US deal will not shoot down European rival; COMMENT
Tuesday 17 December 1996
The reasoning goes something like this. The merger will reduce the number of players in the big airliner market to two. If the world's airlines want to ensure healthy competition for their custom when they next update their fleets, then they will make damn certain that the European manufacturer is on every tender list. The market will not allow the Americans to steamroller Airbus into oblivion because it has seen what happens when Boeing has a monopoly. It is no accident that the 747 jumbo jet, available only from Seattle, accounts for more than a third of Boeing's profits.
There are other reasons why the merger should not mean the meltdown on this side of the Atlantic suggested by some observers. One is the simple fact that it will tie Boeing up in knots for at least a year as the combined business beds down. The other is that it removes a bit player with a tired product range from the market, thus eliminating the threat of uncommercial pricing.
In any event, it is by no means obvious that Boeing's primary purpose in buying up McDonnell is to gang up on Airbus. The increased presence the deal gives Boeing in the military market looks a more compelling motive, particularly now that it also has Rockwell under its belt. Lockheed Martin and Europe's collection of still-independent defence manufacturers probably have more to worry about than Airbus does.
None of this means, however, that Airbus can afford to be complacent. One side effect of the merger is to put more onus on the consortium to complete its restructuring into a properly accountable and fully commercial entity, so that it can tap the capital markets for funds and match the efficiencies and economies of scale that Boeing presumably reckons it can wring from Douglas's factories lower down the West Coast.
That is no bad thing. The French partner in Airbus has recently shown signs of wanting to drag its feet. The Boeing-McDonnell deal is perhaps the kick in the shins it needs.
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