Sir: The proposed merger between Boeing and McDonnell Douglas (MDC) represents a huge concentration of market power and technical expertise. Turnover for the new Boeing Corporation is estimated at pounds 48bn. Europe has been right to resist this merger because of the threat to the European aerospace industry.
US justifications for the merger argue that it is a question of national security. MDC is presented as a vital defence asset which has been in financial difficulty and is secured by the takeover. But Boeing/MDC together will have nearly 90 per cent of aircraft in service on the world's airlines. This has enormous effects regarding maintenance, servicing and regulation. MDC also has niche markets where Boeing is absent and a presence in regions where Boeing diplomacy has not borne fruit. Clearly the merger has serious consequences on the commercial side.
The Pentagon has long provided vast resources for research and development which benefit commercial manufacturers. The US is a monopoly provider of security to countries it defines as friendly. High technology defence assets are a diplomatic tool and can be used to smooth or even guarantee commercial orders. Here Europe's weakness as a provider of security is a key factor and leaders should take note.
The market power of Boeing/MDC will be awesome. Boeing will have leading products in civil aeronautics, defence and space. Boeing will be able to offer the Pentagon unrivalled systems integration capabilities. The merger will create a Leviathan not subject to market constraints.
The merger increases pressure on Airbus and makes greater support imperative. The 1992 Bilateral Agreement is iniquitous and should be scrapped. Restrictions on indirect support in the US cannot be policed. Everyone knows the US industry receives massive support from Nasa, and the Department of Defense, but it is difficult to quantify.
We should bear in mind that Europe is in substantial deficit with the US in aerospace trade. If a trade war is to be threatened then who has the most to lose? Europe must beware of overestimating US power.
If the merger goes ahead the EU should not be afraid to take tough decisions. Europe must substantially increase the budget for aeronautics R&D. A blueprint should be drawn up for rationalisation of the European aerospace industry. If Brussels cannot do this it should be done intergovernmentally by the key aerospace countries.
Europe needs to realise the scale of the US threat and to decide on the actions necessary to secure its own aerospace future. By the end of the century it will be too late.
Professor PHILIP LAWRENCE
Director, Aerospace Research Group University of the West of England
Dr DEREK BRADDON
Associate Director, Centre for Social and Economic Research, UWE, Bristol
Dr ANDERS HANSSON
Senior Science Consultant, Reaction Engines Ltd, UK
Dr VITTORIO FIORINI
Director, Registro Aeronautico Italiano
Professor DIETER SCHMITT
Department of Aeronautical Engineering, Technical University of Munich
Technology Consultant, Ludwig Bolkow Foundation, Munich
Senior Fellow, Research Unit in Defence Economics, UWE, BristolReuse content