able to utilize subsidies to finance the development of its biggest projects. The company had great ideas and it would have been able to be a competitive company irrelevant of the subsidies, but it is questionable whether the company could have become the giant it is today if they had not received the subsidies. Airbus after 2004 was able to become the world largest aircraft producer surpassing Boeing in market share. In 2009 the company employed over 52,000 people (Airbus, 2009). The subsidies the company received were a critical success factor for the enterprise. If the company had not received the subsidies it would have been real hard to obtain the billions in finance it need to developed the next generation planes such as the A330 and the A350. 2. The European governments helped Airbus in many ways including proving subsidies probably because the innovative aircraft developer had designs that would revolutionize the industry forever. The planes the company designed offer incredible advantages over the competition such as providing better fuel efficiency and lower emissions. There is a tremendous problem Europe and the world is facing associated with air pollution which is causing global warming. Air pollution also makes people sick, causes cancer, and it harms animals and the ecosystem (Msn, 2009). The European government took a proactive approach towards contributing to the financial well being of a private entity, which tremendously helped Airbus in the long run. Another potential reason why the European government provides so much assistance is because of national pride. The Americans had historically being the world leaders in aircraft manufacturing, with the emergence of Airbus as a global leader a foreign company was able beat the American at their own game. 3. Airbus’ position over the subsidy programs Boeing is currently enjoying is justified. Boeing is playing devil’s advocate and it is using deception in order to receive subsidies they are not entitled too. There is an agreement in place since 1992 in which the companies agree not to receive subsidies (Hill, 2007). Boeing is utilizing third parties in order to receive money they would otherwise not be entitled to directly. The Japanese companies involved in the plot know that they are receiving the subsidy money under false premises since the money is going to be used to finance the research and development activities of Boeing Corporation. Airbus is within their right to complain since it is quite obvious that Boeing is utilizing a loophole in the law in order to get away with unethical behavior. Subsidies programs exist to help out smaller companies that need a capital injection or to protect local industries from foreign competition when the local industries can not survive on their own. 4. Antitrust agencies are in place to ensure that illegal activity such as collusion, price fixing, and monopolizing an open marketplace do not occur. We are living in an era in which the business community dominates the global economy. There are thousands of multinational corporation across the over 200 countries on this planet. There are many different types of industries and a common denominator in all of them is that competition has become more intense than ever. In order for many of these companies to survive they have to at times join forces to stay ahead of the curve. This is why the antitrust agencies are force to approve many mergers and acquisition deals since they have become a primary strategic tool that companies utilize to stay competitive. The antitrust agencies have to their job to ensure the best interest of the general public, but they realize that mergers and acquisitions are necessary to keep many of these multinational firms which generate thousands of jobs for the economy operating. 5. The United States government entered the dispute in 2004 concerning the subsidies Airbus was receiving when they noticed that their own interest were being affected. The US government collects a lot of tax revenues on every sale of a plane that is manufactured by Boeing. At this same exact time Airbus had surpassed Boeing in overall market share, thus they had become a bigger threat than ever before. There were plans underway for Airbus to develop the A350, which would compete directly with the 787. In order for Airbus ambitious plans to take place the utilization of subsidies were once again extremely important for Airbus. It is evident that the longer the dispute over subsidies continues the beneficiary of the dispute is Boeing because the multibillion project to develop the A350 will continue to put on hold until all the financing is in place which includes subsidy money. 6. The dispute is now in the hands of the World Trade Organization (WTO). The WTO was founded in 1995 with the purpose of promoting global trade in goods, services, and intellectual property (Referenceforbusiness, 2007). They are the ones that have the final say over the subsidy dispute. I see Airbus and Boeing as two giant corporation that are taking advantage of their corporate position to squeeze money out of government. Subsidies were not meant to help finance ambitious projects for rich corporations. Subsidies exist to protect small industries that are struggling and need governmental assistance in order to survive. I believe that neither Airbus nor Boeing deserve the subsidies they are receiving. The WTO should prohibit both these companies from receiving subsidies ever again, the money Boeing got through its Japanese alliance should be detracted and the subsidies for the A350 should not be approved. Conclusion The subsidy controversy depicted in this case study showed us how sometimes companies have to get creative to stay on ahead of the competition. Boeing entered into a alliance with a Japanese partner in order to indirectly receive subsidies. Airbus did not like the move, but their position is ironic and contradictory since this company has been able to receive tremendous benefits from subsidies in the past. Since the companies nor the government involved in the controversy were not able to settle the dispute on their own the World Trade Organization was brought into the picture to become the judge and settle this manner. References Answers.com (2009). Subsidy. Retrieved July 15, 2009 from http://www.answers.com/topic/subsidy Aribus.com (2009). Corporate Information. Retrieved July 15, 2009 from http://www.airbus.com/en/corporate/ Hill. (2007). International Business (6th ed.). New York: McGraw Hill. Msn.com (2009). Air Pollution. Retrieved July 15, 2009 from http://encarta.msn.com/encyclopedia_761577413/Air_Pollution.html Referenceforbusiness.com (2007). World Trade Organization (WTO). Retrieved July 15, 2009 from http://www.referenceforbusiness.com/encyclopedia/Val-Z/World-Trade-Organization-WTO.html Read More