Boeing Vs. Airbus

Question 5

Reasons for U.S. industry cautious reactions to attempts by politicians to reopen the trade dispute in 1993

According to Bruner (2004), a vast majority of those in the United States have responded to the sustained Airbus success over time by crying foul. In the past, since the onset of this debate; the contentious issue has been that the Spain, Germany, France as well as Great Britain have heavily subsidized Airbus hence paving its route to success. However, Airbus has often retorted by accusing Boeing of receiving veiled subsidies from the United States government.It was not until the year 1992 that Boeing and Airbus sat down and agreed to iron out the differences that have seen then on the warpath against each other over time.

However, this agreement was far from sealing the loopholes that informed previous disputes. Just a year after seeking to end heir perennial disputes, another battle front seemed to be emerging courtesy of politicians who were seemingly bent on reopening the trade dispute that had previously existed between Boeing and Airbus.However, the United States industry largely remained largely silent and this can be seen as a tactful approach to avert a number of happenings.

To begin with, the calls by the administration lead by the newly elected president Bill Clinton to call for a freeze on Airbus subsidies could trigger serious disputes and significantly injure relations between the United States and Europe. There were also the real possibilities of Europe retaliating which could have in one way or the other had serious impacts on a number of companies in the United States. For instance, General electric and Pratt and Whitney were two companies in the United States which benefited by supplying engines to Airbus.

Further, there were a number of other companies in the United States that supplied Airbus with avionics. It hence follows that a reiteration from Europe could have had a significantly negative impact on the bottom-line of a number of U.S firms that did business with Airbus.Further, another reason why the U.S industry reacted with caution to attempts by politicians to rekindle another trade dispute was the fact that Boeing supplied a number of state owned firms in Europe with aircrafts.

Hence many industry insiders felt that by having the trade dispute reopened, the United States stood a chance of loosing out on this highly profitable venture. It is important to note that the attempts to reopen the trade disputes did not end with the blasting off of the European union by President Clinton over the continued Airbus subsidies. Other attempts to reopen the dispute that were largely ignored by the United States industry include the attempts by Montana and Missouri senators.

The two senators wanted the United States government to facilitate a trade case against the aircraft maker for alleged subsidies that were largely seen to be unfair and anticompetitive. This was only one of the bills that were drafted by the two senators but needless to say, industry players including but not in any way limited to Boeing refused to play ball hence effectively rendering these efforts ill informed.

Question 6

The case for antitrust authorities to permit the formation of large domestic firms through mergers and acquisitions in the era of global competition

In Galpin (2007) own words, “the world today has become a global village and hence with that in mind; the adoption of strategies to enhance the competitiveness of firms operating in the global marketplace is not only timely but also relevant.” These strategies include but are not in any ay limited to mergers and acquisitions. It hence follows that for domestic companies to be able to remain relevant in an increasingly competitive marketplace, the relevance of mergers and acquisitions cannot be understated and hence herein lies a case for antitrust authorities to permit the formation of large domestic firms through mergers and acquisitions.

To begin with, mergers and acquisitions benefit firms through the creation of economies of scale. This hence means that through the revenue gains such companies make as a result of economies of scale, they can be able to enhance the value of their services hence benefiting the client I the long run. Further, revenue gains made in this case can be used towards the betterment of other stakeholders including the employees through enhanced benefits as well as stockholders or owners through stockholder wealth maximization (Miller 2008).

According to Frankel (2005) companies operating in the global marketplace benefit from synergy as a result of mergers and acquisitions or what are better known as M&A deals. Synergy in the context of mergers and acquisitions is loosely denoted by the ability of a company to enhance its cost efficiencies. Cost efficiencies or in other words synergy in the case of mergers and acquisitions comes about as a result of a number of things. One, M&A deals could uplift their technical capabilities of the resulting company and in a world that is increasingly becoming technical by the embracing of ecommerce amongst other things, the acquisition of enhanced technical capabilities can largely be seen as way of enhancing a company’s competitive edge.

Two, M&A deals in this context could enhance the market reach of companies and improve their visibility in the industry. Hence in that direction, considering we are in the era of global competition, antitrust authorities must realize that mergers and acquisitions are sometimes the only way to penetrate hostile or unreachable markets. This goes a ling way to pave way for improvements in the marketing as well as distribution channels of the companies formed. Further, according to Bragg (2008), companies are finding it appropriate to grow as well as expand through the use of debt.

Given that a merger can enhance a firms image in front of the investment community, antitrust authorities should be compelled to favor mergers and acquisitions. However, it is important to note that achieving synergy is not automatic on the merger of two firms or the acquisition of another.It is also important to note that another significant argument for antitrust authorities to permit mergers and acquisitions is the ability of such moves to attract more investment and hence foster greater innovation as well as better products and services. This is as a result of the inherent ability of an M&A deal to boost earnings per share.

Though this is mainly due to shares outstanding and earnings rate of increase inconsistency, investors seeking to cash in on the enhanced earnings per share may contribute towards the enhanced wellbeing of the firm. Over time, we have had successful mergers and acquisitions including but not limited to the one recounted in the case study between Boeing and McDonald Douglas where though the undertaking had its teething problems in the first instance, the deal eventually informed a reduction of operating costs by up to 20%.

  Question 7

A discussion on whether the threat by EU authorities to declare the Boeing-McDonnell Douglas illegal was a violation of the national sovereignty of the United States.

The Boeing-McDonnell Douglas merger came as a shocker to many industry insiders as well as analysts. The deal that was estimated in some quarters to be in the region of 13.3 billion U.S Dollars would see the two companies which had previously been rivals merge in what was seen by some to be a move by Boeing to consolidate its position in the market in the light of the increasing competition by Airbus. Some of those who were up in arms included the UU authorities and they went a step ahead to threaten that if the deal was allowed to go on, they would declare the same illegal.

Their opposition was founded on a number of concerned raised by the European Commission including but not in any way limited to the stifling of competition in the marketplace and the possibility of going against the spirit of the declaration between Continental, Delta as well as American Airlines that had provisions aimed at curbing commercial aerospace market competition.When it comes to the violation of U.S national sovereignty, a number of arguments can be brought out. To begin with, the merger was in the best interest of the country.

It is important to note that McDonnell Douglas is a company hat had been on the loosing streak for quite a while (since 1970s) and hence it was just a matter of time before it lost its marketplace for good. Hence in this regard, it was only logical to merge Boeing and McDonnell Douglas so as to protect the jobs of so many American citizens who derived third daily living from the company.Indeed, antitrust authorities in this case saw the need for a Boeing-McDonnell Douglas merger sop that the resulting entry would be able to compete effectively globally.

Further, there were discussions at the governmental level that were of the opinion that in order to do away with excess capacity in the defense industry, there was an urgent need for consolidation. Hence the merger between Boeing and McDonnell Douglas had an impact on a crucial sector of the economy of a sovereign nation and hence the threat by EU authorities can be constructed to have been undertaken in violation of the national sovereignty of the United States.

It is important to note that on the other hand, EU had a valid argument that was largely based on merit though a little but shaky in a way. Though, the merger between Boeing-McDonnell Douglas would increase the level of competition, there was no way it was going to kill the same as the EU officials put it. While it was possible Airbus would be shut off from exclusive supply contrast, other fears like the likelihood that the Boeing-McDonnell Douglas merger could go a long way towards frustrating competition in the large commercial jet aircraft marketplace were largely unfounded and ill informed.


Bruner, R.F. (2004). Applied mergers and acquisitions. John Wiley and Sons

Bragg, S.M. (2008). Mergers & acquisitions: a condensed practitioner’s guide. John

Wiley and Sons

Frankel, M.E. (2005). Mergers and acquisitions basics: the key steps of acquisitions, divestitures, and investments. John Wiley and Sons

Frankel, M.E. (2007). Mergers and acquisitions deal-makers: building a winning team. John Wiley and Sons

Galpin, T.J. (2007). The complete guide to mergers and acquisitions: process tools to support M&A integration at every level. John Wiley and Sons

Miller, E.L. (2008). Mergers and acquisitions: a step-by-step legal and practical guide. John Wiley and Sons