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Airbus vs Boeing: Contrasting Views for the Future

Case Study Reference No. COM0159K This case was written by Supratim Majumdar under the direction of Bitan Chakraborty, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources. © 2006, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium ± electronic, mechanical, photocopying, recording, or otherwise ± without the permission of IBSCDC

AIRBUS VS BOEING: CONTRASTING VIEWS FOR THE FUTURE

JUMBOS TO SUPER JUMBOS In early 1999, The Boeing Company (Boeing) conjectured, that in the future it might lose its monopoly in the commercial aircraft industry. Boeing¶s 747 - the 400-seater jumbo, was the most profitable and visible product in the entire product line of the company. But Boeing was facing a reduction in the number of new orders for the giant aircraft (Refer Exhibit 1). In 2000, Boeing¶s arch-rival, the European consortium, Airbus S.A.S. (Airbus), was gearing up with its plans to launch the double-decker, super-jumbo A380, capable of carrying over 600 passengers. A380 was the most advanced, spacious and efficient aircraft ever conceived. Industry experts had expressed their anticipation that Boeing 747 jumbos, which had dominated the large passenger aircraft market (above 400 seats category) for over 30 years, since its inception in 1970, would lose its dominance, to Airbus¶ economical and technically advanced super jumbo A380

The growing acceptance of Airbus among across the world, was also a matter of concern for Boeing. In 1998, in terms of delivery (in value terms) of new aircrafts, Boeing had two-thirds share of the U$65 billion global passenger aircraft market. However, in 1998, Airbus captured 46% of all new orders for passenger aircrafts from the airlines, which was more than double, as compared to 1995. In the first half of 1999, Airbus acquired 62% of the new orders for passenger aircrafts and the remaining 38% was taken up by Boeing Boeing believed that the A380 would be detrimental for Airbus. Boeing was opposed to the idea of developing an all new aircraft to compete with Airbus¶ A380. Developing a new aircraft was an expensive, complex and time consuming affair. Instead, Boeing opted to make design modifications in its existing 747 jumbos, to accommodate over 500 passengers, 20% more than its existing models, at a lower cost. The company also had plans to add new engines to increase the fuel efficiency and flight range of the 747 model. The company assumed that by upgrading its 747 model, it would be able to meet the demand for aircrafts with above 400 seats, inspite of being based on 30 year old technology. Boeing planned to proceed with one of these new jumbos, as soon as Airbus got the nod from a couple of airlines to go ahead with its A380. In order to prevent Airbus¶ entry into the US market, in 1997, Boeing entered into an exclusive 20 years contract with the major US Airlines (Delta, Continental and American Airlines). In 1999, these three airlines accounted for over 11% of the global aircraft demand. Boeing had similar plans to strike exclusive deals with major airlines, to deter Airbus from launching its new jumbo jet. Boeing was convinced that the future air-travel market would evolve into long-range, point to point travel in 350-seater aircrafts rather than 550-650-seater super jumbos that link giant, hub airports. Boeing also predicted that in the next 20 years, there would be demand, only for 400-seater super jumbos (the type Airbus was developing) from the airlines. Airbus, however, forecasted an optimistic market scenario, where the demand for super jumbos would cross 1,500 (including 300 freight versions). The company emphasized that it could reap profits, even if it reached half that mark. Boeing dismissed Airbus¶ claim that the new super jumbos would be 15-20% cheaper to fly, than the existing 747 jumbos. Both the companies were busy convincing the major airlines to bet on their future jets. AIRBUS: THE GENESIS Airbus was established in December 1970, by a consortium of firms, viz., Germany¶s DaimlerChrysler Aerospace and France's Aerospatiale. The Spanish company CASA, joined the consortium in 1971. Prior to the formation of Airbus, the European aerospace industry was weak and fragmented. The European companies feared that the three big US civil-aircraft manufacturers, Boeing, McDonnell Douglas1 and Lockheed Corporation2, would takeover Europe¶s weak and divided aerospace industry. To beat the US giants, the European companies united and co-operated with each other, to produce commercial aircrafts under the Airbus umbrella.

1 McDonnell Douglas was a major American aircraft manufacturer, producing a number of famous commercial and military aircraft. The company was merged with Boeing in 1997. 2 Lockheed Corporation was an aircraft company founded in 1912, which merged with Martin Marietta in 1995 to form Lockheed Martin. The company withdrew from the civilian aircraft business in 1981.

1 Airbus vs Boeing: Contrasting Views for the Future Case Study Reference No. COM0159K This case was written by Supratim Majumdar under the direction of Bitan Chakraborty, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources. © 2006, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium ± electronic, mechanical, photocopying, recording, or otherwise ± without the permission of IBSCDC. Related Products Availability Teaching Note Structured Assignment Distributed and Printed by Phone : 91(40) 23435310 - 11 IBSCDC, India Fax : 91(40) 23430288 www.ibscdc.org E-mail : [email protected] All rights reserved 2 AIRBUS VS BOEING: CONTRASTING VIEWS FOR THE FUTURE By Supratim Majumdar, IBS Research Centre, Kolkata JUMBOS TO SUPER JUMBOS In early 1999, The Boeing Company (Boeing) conjectured, that in the future it might lose its monopoly in the commercial aircraft industry. Boeing¶s 747 - the 400-seater jumbo, was the most profitable and visible product in the entire product line of the company. But Boeing was facing a reduction in the number of new orders for the giant aircraft (Refer Exhibit 1). In 2000, Boeing¶s arch-rival, the European consortium, Airbus S.A.S. (Airbus), was gearing up with its plans to launch the double-decker, super-jumbo A380, capable of carrying over 600 passengers. A380 was the most advanced, spacious and efficient aircraft ever conceived. Industry experts had expressed their anticipation that Boeing 747 jumbos, which had dominated the large passenger aircraft market (above 400 seats category) for over 30 years, since its inception in 1970, would lose its dominance, to Airbus¶ economical and technically advanced super jumbo A380. The growing acceptance of Airbus among airlines across the world, was also a matter of concern for Boeing. In 1998, in terms of delivery (in value terms) of new aircrafts, Boeing had two-thirds share of the U$65 billion global passenger aircraft market. However, in 1998, Airbus captured 46% of all new orders for passenger aircrafts from the airlines, which was more than double, as compared to 1995. In the first half of 1999, Airbus acquired 62% of the new orders for passenger aircrafts and the remaining 38% was taken up by Boeing (Refer Exhibit 2). Boeing believed that the A380 would be detrimental for Airbus. Boeing was opposed to the idea of developing an all new aircraft to compete with Airbus¶ A380. Developing a new aircraft was an expensive, complex and time consuming affair. Instead, Boeing opted to make design modifications in its existing 747 jumbos, to accommodate over 500 passengers, 20% more than its existing models, at a lower cost. The company also had plans to add new engines to increase the fuel efficiency and flight range of the 747 model. The company assumed that by upgrading its 747 model, it would be able to meet 3 the demand for aircrafts with above 400 seats, inspite of being based on 30 year old technology. Boeing planned to proceed with one of these new jumbos, as soon as Airbus got the nod from a couple of airlines to go ahead with its A380. In order to prevent Airbus¶ entry into the US market, in 1997, Boeing entered into an exclusive 20 years contract with the major US Airlines (Delta, Continental and American Airlines). In 1999, these three airlines accounted for over 11% of the global aircraft demand. Boeing had similar plans to strike exclusive deals with major airlines, to deter Airbus from launching its new jumbo jet. Boeing was convinced that the future air-travel market would evolve into long-range, point to point travel in 350-seater aircrafts rather than 550-650-seater super jumbos that link giant, hub airports. Boeing also predicted that in the next 20 years, there would be demand, only for 400-seater super jumbos (the type Airbus was developing) from the airlines. Airbus, however, forecasted an optimistic market scenario, where the demand for super jumbos would cross 1,500 (including 300 freight versions). The company emphasized that it could reap profits, even if it reached half that mark. Boeing dismissed Airbus¶ claim that the new super jumbos would be 15-20% cheaper to fly, than the existing 747 jumbos. Both the companies were busy convincing the major airlines to bet on their future jets. AIRBUS: THE GENESIS Airbus was established in December 1970, by a consortium of firms, viz., Germany¶s DaimlerChrysler Aerospace and France's Aerospatiale. The Spanish company CASA, joined the consortium in 1971. Prior to the formation of Airbus, the European aerospace industry was weak and fragmented. The European companies feared that the three big US civil-aircraft manufacturers, Boeing, McDonnell Douglas1 and Lockheed Corporation2, would takeover Europe¶s weak and divided aerospace industry. To beat the US giants, the European companies united and co-operated with each other, to produce commercial aircrafts under the Airbus umbrella. 1 McDonnell Douglas was a major American aircraft manufacturer, producing a number of famous commercial and military aircraft. The company was merged with Boeing in 1997. 2 Lockheed Corporation was an aircraft company founded in 1912, which merged with Martin Marietta in 1995 to form Lockheed Martin. The company withdrew from the civilian aircraft business in 1981. 4 Airbus¶ first aircraft, the A300B2, was launched in 1969 at the . A300B2 was a wide bodied, twin-engine aircraft, which could carry 226 passengers in a comfortable two class layout. The following year, a stretched version of A300B2, the 250-seater A300B4, was launched and Air France was the first to purchase it. The two aircrafts entered service in 1972 and 1974, respectively. By the end of 1975, Airbus had captured 10% of the market and had orders for 55 aircrafts. The company received a boost,in July 1978, with the launch of A310, a shortened version of the A300B2. In 1979, British Aerospace (BAE) became a full partner of the Airbus consortium. By the end of 1979, Airbus had captured 26% of the market and had 256 orders from 32 customers and 81 aircrafts in service with 14 airlines. In spite of the recession in the mid 1980s, Airbus anticipated correctly, that with the recovery of the economy, demand for modern, cost efficient aircrafts would increase, which would replace the older aircrafts manufactured by Boeing. In 1984, therefore, Airbus launched the A320, a narrow-bodied plane that had a seating capacity of 150-170 passengers. The A320 incorporated new technologies and the aircraft provided better operating efficiency, better performance and greater passenger comfort. It was the first commercial aircraft to feature fly-by-wire3 controls and side sticks (Generally aircrafts have central sticks but for better ergonomics Airbus replaced it with side sticks, which eliminate visual obstruction between the pilot and the instrument panel in the cockpit). This set the standard for all subsequent Airbus cockpits and for the industry as a whole. µFly-by-wire¶ also enabled Airbus to develop a family of aircrafts, which had identical cockpits and flight handling characteristics. The new A320 was promptly selected by airlines like Air France, British Caledonian, Adria Airways, Air Inter and Cyprus Airways. The A320 was one of Airbus¶ best-selling aircrafts, popular with passengers and airlines alike. Between 1984 and 1999, Airbus launched different versions (A321, A319 and A318) of the A320. These different versions were capable of carrying 108 to 185 passengers (Refer Exhibit 3). With this, Airbus completed the entire range of narrow body, medium to short range fleet of aircrafts. The success of the A320, gave Airbus the confidence to develop two aircrafts in a single program. In 1987, Airbus took the initiative to launch two wide bodied, medium to long 3 In fly-by-wire the control inputs from the pilot are transmitted to the flying surfaces by electronic signals rather than mechanical means. 5 range aircrafts. During the late 1980s, Airbus began looking for opportunities, for producing aircrafts for medium and long-haul markets. Work began simultaneously on a twin-engine, medium range and a four-engine, long range aircraft. The culmination of the company¶s efforts was the launch of the four engined A340, in 1993, which entered into service with Lufthansa and Air France. The A340 was the first, entirely new, long range aircraft to enter commercial operations in over 20 years, since Boeing 747. The twinengined A330, which joined service in 1994, had the lowest operating costs compared to other aircrafts that were designed for wide-range routes. Two additional versions of the A340, the A340-500 and the A340-600, which entered service in 2002, were developed in close collaboration with the airlines. Over the years, Airbus had cleverly exploited the gaps in Boeing¶s product line and had successfully projected itself as a technological innovator, with relatively new and technologically superior aircrafts, rather than being a cheap imitator of Boeing. 56% of Airbus¶ total fleet was less than 15 years old, as compared to 30% of Boeing¶s (Refer Exhibit 3 & 4). Most of Boeing¶s aircrafts were antiquated and its design and technology dated back to the 1960s and 1970s. Airbus developed aircrafts that suited every need of the global airlines. The company developed a full range of aircrafts, from the 107 seater A318 to the 380 seater A340. The wide spectrum enabled airlines to switch easily from Boeing to Airbus and to spread their maintenance costs over a whole family of planes rather than on just one model. Compared to Boeing, Airbus¶ aircrafts were technologically superior, had better operational efficiency, superior cabin comfort, low maintenance cost and were flexible enough to be operated under any kind of route structure. Frederic Brace, Vice President of Finance, United Airlines, opined that once an got an Airbus in its fleet it intended to procure more of them, as Airbus manufactured good aircrafts that were economical to operate. Airbus added many innovative airline-friendly features to its aircraft. Unlike Boeing, which customized the cockpit for every model, Airbus preferred a single flight deck and same flight handling characteristics, so that pilots could shift and adapt easily across different models. In case of Airbus, a pilot needed eight days of re-training to move from the narrow-bodied A320, to the wide-bodied A330, as compared to several weeks in case of a transition from a Boeing 737 to a 747. 6 AIRBUS¶ WOES In 1992, the US and European aircraft makers signed a bilateral deal on financing new aircrafts. According to the deal, the launch aid4 for Boeing and other US aircraft makers from the US government bodies (like NASA and Pentagon) was upto 3% of the company¶s turnover. The European companies agreed to limit the launch aid for new aircrafts, to 33% of the total development cost. The European companies received launch aid in the form of soft loans from the European governments. It was also stipulated that the aid would have to be repaid with interest, within 17 years. However, Boeing had accused Airbus of receiving launch aid above the agreed limit from the European governments, for the A380 project, in spite of the bilateral aid deal. In return, Airbus alleged that Boeing¶s airline business was indirectly subsidized by the US defence budget. The four members of the consortium had proportionate (according to their ownership stake) voting rights on the major issues regarding Airbus. In the past, Airbus faced difficulties in operating efficiently, as an independent corporate entity. The members of the consortium shared the development cost and work for any new aircraft among themselves. The group companies supplied critical components like wings and fuselages for the aircraft. The corporate structure of Airbus was considerably politicized and financially opaque. Airbus was often forced to purchase components at high rates from consortium members and didn¶t always get the best deal. In 1998, the individual partners garnered profits, by selling components to Airbus. However, the following year, Airbus reported a loss of U$204 mn, on sales of U$13.3 bn. Airbus blamed the losses on the high prices it had paid to its partners, for components. Airbus was indirectly under the control of four European governments - French, German, Spanish and British. To satisfy their political and business interests, the governments of these countries frequently interfered with the business affairs of Airbus. According to industry analysts, Airbus could have better control over costs if it operated as an independent company rather than as a consortium. Due to the high development cost of any new aircraft, the consortium members often sought financial help in the form of soft 4 Launch aid is the soft governmental loan for the development of the new aircraft. Launch aid is paid back to the governments as a royalty on sales. 7 loans from their respective governments. Moreover, Airbus had to convince governments that there was sufficient demand for the aircrafts, in order to arrange funds from them. To build such a huge aircraft, was a great challenge for Airbus. Smooth operational coordination among four different manufacturing locations, across four nations was a daunting task. Different modules of the aircraft were manufactured at various locations and the final aircraft was assembled at one point. Arranging the logistics to facilitate equal and fair distribution of work among the consortium members, was also a matter of worry for Airbus, as problems crept up in past projects. Sales analysis of Boeing and Airbus exhibited the declining sales of Boeing 747, while Airbus strengthened its position in the shorter range aircraft sales. A few important airlines like British Airways and United Airlines, had converted several 747-400 orders to smaller 777¶s. Asian routes being fragmented, there was an increased demand for mini jumbos like the A340 and the Boeing 777 (3-class), at the cost of Boeing 747s. China Airlines and Singapore Airlines showed a preferential shift towards mini-jumbos. International carriers like Delta Air Lines and American Airlines, discontinued using the Boeing 747, altogether.. Japanese airlines were also uninterested in increasing their fleets by including jumbos. Airbus was worried about the arrangement of funds, for meeting the initial development costs of the massive A380. The development cost of the aircraft was expected to reach U$15 bn. Airbus was expecting to get 40 percent of its funds from suppliers like Sweden's Saab, 30 percent from governmental loans arranged by its partners, and the rest from its internal resources. Establishing a new corporate structure was an essential pre-requisite for arranging this finance. As huge investments were required to develop and manufacture aircrafts like A380, Airbus required atleast 50 confirmed orders for the new aircraft from the airlines, before starting its commercial production. Lufthansa, Virgin Atlantic, , Singapore and Malaysian Airlines, were among 11 passenger airlines that had agreed to buy the A380. Emirates was the largest customer, ordering 45 A380s. Airbus predicted, that at the earliest, the new aircraft would roll out of its assembly line in 2006. 8 CONTRASTING VIEWS Boeing, however, expected that air travel would be de-regulated worldwide, resulting in an increased demand for long range, faster, smaller and fuel efficient aircrafts. According to Boeing, big aircrafts suited the regulated markets, because the number of flights was restricted and the airlines operated from big hub airports. So, the airlines preferred big aircrafts that could carry a large number of passengers. Whereas, in a deregulated market, the number of flights would increase, as customers would prefer pointto- point connectivity between destinations instead of the µhub and spoke¶ model. Thus, the demand for smaller aircraft would increase. Randy Baseler (Baseler), Marketing Head, Boeing, substantiated Boeing¶s claim by citing a case. In 1987, there was only one daily flight [a 400-seater, Boeing 747] between Chicago and London. Further, 60% of all transatlantic flights between the US and Europe were using Boeing 747s. The scenario changed by 2000, when there were 21 daily flights between Chicago and 11 different destinations of Europe and the majority of them were or Boeing 777, with 250 to 350 seating capacity. Baseler predicted that further fragmentation of transatlantic flight routes to 160 destinations would increase the usage of Boeing 777s and Airbus A330s, in place of Boeing 747s. According to him, there would be further point-to-point routes in Asia and demand for the long-range versions of Boeing 777s and Airbus A340s would increase. Airbus acknowledged Boeing¶s claims and further predicted that there would be a rise in the demand for large aircrafts, flying between big international hubs. The company, with its A380, targeted to capture half the market in the jumbo category which was dominated by Boeing¶s 747s. Airbus argued that Air Travel was growing by 5% a year and that by 2015, the number of travelers would also increase. The limited capacity of big airports, especially in Asia, would create a demand for large aircrafts (Refer Exhibit 5). But the world¶s busiest airports were changing their terminal buildings to accommodate A380s. Heathrow airport would spend £ 450 mn to accommodate A380s. In addition, large aircrafts would reduce noise, pollution, and congestion in big airports because they required fewer landings and take-offs. Analysts estimated, that by 2015, the traffic increase in a single year would be equivalent of total air traffic in 1969 - the year in which Boeing¶s 747 was launched. To manage such heavy traffic across the globe, huge aircrafts like A380s would be needed. John Leahy, Marketing Director, Airbus, pointed 9 out, that in the mid 1990s, when Airbus launched the narrow bodied A320 and the A330- 340, Boeing claimed that there would be no demand for these kinds of aircraft. However, in later years, Boeing launched similar kinds of aircraft in the market. Airbus also feared that Boeing might subsidize the price of 747s to reduce the market of A380s. Congestion at major airports was a growing problem for airlines. According to Airbus, airlines would therefore use bigger aircrafts to carry a greater number of passengers. Big aircrafts would also be more efficient than smaller ones, in using increasingly valuable take-off and landing slots. But Boeing believed that air travel had become fragmented and that passengers wanted to fly on smaller jets, used on more frequent routes, which would bypass many of the busy hub airports, by providing direct services, especially between secondary/smaller cities. Boeing believed it can meet the airlines¶ demands much better, with a combination of its stretched 747 on the big trunk routes and its slightly smaller, but much newer, long-distance aircraft, the 777, on the less-busy ones. Airbus was optimistic about the future of the A380 because it received favorable responses from a host of passenger airlines and leading freight operators. Singapore Airlines, Cathay Pacific, Malaysia Air Lines and Emirates were the prospective customers of the A380. Among freight operators, Federal Express and Atlas Air expressed interest in the freight version of the A380, because of its ability to carry 150 tons of cargo over 6,000 nautical miles (11,120 kms or 6900 miles on land). A380 would save one day for the freight operators between Asia and North America. Airbus also consulted 60 airport authorities worldwide, to find out whether the new aircraft would be able to land and take-off easily. Weight was a critical issue, since Airbus had promised the airlines that the A380 could be used on the same runways that were being used by Boeing 747, even though its fuselage was ten inches wider. Airbus had developed a new lightweight material called Glare, made of aluminum alloy and glass-fiber tape. If this was used instead of regular aluminum to fabricate the body of the A380, the aircraft would be several tons lighter. A RISKY PROPOSITION On 19th December 2000, Airbus finally got the approval from its shareholders to go ahead with the proposed super jumbo project, the A380. The A380 project was the 10 biggest aircraft development project globally. Airbus received 50 pre-production orders for the new aircraft. The initial customers for the aircraft were - Emirates, Air France, International Lease Finance Corporation (ILFC), Singapore Airlines, Qantas, and Virgin Atlantic. Airbus tried to lure the airlines by offering discounts on the approximate price of the aircraft (U$200 mn). Airbus estimated that it needed to sell 229 aircrafts before it could earn profits. To recover the total investment made by Airbus, the European governments and suppliers, Airbus needed to sell at least 780 aircrafts. Airbus was aware that launching a new aircraft was a complicated and risky proposition. The development cost of an aircraft was huge and in case of the A380, it was estimated to be over U$12 bn. In 2000, the development cost of the aircraft was more than the total asset value of Airbus. To get returns on the investment, Airbus would have to ascertain that the new aircraft would sell sufficiently and would remain in service for quite some time. Big orders for the A380 would help Airbus bring down the unit cost of the aircraft. It was predicted that if the production of A380 was doubled, Airbus could cut 20% costs of the aircraft. Apart from the cost benefits, wide acceptance of the aircraft among airlines, would enable Airbus to spread the technology across its existing aircrafts. Boeing had tried hard to persuade airlines that they would be better off, buying a cheaper version of a stretched 747, which it planned to develop at a cost of only U$4 bn. Boeing claimed that the upgraded version of Boeing 747, would match the performance of the A380. With the successful production of A380, Airbus would have a full range of aircrafts with which it could challenge the market leader, Boeing. In the past, Airbus had always accused Boeing of holding down the price of its popular aircraft (Boeing 777s and 767s), because it could cross-subsidize it, using the hefty profits it made from the 747s. Would Airbus challenge Boeing in the virgin territory of super jumbos? 11 Exhibit: 1 New Orders and Deliveries for Boeing 747* * It include all the models of 747 Source: Compiled by IRCK Exhibit: 2 Historical Orders Year 1996 1997 1998 1999 2000 Boeing 671 530 607 355 598 Airbus 183 394 517 421 483 McDonnell Douglas* 44 16 NA NA NA Net Orders 898 940 1,124 776 1,081 * Merged with Boeing in 1997 Source: Compiled by IRCK Exhibit: 3 Airbus¶s Fleet^ Year 1990 1995 1996 1997 1998 1999 2000 New Deliveries 747 70 25 26 39 53 47 25 Total Delivery 527 256 271 375 563 620 491 Percentage (%) 13 10 10 10 10 8 5 New Orders 747 120 35 61 36 15 35 26 Total New Orders 533 444 671 530 607 355 598 Percentage (%) 41 11 12 8 3 10 5 Segment Narrow Body Range (Km) Capacity Cruising Speed (km/h) Service Entry Type A318 6,000 107 870 2003 Short to medium range A319 6,800 124 903 1996 Short to medium range A319CJ 11,600 124 870 1999 Long range large corporate jet A320 5,550 150 903 1988 Short to medium range A321 5,550 185-220 903 1993 Short to medium range Wide Body A300B2/B4 3430 /5357 220-336 917 1972/1974 Medium range A310 9,600 220 897 1983 Medium to long range A300-600 7,700 266 897 1984 Medium range A300F 4,800 51 tons NA 1988 Medium range cargo freighter A330- 200/300 12,500/10,5 00 253/295 880 1998/1993 Long range/ Medium to long range A340- 200/300 14,800/13,7 00 261/295 914 1993/1992 Long range A340- 500/600 16,700/14,8 00 313/380 882 2002 Long range 12 ^This list is not exhaustive Source: Compiled by IRCK Exhibit: 4 Boeing¶s Fleet^ Narrow Body Capacity Range (Km) Cruise Speed (Km/h) Service Entry Type 707-120B 110-179 8,485 1,010 1958 Medium to long range 707-320B 189-219 9,265 1,009 1959 Short to medium range 717-200 106-117 3,800 811 1999 Short to medium range 720 112-149 6,687 1,009 1960 Short to medium range 727-100/200 131/189 5,000/4,500 1,017 1963/1967 Short to medium range 737-100/200 100/115 2,855/4,260 943 1968/1967 Short range 737-300/400 149/188 5,000/3,850 943 1984/1988 Short to medium range 737-500/600 132 2,815/5,648 943 1990/1998 Short to medium range 737-700/800 12-50 12,000 871 1998 Long range corporate jet 757-200/300 178- 239/289 5,000/6,500 914/850 1982/1999 Medium range Wide Body 747-100/200 397-452 9,045/12,778 967/981 1970 Long range 747-300/400 470/416 11,675/13,214 996/939 1983/1989 Long range 747SP 316-440 12,325 1,000 1976 Long range 767-200/300 290/350 12,352/10,880 914/900 1982/1986 Long range 767-400 245 10,418 850 1999 Long range 777-200/300 305/394 16,417/13,427 905/893 1995/1998 Long range ^ This list is not exhaustive 30 percent of the fleet is less than 15 years old. Source: Compiled by IRCK Exhibit: 5 Airline Passenger Travel, 2001 forecast Routes % of Total Traffic Growth Latin America 4.9 5.9 North America 38.7 4.1 Middle East 2.8 4.5 Europe 26.9 5.7 Asia-Pacific 24.5 7.4 Africa 2.2 5.8 Source: International Civil Aviation Organization 13 Annexure: 1 Airbus at a Glance* Established 1970 Based in , France Employees 52,000 Turnover 20 billion Euro Shareholders EADS (80%), BAE SYSTEMS (20%) European Operations France: Toulouse, St Nazaire, Nantes, Méaulte Germany: Hamburg, Bremen, Nordenham, Stade, Varel, Laupheim (Aircabin), Buxtehude (KID Systeme) Spain: Getafe, Illescas, Puerto Real UK: Filton, Broughton Main Subsidiaries Airbus North America Airbus China Airbus Japan Airbus Transport International Spares Centers Hamburg (Germany) Frankfurt (Germany) Ashburn, Virginia (USA) Beijing (PRC) Singapore Training Centers Toulouse (France) Miami, Florida (USA) Beijing (PRC) Field Offices 130 Resident customer support representatives 175 In-service Airbus fleet Over 3,700 aircraft * Data is for 2004 Source: Compiled by IRCK 14 Annexure 2 Pictorial Comparison of Boeing 747 &

Source: http://news.bbc.co.uk

Annexure 3

Source: www.airbus.com SPECIFICATIONS OF A380 Total Length 239ft 3 inches Wing Span 261ft 8 inches Passenger Aisles Triple-Aisles Seating Capacity 555 seats Number of Engines 4 Power Plants Max. Gross Weight 540,000 Kg Maximum Range 14,800 Km First Service 2006 15 REFERENCES 1. Mascolo, Georg & Hawranek, Dietmar; ³Dueling for the U$100 Pentagon Deal´, http://www.spiegel.de, June 27, 2005. 2. Ghemawat, Pankaj & Esty, Benjamin; ³Airbus vs. Boeing in Super Jumbos: A Case of Failed Preemption´, http://ssrn.com, February, 2002. 3. Andorf, Alexander; ³Battle for the Skies: Airbus Vs. Boeing´, http://www.airborneaircrafts.com, May, 2005. 4. ³Airbus A380 completes test flight´, http://news.bbc.co.uk, April 27, 2005. 5. Irwin, Douglas A. & Pavcnik, Nina; ³Airbus versus Boeing revisited: international competition in the aircraft market´, Journal of International Economics 64 (2004) 223- 245, www.elsevier.com, August 2003. 6. ³Airbus unveils 'superjumbo' jet´, http://news.bbc.co.uk, January 18, 2005. 7. Madslien, Jorn; ³Airbus vs. Boeing: The next battle´, http://news.bbc.co.uk, April 26, 2005. 8. Madslien, Jorn; ´Boeing fighting back at Air Show´, http://news.bbc.co.uk, June 14, 2005. 9. Max Kingsley Jones, ³Rivals cross swords´, , June 14, 2005. 10. Leslie, Devon and Attfield, Rick; ´Airbus Vs. Boeing: Who's moving in the right direction??´, http://www.flightsim.com. 11. Daly, Matthew; ³ Boeing Biting into Airbus' Market Share´, www.etcnews.com, April 26, 2005. 12. Creswell, Julie; ³Boeing Plays Defense´, http://www.fortune.com, April 19, 2004. 13. Holmes, Stanley; Dawson, Chester & Matlack, Carol; ³Airbus vs. Boeing: Rumble over ´, www.businessweek.com, April 2, 2001. 14. ³Boeing, Airbus Showdown At 40,000 Feet´, www.forbes.com. 15. ³Timeline - Airbus A380 'superjumbo'´, http://news.bbc.co.uk, April 25, 2005. 16. Company Profiles ± The Boeing Company & Airbus S.A.S.; http://search.epnet.com. 4

Asia

1 Boeing and Airbus: The Asian Challenge Case Study Reference No. INA0071C This case was written by Krishnakumar, IBSCDC. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. This case was compiled from published sources. © 2006, IBSCDC No part of this publication may be copied, reproduced or distributed, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or medium ± electronic, mechanical, photocopying, recording, or otherwise ± without the permission of IBSCDC. Related Products Availability Teaching Note Structured Assignment Distributed and Printed by Phone : 91(40) 23435310 - 11 IBSCDC, India Fax : 91(40) 23430288 www.ibscdc.org E-mail : [email protected] All rights reserved 2 Boeing and Airbus: The Asian Challenge - Krishna Kumar ³China's passenger traffic is increasing vigorously and will be the third-largest only behind that of the United States and Europe in the future.´ Li Jiaxiang, President Air China1 ³The important thing is we all agree there's going to be higher than world average growth and there's going to be a significant demand for aircraft in China. When we have increased demand, we have increased production rate. We're looking at whether we should go beyond 30 (planes) a month.´ Laurence Barron, President Airbus China2 Asia had always been a large, potential market for the two giants in the aviation industry, the American Boeing Corporation and the European Airbus Industries. The opening out of the third world to foreign investment with the advent of globalisation saw competition intensifying between Boeing and Airbus to dominate the Asian market. With the beginning of the new millennium Airbus had come up with an engineering marvel, the A 380 µdouble decker¶- the first plane to have two floors. The first official test flight of the A 380 (Exhibit I) was on April 27, 20053 at Toulouse, France. Singapore Airlines was the first to order the plane which would see commercial operations in 2006. The order bookings with options in 2005 had crossed the 200 mark. Not to be outdone, Boeing had developed the µ787 Dreamliner4¶ (Exhibit II) to go into commercial use by 2008. The firm orders on hand as of April, 2006 for this state-of- the-art airliner were 350 valued at $51 billion, including 20 by Air India.5(Exhibit III) The dilemma faced by both companies was to get Asian leadership by primarily developing the markets in China, Japan, Singapore, Malaysia and India which would, in turn, help them become the universal leader in the aviation industry. To do this effectively they had to not only monitor the economic development and financial availability of the developing nations but also step up efforts in research and cutting-edge technologies to ensure that the best product was put on the market, fine-tuned to passenger comfort and satisfaction. Background: Boeing Headquartered in Chicago, Illinois, U.S.A., the Boeing Company employed more than 153,000 people in more than 67 countries with a turnover in 2005 of $54.8 billion. The main commercial products were the 737, 747, 767 and 777 families of airplanes and the Boeing Business Jet.6 New product development efforts were focused on the . The company had about 12,000 commercial jetliners in service worldwide, which was roughly 75 percent of the world fleet. Over the decades Boeing had grown to a huge corporation, diversifying into other areas in the modern era like satellite and missile avionics. Revenues have shown positive growth. For the quarter ended 31st. March, 2006, revenue had increased by 12% and earnings from operations by 40%, over the same period the previous year (Exhibit IV). 1µPoised for Greater Heights¶ www.sinomedia.net/eurobiz/v200503/ 2µChina aviation booms markets¶ www.fin24.co.za/articles/int_economy/ 21st.September,2005 3 www.airbus.com 4 Lagorce, Aude µAirbus vs. Boeing¶ www.forbes.com, 1st.May,2004 5µBoeing Celebrates Second Anniversary of Dreamliner Launch¶ biz.yahoo.com/prnews/26th.April,2006 6 www.boeing.com 3 The company was founded in 1916 by William E. Boeing who remained Chairman till 1934.7 The post-depression legislation after the stock market crash in the 30s saw Boeing increase his stock in the Company to become a major shareholder. He lived till 1956, long enough to see Boeing¶s entry into the Jet Age. In 1934 Boeing produced the four-engine Model 299, prototype for the B- 17 Flying Fortress bomber,8 one of the most important aircraft of World War II. The big bombers¶ features were then incorporated in the four-engine Model 314 Clipper, a luxurious that made the first scheduled transatlantic airplane flight, and in the commercial Model 307 Stratoliner, the first pressurized airliner.9 The Clippers and the Stratoliners attracted air travelers around the world. The DC-3 was delivered in 193610 which revolutionised the aircraft industry, with two seats per row on one side of the aisle and one per row on the other side and made air transportation more affordable and profitable. In 1952 the Boeing board of directors decided to sink $16 million of the company profits into a prototype jet transport, the Model 367-80 or µDash 80.¶11 It combined aerodynamic and structural features of the B-47 and the B-52 with the cabin capacity of a larger transport. The Dash 80 became the prototype, first for the KC-135 Stratotanker, the first jet aerial tanker, and then for the Model 707-120, the first in the long line of Boeing commercial jet airliners. Jet transport soon proved its efficiency and reliability. Using about one-tenth the fuel, the $5 million 707 could carry as many trans-Atlantic passengers a year as the $30 million Queen Mary ocean liner.12 In February, 1969 the 747 took to the skies and on January 21, 1970 the Jumbo made its inaugural commercial flight from New York to London for Pan American Airways13. As markets developed, so did Boeing jets. The Boeing product range (Exhibit V) expanded to include the 727, the company¶s first and only trijet designed for smaller airports with shorter runways. The 737 was initially a smaller, short-range, twin-engine jet, designed to compete with the Douglas DC-9. By June 12, 1987, the 737 was the most ordered airplane in commercial history. The 1990s saw many revolutionary accomplishments for The Boeing Company. The 777 family commenced operations in October, 1990, when United Airlines ordered 34 of the widebody transports and placed options for 34 more. Besides this, in 1993, NASA selected Boeing as prime contractor for the International Space Station. The 777 was sized, shaped and launched according to market demand. The plane was the first jetliner to be 100 percent digitally designed using three-dimensional computer graphics. Throughout the design process, the airplane was µpreassembled¶ on the computer, eliminating the need for a costly, full-scale mock-up. In June 1995, United Airlines flew its first 777 in revenue service. In December 1996, The Boeing Company merged with Rockwell International Corporation¶s aerospace and defense units, uniting the two companies14. On Aug. 1, 1997, Boeing, with its North American component, merged with McDonnell Douglas Corp. In October 2000, through the subsidiary, the company bought Hawker de Havilland, designer and manufacturer of commercial and military aero-structure components. It became a wholly owned subsidiary of The Boeing Company.15 In 2002 Boeing delivered the 1,000th 757 and the 100th 717-200 twinjet. The 747-400ER made its first flight on July 31, 2002. The airplane was the 7 www.boeing.com/history/boeing/boeing.html 8 www.centennialofflight.gov/essay/Aerospace/Douglas_later/Aero30.htm 9 www.aviation-history.com/boeing/314.html 10 www.boeing.com/history/mdc/dc-3.htm 11 www.nasm.si.edu/research/aero/aircraft/boeing_367.htm 12 www.boeing.com/early years 13 www.airliners.net/info/stats.main?id=97 14 www.boeing.com/history/boeing/future.html 15 ibid 4 1,308th 747 assembled by Boeing in its Everett, Wash., factory, making it the world's most popular widebody jetliner. At the Paris Air Show in 2003, Boeing announced that approximately 500,000 votes cast by people in 160 countries indicated that the newest member of 700 series passenger jet family, the 7E7, would be called the µDreamliner.¶ On April 26, 2004, the Boeing board of directors announced the formal launch of the 787 passenger jet, based on a firm order for 50 787s from ANA (), with deliveries scheduled to start in 200816. The ANA order was the largest launch order in history for a new Boeing commercial jet. It was named the 787 Dreamliner on Jan. 28, 2005, the day the company announced orders from the People's Republic of China for 60 of the airplanes. The 787-8 Dreamliner and 787-9 Dreamliner airplanes carry 217 to 257 passengers in three-class configurations on routes of 9,781 and 9,551 miles (15,700 and 15,400 km), respectively. A third 787 family member, the 787-3 Dreamliner, accommodates nearly 289 passengers in a two-class configuration and was optimized for routes of 4,027 miles (6,500 km)17. In the last two decades there have been some changes at the Board level. , who headed the team in 1985 as President, became Chief Executive Officer in 1986 and Board Chairman in 1988. In 1992, Phil Condit became President of Boeing; CEO in 1996 and Board Chairman in 1997. When Boeing merged with McDonnell Douglas Corporation, Philip M. Condit remained CEO and Chairman of the new Boeing Board of Directors. Harry C. Stonecipher of McDonnell Douglas became President and Chief Operating Officer18 of Boeing. However, a sex scandal saw Stonecipher give way to James A. Bell who acted as President on an interim basis with Board Chairman Lew Platt extending his role as non-executive chairman. On June 30, 2005 W. James McNerney, Jr. of 3M was named Board Chairman, President and CEO of The Boeing Company. He had been a member of the Boeing board of Directors since 2001. James A. Bell remained Chief Financial Officer, and Lewis E. Platt became Lead Director19. Background: Airbus Airbus, known as Airbus Industrie, was officially formed in 1970 as a consortium of France¶s Aerospatiale and Deutsche Airbus, a grouping of leading German aircraft manufacturing firms20. Together the companies had decided to build the A300, the first twin-engine widebody airliner, to fill a gap in the market and to challenge American supremacy in the aviation industry. Shortly afterwards Spain¶s CASA joined the consortium and in 1974 the Airbus Industrie GIE, Groupe d¶Intérêt Economique, moved its headquarters from Paris to Toulouse. British Aerospace joined Airbus Industrie in 1979. Each of the four partners, known as Airbus France, Airbus Deutschland, Airbus UK and Airbus España, operated as national companies with special responsibilities for producing parts of the aircraft, to be transported to Toulouse for final assembly. The GIE provided a single face for sales, marketing and customer support. In 2001, Airbus became a single fully integrated company. It was incorporated under French law as a simplified joint stock company or "S.A.S." (Société par Actions Simplifiée - Simplified Shares Society). The European Aeronautic Defence and Space Company (EADS), a merger of the French, German and Spanish interests, acquired 80 per cent of the shares and BAE Systems, the successor to British Aerospace, 20 per cent. In 2005 it had 55,000 employees on the rolls with a sales turnover of ¼22.3 billion and delivered 378 airliners (Exhibit VI). Of this 289 were Single Aisle Family aircraft and 89 widebody long range airliners, A330s and A340s. As of March, 2006 airbus had 16en.wikipedia.org/wiki/Boeing_787_Dreamliner 17ibid 18 µBuilding for the future±1983-1998¶, www.boeing.com/history 19ibid 20http://events.airbus.com/about/history.asp 5 6377 orders on hand, of which 4231 were delivered. The total aircraft in operation worldwide was 4050.21 Airbus began with the widebodied, double isled, eight-in-a-row A300 followed by the A310. But it was the A320, with its landmark fly-by-wire technology, that put Airbus among the top two manufacturers of commercial aircraft in the world. The long range A330 and A340 confirmed its technical expertise in civil aviation (Exhibit VII). The company took an innovative step in 2004 to unify the design and production management processes by setting up µCentres of Excellence¶ in preferred locations at their 16 manufacturing sites in France, Germany, Spain and the UK, complemented by subsidiaries in North America, China and Japan, and a joint engineering centre in Russia. This was done to simplify working. Each center was responsible for specific parts of the aircraft and had its own chain of decision making and command. For Airbus, the feather in its cap was in January 2005 when it presented the world¶s largest and most advanced passenger aircraft ± the µdouble decker¶ A380, which had its first flight in April the same year. It seats 555 passengers but can be reconfigured to have 853 seats.22 It was the answer for high density routes where more passengers can be accommodated without increasing the number of flights. The A380¶s unveiling was preceded by an announcement that Airbus was to build the A350, a longerrange mid-size twin engine aircraft that would bring exceptional levels of efficiency and comfort to the long range market. Over the years Airbus had grown from 421 aircraft orders ($34 billion) in 1989 to 1111 aircraft orders ($95.9 billion) in 2005 (Exhibit VIII). ³2005 was a record for the whole industry and for Airbus in particular,´ said Airbus President and CEO, Gustav Humbert. ³Airlines have never ever placed so many orders, a sign that they are very optimistic about the future of air transportation, with also a lot of new carriers emerging and bringing cheap air travel to an increasing number of consumers. But it also reflects the need for more modern equipment to face the rising fuel prices. We are pleased to have maintained our lead in terms of market share. But, more importantly, we continue to increase our production output, based on a backlog never seen in history, which secures work for the next four to five years at very high production rates.´23 Airbus was managed by an Executive Committee headed by President and Chief Executive Officer Gustav Humbert and appointed by the Shareholders Committee, which consists of five members from EADS and two from BAE Systems. Each member of the Executive Committee was responsible for core functions and strategy in his field. There were four General Managers, each covering France, Germany, Spain and the UK, while the subsidiaries in China and Japan were each headed by a President and in North America by a Chairman. Charles Champion was COO and head of the A380 programme. Glen Fukushima and Laurence Barron were Presidents of Airbus Japan and Airbus China respectively. The Asian Connection China ³In the last five years, passenger traffic in China has witnessed an unprecedented rise of 95 percent and looks like it will continue to be the fastest growing market over the next 20 years.´24 Steve Miller, Rolls-Royce's Vice President of Customer Business for China. 21 www.airbus.com 22 http://en.wikipedia.org/wiki/Airbus_A380 23 www.airbus.com/history 24µChina¶s aviation boom drives world market¶www.terradaily.com/news/ 21st.September, 2005 6 The Chinese connection with Boeing goes back to nearly a century. In the year it was established the founder asked Beijing born Wang Zhu to design a new seaplane for the American Navy called the model C. In 1935, China became the first country where Boeing set-up a service office and in 1939 Pan American Airways began flying to Hong Kong across the Pacific with the 314 Clipper seaplanes. The decade of the 40¶s saw the DC- 2 & 3 operate in China. In 1972 in the wake of President Nixon¶s path breaking, bridge building visit, the Chinese Civil Aviation Administration ordered 10 Boeing 707s and launched itself as a major player in the world market. More orders followed especially after the visit of Vice Premier Deng Xiaoping to the United States in 1979 when the relationship between the two countries was put on an even footing. As of March 2005, of the 802 jetliners operating in China, excluding Hong Kong and Macao, 501 were manufactured by Boeing. Their China unit market share was 63% and seat market share 67%.25 ³In today's competitive marketplace, passengers are asking for comfortable, low-fare, convenient flights with more frequency choices,´ said Randy Baseler, VP Marketing of Boeing Commercial Airplanes. ³They want flights to be as short as possible, and they prefer non-stop service.´26The 20-year Gross Domestic Product (GDP) forecast for China was for an average annual increase of 5.9% which was the highest in the world. Citing high GDP growth rates as a key driver in domestic traffic, Baseler noted that China's fleet was expected to increase by a factor greater than three-fold in the next 20 years. Total fleet size in 2021 was estimated at 2,320 units, compared with 636 airplanes in 2001. China, with 1.3 million metric tonnes moved annually, was the second largest domestic air cargo market in 2002 after the United States. Domestic cargo within China was expected to grow 10.3% annually and passenger travel 8.4% yearly for the 20-year forecast period.27 Airbus entered China in 1985 when China Eastern Airlines first utilized their aircraft. By end 2005 they had 93 aircraft in operation. Also Guangzhou based China Southern Airlines flew 43 aircraft, the national flag carrier, Air China, operated 26 and Chengdu based Sichuan Airlines had a fleet of 15. More than 260 Airbus aircraft were already in operation with airlines in China, Hong Kong and Macau. By 2020 China was expected to become the second largest aviation market in the world with the number of international Chinese travelers crossing 100 million which would, in turn mean a four-fold growth in Chinese passenger traffic.28 Consequently the demand for planes, of 100 seat capacities and above, was expected to be around 1500 units. Having crossed just over 50% market share by 2006 Airbus would ensure that it captured more than half the new orders from China in the future. Airbus planned to considerably increase its procurement from China in the coming years, with values touching US$60 million annually by 2007. Industrial co-operation between Airbus and the Chinese aviation industry began in 1985, when the General Administration of Civil Aviation of Shanghai, now China Eastern Airlines, became the first carrier in China to operate the Airbus. Contracts for Chinese companies to build sections of Airbus aircraft followed, as did further orders from Chinese airlines. Aerospatiale, which was now Airbus France, signed its first product sub-contracting agreement in 1985 with Xian Aircraft Co. to manufacture and assemble access doors for /A310 widebody aircraft. Since then, the total value of projects subcontracted by Airbus to Chinese manufacturers had exceeded US$500 million. 25www.boeing.com/company offices 26µBoeing: Continuous growth for China¶s aviation market¶ www.tdctrade.com/shippers/vol25 27ibid 28www.airbus.com/en/worldwide 7 The contracts covered increasing production rates for A320 access doors, A330/A340 brake blades and passenger door skin for the A320 family.29 Japan Japan¶s link with Boeing goes back to 1928 when they bought a F2B-1 for use as a sports plane30. In 1953 Boeing began operations in Japan by setting up Boeing Japan Inc. Mitsubishi, Kawasaki and Fuji, the three largest heavy industries aerospace manufacturing firms in Japan, had been supplying Boeing with various parts for the 767 aircraft manufacture which was about 15% of the value. In 1978 the success of this partnership resulted in more than 85 Japanese companies becoming programme partners, subcontractors and suppliers to Boeing for all their jetliner assemblies. In 1983 All Nippon Airways took delivery of its 50th Boeing 767 and in 1998 took delivery of its 100th Boeing 747. This delivery confirmed Japan Airlines as the largest Boeing 747 Jumbo operator in the world. In 2005 Japan Airlines completed the contract for the 787 Dreamliners and Next-Generation 737-800. Till June the same year Japan had ordered 796 Boeing airplanes worth more than $70 billion. For the next two decades Boeing had forecast that Japanese airlines would require 1,176 airplanes, valued at approximately $147 billion31. Airbus entered the Japanese market in 1979 when Japan Air Systems (JAS, which later merged with Japan Airlines) ordered a fleet of six A300B2s. These were the first widebody jets to be acquired by the carrier and were used to meet demand on domestic routes. Japan Airlines then began to acquire other types of A300 planes. All Nippon Airways became the second Japanese airline to purchase Airbus aircraft, the A320.32 Ten of these entered service in 1991. All Nippon later took delivery of seven new A321s, which became the first foreign-built civil airliner to gain Japanese type certification. In May 2005, Sagawa Express Co. Ltd, one of the largest cargo business companies in Japan, established a subsidiary, Galaxy Airlines Co. Ltd, and selected Airbus A300-600 freighter to inaugurate its own air transport business in Japan and in March 2006 Japan¶s new low-cost airline StarFlyer started operations with the A320 on the Kita- Kyushu-Tokyo route.33 Airbus¶ main disadvantage was the more than fifty years headstart Boeing had over it in Japan. All Nippon Airways had ordered 5 A320s in October 2005. But this was only to serve them till the Boeing 737NG (New Generation) came on the market. The airline placed a firm order on Boeing in early 2006 for 53 long-range planes estimated at $13 billion. They want to use the 365- seat 777-300ERs to replace the fleet of Boeing 747 and 777 planes, passing over the Airbus A380. A major factor contributing to the preference for Boeing aircraft was the close manufacturing partnership between Boeing and several Japanese consortiums, most notably in the production of the wings of 787. Besides that, airlines in Japan were being consulted by Boeing in the design phase of 777. Also Boeing had developed good contacts at different levels with the Japanese government which could be utilised during finalisation of tenders. Airbus was also fully geared to tackle these problems based on their long-term commitment to operate in Japan. India 29www.airbus.com/en/worldwide 30www.boeing.com/companyoffices/aboutus/boejapan.html 31ibid 32 www.airbus.com 33ibid 8 After China, India was rated the next growing economic powerhouse in Asia. Boeing¶s relationship with India goes back to more than half a century. In 1960 India entered the jet age with the introduction of the 707 transatlantic jetliner34. Just over a decade later, in 1971, the 747 Jumbo went into service. Air India, the international carrier, started the Eighties with a programme of fleet renewal. In the first phase, Air India purchased three Airbus A300-B4s in 1982. In the second phase, six A310-300s were inducted into the fleet. The airline acquired two more Boeing 747-300 Combi aircraft in October/November 1988 and two Airbus A310s in August 1990. Four Boeing 747-400s were inducted into the fleet between August 1993 and July 1994. Two more Boeing 747-400s were inducted in November 1996. One B 747-400 and nine Airbus 310s have been inducted on dry lease in the fleet in the recent months35. In January 2006 Air India formally announced an order agreement with Boeing for 68 airplanes valued at more than $11 billion36. Air India's order consists of 23 777s, including eight 777- 200LR (Longer Range) Worldliners and 15 777-300ERs (Extended Range), and 27 787-8 Dreamliners. Air India Express, a wholly-owned subsidiary of Air India, will receive 18 Next- Generation 737-800s. ³Boeing's commitment to the Indian aviation industry dates back more than 60 years,´ Boeing CEO said,37 ³Air India is a valued and long-time partner, and we look forward to working closely with this great airline as it expands its operations with its all-Boeing fleet and brings its unique offerings to the world.´ ³The positive economics of the 777-200LR, 777-300ER and 787 Dreamliner will offer Air India operational cost savings and the flexibility to serve new, ultra-long-range nonstop routes that our passengers demand, such as Delhi-New York and Mumbai-San Francisco,´ said Air India CMD V. Thulasidas. ³The combination of the 777 and 787, matched with the reliability and low operating costs of the 737s, will provide a competitive advantage for Air India and Air India Express. Air India will ensure that these new aircraft have the latest passenger amenities on board so that, with the induction of these aircraft, Air India can emerge as one of the leading global carriers,´38 Thulasidas added. Additionally, Boeing had announced that it was committed to investing in a regional maintenance, repair and overhaul (MRO) base, and a pilot training facility in India. Details of this effort were to be finalized over the coming months. Three years earlier in February, 2003 at the AeroIndia 2003 exposition in Bangalore, it was announced that Indian Airlines would purchase 43 Airbus airplanes. It would comprise of a combination of A319, A320 and A321 models.39 The deal was worth $2.1 billion with deliveries extended up till 2010. The Indian government had planned to replace most of its aging fleet of aircraft in the next 15 years. It was likely to merge Air India and Indian Airlines to form a single entity for ease of operations. To generate funds, an Initial Public Offering was also on the cards, scheduled to take place before March, 2007. Also, the liberalization policies of the government had seen the entry of many private players into the fray. For both Airbus and Boeing the next two decades would represent a great opportunity to sell aircraft models in India. At the Paris Air show in June, 2005 the dramatic rise of air traffic in India was highlighted when the total value of orders from Indian companies crossed $13 billion. This included 100 A320s from the low-cost start-up IndiGo airlines, an order for A380 superjumbos and other aircraft from 34www.airindia.com/page.asp 35ibid 36www.boeing.com/news/releases/ 11th.January, 2006 37ibid 38http://webbolt.ecnext.com/coms2/news_58369, 17th.January, 2006 39µAirbus aces Boeing in India deal¶www.bizasia.com, 6th.February, 2003 9 India¶s Kingfisher Airlines and a split order from Jet Airways for both Airbus and planes. Together with forecasts of a travel boom in China, Airbus asserted India was one of the world¶s most promising markets and predicted that 100 million new urban middle-class consumers would become potential air travelers by 2010.40 ³India is starting a rapid economic expansion and we think air travel will be part of that,´ commented Airbus Chief Commercial Officer John Leahy.41 He continued that Air travel tends to grow at twice the rate of GDP. The Indian government had estimated 20% annual growth in domestic and international air traffic by the end of the decade. Indian passenger fleets were forecast to almost treble from 150 to 400 in the same period.42 Future Outlook ³China is one of the key commercial aviation markets for The Boeing Company,´ said Fred Howard, President of Boeing China. Boeing estimates the world fleet will double to almost 33,000 jets by 2021 and that airlines will invest $1.8 trillion in new commercial airplanes, which equates to about 24,000 airplane deliveries through the next 20 years. Chinese airplane manufacturers like AVICI are eager to win back their own home market from the foreign aviation giants Boeing and Airbus. Airbus had named China as its partner in the design of the new A350. In December 2005 it signed a deal with the Chinese government to assemble planes in China. The agreement was signed in Toulouse by Airbus chief executive Gustave Humbert and the deputy head of China's national development and reform commission, Zhang Xiaoqiang.43 The deal could lead to Airbus assembling some of its smaller A320 single-aisle jets in China. The company said it would carry out a feasibility study to establish whether it should build an alternative assembly point for A320 planes in China. According to Ma Xiaowen, a senior consultant with Great Wall Industry44, China¶s state run aerospace company, the decision to fabricate planes would help Airbus increase sales. Airbus senior vice-president for Marketing and Pricing, Olivier Andries declared, ³Airbus is not only selling aircraft in China, but also committed to the long-term development of China's aviation industry.´45 In March 2006 Boeing and Japan Airlines (JAL) signed an agreement that would reduce JAL¶s operating costs by allowing Boeing to manage a majority of the airline¶s spare parts inventory.46 In 2001 Boeing and JAL had entered into a contract for management of a limited scope of expendable parts. The current agreement appreciably expands that relationship and augments the value of JAL¶s maintenance operations. The system was known as Integrated Material Management where Boeing would be responsible for purchasing, inventory management and logistics for JAL¶s replaceable aircraft parts. The parts were stored at a site near the airline¶ operations until needed. JAL only paid for parts when it needed them which greatly reduced its inventory holding costs and improved the return on assets. This program was an innovative development in expanding Boeing¶s supply chain services to provide value to both airline clientele and suppliers. 40µBooming India buoys Airbus at show¶ www.msnbc.msn.com/id, 16th.June,2005 41ibid 42www.indiadaily.com/editorial 13th.May, 2005 43µAirbus and China strengthen ties¶ http://news.bbc.co.uk/1/hi/business/ 4th.December,2005 44Heim,Kristi µBoeing stumbles in race for China¶ 20th.June, 2005 www.seattletimes.nwsource.com 45µAirbus expects soaring China purchase¶,www.chinadaily.com 25th.March,2004 46µBoeing and Japan Airlines Sign Deal on End-to-End Supply-Chain Solution¶www.webwire.com 15th.March,2006 10 Mitsubishi, Kawasaki, Sumitomo and Furukawa are some of the top suppliers involved in the manufacture of the A300 series of Airbus47. A total of 16 Japanese companies had become contractors for the best selling single-aisle A320. The A380 had forged even stronger partnerships between Airbus and the Japanese industry. It was estimated that the A380 production programme would bring about US $4.6 billion to the Japanese industry, confirming Airbus¶ confidence in Japanese technological skills, quality standards and dependability. With eight out of 10 main A380 routes expected to begin or end in the Asia-Pacific region over the next 20 years, Japan would be a key market for Airbus in the next two decades. According to analysts, the current race was between Boeing and Airbus in outsourcing to India to produce better planes at lower costs. While the European aircraft maker, Airbus, had started talks with Hindustan Aeronautics Limited (HAL) in India to develop components for the A380, Boeing had awarded a new deal to HCL Technologies to develop software for its latest innovation, the 787 Dreamliner. According to Boeing¶s Senior Vice President Thomas Pickering, ³HCL Technologies will focus its software development services on two aspects of the 787 programme. First, it will provide a hosting platform for the flight test computing system to support the requirements of the 787 global team. Second, the company will be providing software development services to many of the 787 systems partners.´48 Boeing had forecast 492 aircraft in the next 20 years from India valued at $36 billion according to Senior Vice-President (Sales) Dinesh S Keskar.49 In December, 2005 Singapore Airlines was interested in acquiring a long-range version of the wide-body 777, the Jumbo 747 and the new 787 Dreamliner, giving the deal a list-price value ranging between 11 billion and 16 billion dollars. The transaction would mark another win for Boeing in the Asia-Pacific region. Hong Kong's Cathay Pacific and Australia's Qantas both booked major orders for Boeing jets, after the company won a succession of big orders from China. By end 2005 Boeing overtook Airbus which, in recent years, had overtaken Boeing in airplane deliveries, by logging in firm orders for 870 aircraft. But negotiations between Singapore Airlines and Airbus have continued and discounts could alter the deal. ³This is one of the last major Asian campaigns to be resolved and Airbus, whose A340 Singapore currently flies, will no doubt be slashing their prices to regain some market share after a triumphant year in the region for Boeing's wide-body offerings,´ Banc of America Securities analyst Nick Fothergill said.50 While its young 90-plane fleet was mostly Boeing, Singapore Airlines had ordered 10 A380s with another 15 on option. They would be the first airline to commercially put into operation the superjumbo when it is delivered in November, 2006. The company also operated five Airbus A340s. Airbus was confident of more orders in Asia and announced in December, 2005 its biggest deal in China, for 150 mid-range planes worth nearly 10 billion dollars.51 In May, 2006 a spokesman for Malaysian Airlines, another middle-level player in Asia, said that the company would buy or lease 50 medium-range aircraft to replace 39 Boeing 737-400s. He also stated that the Kuala Lumpur-based carrier was finalizing selection between the and the Boeing 787.52 47www.airbus.com/japan 48Chopra, Sonal µBoeing and Airbus rush towards India to outsource services and software¶ swww.indiadaily.com, 9th.February, 2005 49µBoeing expects 492 plane orders from India in 20 years¶ www.hindustantimes.com/31st.January, 2006 50http://asia.news.yahoo.com/051224/ 24th.December, 2005 51Op.cit asia.news.yahoo.com 52µAsian showdown looms for Boeing and Airbus¶ 17th.February, 2006 www.iht.com/articles/bloomberg/bxplanes.php 11 Asian airlines, with a combined 2005 profit estimated at $1.5 billion, would be the biggest buyers of large aircraft by 2023, according to a forecast by Airbus. Asian demand for outsized planes seating more than 450 people will see an upward trend, given the fact that incomes are on the rise in India and China, as also expected increase in tourism to China for the 2008 Olympic Games. Airbus needs to sell more of the wide-bodied planes with two passenger aisles each to catch up with Boeing in value of 2005 contracts. Airbus had booked 526 airplane orders in Asia valued at $39.4 billion in 2005 compared with Boeing's 381 plane orders valued at $45.5 billion.53 The two majors won a record 2,057 orders in 2005, with carriers in China, India and other Asian countries accounting for more than 40 percent of the total units sold. China's airlines ordered 352 planes in 2005 from Boeing and Airbus, 17 percent of the total orders received. India, led by low-cost airlines like Air Deccan, ordered 337 planes.54 For the two giants of aviation attaining the first rank in industry would depend on individual performance in the Asia-Pacific region. These would be the developing markets in the next two decades powered by the two economic powerhouses, China and India. Japan and Singapore- Malaysia would also see an upswing in aircraft requirement. To effectively meet these needs both Boeing and Airbus would have to give prime importance to product up-gradation, technological innovation and marketing strategy. With new models on the anvil, the efficient development of these markets would ensure steady absorption of airplane product lines in the future. The Airbus mission statement sums it up significantly. ³Airbus' mission is to provide the aircraft best suited to the market's needs and to support these aircraft with the highest quality of service.´55 Exhibit I Airbus A 380 The Airbus A380 is a double-decker, four-engined airliner manufactured by Airbus S.A.S. It first flew on April 27, 2005 from Toulouse, France. Commercial flights should begin in late 2006 after 15 months of testing, with the delivery of the first aircraft to launch customer Singapore Airlines. During much of its development phase, the aircraft was known as the Airbus A3XX, and the nickname Superjumbo has become associated with the A380. The A380 is the largest passenger airliner in the world, topping the Boeing 747, which was the largest for 35 years. The new Airbus is currently sold in two versions. The A380-800 can carry 555 passengers in a three-class configuration or up to 853 passengers in a single-class economy configuration. Expected range for the -800 model is 15,000 km (8,000 nautical miles). The second model, the A380-800F freighter, will carry 150 tonnes of cargo 10,400 km (5,600 nautical miles). The A380- 900 is a proposed stretch variant, for which the A380's wing was originally designed. Integrated 53Op.cit µAsian showdown looms for Boeing and Airbus¶ 54Ibid 55http://hosted.nlr.nl/public/hosted-sites/imcad/partners/airbus.html 12 Modular Avionics (IMA) is the main avionics architecture. It is based on commercial off-theshelf (COTS) design. Many previous dedicated single-purpose avionics computers are replaced by dedicated software housed in onboard processor modules and servers. This cuts the number of parts as well as providing increased flexibility without resorting to customised avionics. It reduces costs, and benefits from the cheaply commercially available computing power. When the 747 replaced the Douglas DC-8 as the biggest airliner, the technology used was essentially similar (similar flight controls, hydraulics, electrics and avionics) but scaled up for the size. The same however cannot be said about the A380 and the 747-400. As compared to the Boeing 747 the colossal size of the A380 requires novel approaches to application of technologies, especially for weight saving purposes, in order for it to meet its performance guarantees. Many of the technologies first used here may later be used by other jetliners as operational experience is accumulated. Given the history of the airline industry, the A380 will significantly expand the improvements that the 747 made²more seats and lower seat-distance costs - while providing wider seats and better amenities. With 555 passengers, the A380 represents a 35% increase over the 747-400 in standard three-class configuration, along with a nearly 50% larger cabin volume - meaning much more space per passenger. Source: http://en.wikipedia.org/Airbus Exhibit II The Boeing 787 Dreamliner The Boeing 787, or Dreamliner, is a mid-sized wide body passenger airliner currently under development by Boeing Commercial Airplanes and scheduled to enter service in 2008. It will carry between 200 and 350 passengers depending on the seating configuration, and will be more fuel-efficient than comparable earlier airliners. In addition, it will be the first major airliner to use composite material in the majority of its construction. Prior to January 28, 2005, the 787 was known as the developmental designator 7E7. On April 26, 2005, one year to the day after the launch of the program, the final look of the external 787 design was frozen. With a less rakish nose and a more conventional tail, the final design has superior aerodynamics as compared to the initial 7E7 concept The 787 essentially uses the technology proposed for the Sonic Cruiser in a more conventional configuration (see Features). Boeing claims that the 787 will be up to 20% more fuelefficient than current comparable aircraft. Roughly one-third of this efficiency improvement will come from the engines; another third from aerodynamic improvements and the increased use of lighter weight composite materials; and the rest from advanced systems. The most notable system advancement contributing to efficiency is a "more electric architecture" which replaces bleed air and hydraulic power with electrically powered compressors and pumps. Technology from the Sonic Cruiser and 787 will be used as part of Boeing's project to replace their entire airliner product line, Yellowstone (of which the 787 is the first stage). Source: http://en.wikipedia.org/Boeing 13 Exhibit III Airbus-Boeing competition: Plane net orders 2002-2005 Exhibit IV The Boeing Company Financial Summary Quarter ended 31st.March (Millions except per share data) 2006 2005 Change Revenues $14,264 $12,681 12% Earnings from Operations $959 $687 40% Operating Margin 6.7% 5.4% 1.3 Pts Reported Net Income $692 $535 29% Reported Earnings per Share $0.88 $0.66 33% *Operating Cash Flow $2,055 $1,405 46% *After pension contribution Source: http://www.boeing.com/news/releases/2006/ 14 Exhibit V Boeing Product List Commercial Airplanes 717 737 747 767 777 787 Dreamliner Out-of-Production Models 707 727 757 DC-8 DC-9 DC-10 MD-11 MD-80 MD-90 Source:www.boeing.com/products Exhibit VI Airbus Performance in 2005 ‡ Airbus booked 1,111 new gross orders and 1,055 net orders during the year. ‡ 2005 deliveries totalled 378 aircraft, bringing turnover for the year to approximately ¼22.3 billion. ‡ The backlog at year-end was 2,177 aircraft, valued at $220.3 billion ± the highest ever, ensuring work for the next four to five years at record production rates. ‡ Airbus achieved a profitability margin above its target of 10 per cent. Source:www.airbus.com/en/airbusfor/analysts/ Exhibit VII 15 Airbus Product List on 1st.April, 2006 Aircraft Description Seats Launch date 1st flight 1st delivery A300 2 engine, twin aisle, 250- 375 May 1969 Oct 1972 May 1974 A310 2 engine, twin aisle, modified A300 200- 280 July 1978 Apr 1982 Dec 1985 A318 2 engine, single aisle, shortened 6.17m from A320 136 Apr 1999 Jan 2002 Oct 2003 A319 2 engine, single aisle, shortened 3.77m from A320 145 June 1993 Jan 1995 Apr 1996 A320 2 engine, single aisle 180 Mar 1984 Feb 1987 Mar 1988 A321 2 engine, single aisle, lengthened 6.94m from A320 220 Nov 1989 Mar 1993 Jan 1994 A330 2 engine, twin aisle 253- 440 June 1987 Nov 1992 Dec 1993 A340 4 engine, twin aisle 261- 440 June 1987 Oct 1991 Jan 1993 A350 2 engine, twin aisle 250- 300 Oct 2005 2009 2010* A380 4 engine, twin aisle, double deck 555- 840 Dec 2002 Apr 27, 2005 Q4 2006 * A350-900 delivery rescheduled to at least 2012. 800 & 1000 variants a year or two later. Source: http://en.wikipedia.org/Airbus 16 Exhibit VIII AIRBUS Results Year 1989 1990 1991 1992 1993 1994 1995 Aircraft orders 421 404 101 136 38 125 106 Value of orders 34 27 9.4 9.8 3.5 9.1 7 (US$ billion) Cumulative orders 1331 1690 1767 1808 1777 1848 1935 Aircraft deliveries 105 95 163 157 138 123 124 Turnover US$ 4.9 US$ 4.7 US$ 7.5 US$ 7.7 US$ 8.7 US$ 8.5 US$ 9.6 (billion) Cumulative deliveries 557 652 815 972 1110 1233 1357 Order backlog 774 1038 952 836 667 615 578 Number of customers 87 101 104 108 113 112 122 Number of operators 70 68 79 97 109 123 131 Year 1996 1997 1998 1999 2000 2001 2002 Aircraft orders 326 460 556 476 520 375 300 Value of orders 23.6 29.6 39 30.5 41.3 44.7 24.3 (US$ billion) Cumulative orders 2236 2674 3203 3633 4125 4399 4632 Aircraft deliveries 126 182 229 294 311 325 303 Turnover US$ 8.8 US$ 11.6 US$ 13.3 US$ 16.7 US$ 17.2 Euro 20.5 Euro 19.5 (billion) 17 Cumulative deliveries 1483 1665 1894 2188 2499 2824 3127 Order backlog 753 1009 1309 1445 1626 1575 1505 Number of customers 133 140 160 169 173 180 191 Number of operators 126 146 158 178 188 188 188 Year 2003 2004 2005 Aircraft orders 284 370 1111 Value of orders 24.3 34.4 95.9 (US$ billion) Cumulative orders 4886 5252 6307 Aircraft deliveries 305 320 378 Turnover Euro 19.3 Euro >20 Euro ~22.3 (billion) Cumulative deliveries 3432 3752 4130 Order backlog 1454 1500 2177 Number of customers 186 204 225 Number of operators 210 232 249 Source: http://www.airbus.com/store/mm_repository/pdf/att00003196/media_object_file_1989-2005_results.xls

EADS European Aeronautic Defence and Space Company N.V. (EADS)

Type Naamloze

vennootschap(Euronext: EAD,BMAD: EAD, FWB: EAD)

Industry Aerospace, defence,telecommunications

Founded 2000

Headquarters Leiden, Netherlands

Area served Worldwide

Key people Bodo Uebber (Chairman), Louis Gallois (CEO)

[1]

Revenue Φ42.82 billion (2009)

Operating ź (Φ322 million) (2009)[1]

income

[1]

Profit ź (Φ763 million) (2009)

[1]

Total assets Φ80.30 billion (2009)

[1]

Total equity Φ10.64 billion (2009)

Owner(s) SOGEADE (22.46%)

Daimler AG (22.46%)

SEPI (5.48%)

[1]

Employees 119,500 (2009)

Divisions Airbus

Cassidian

Eurocopter

Website www.eads.com

Type Subsidiary

Industry Aerospace

Founded 1970 (Airbus Industrie)

2001 (Airbus SAS)

Headquarters Blagnac, France

Key people Thomas Enders, CEO

Harald Wilhelm, CFO

John Leahy, Chief Commercial Officer

Fabrice Brégier, COO

Products Commercial airliners (list)

[1]

Revenue Ÿ Φ27.45 billion (FY 2008)

Net income Ÿ Φ1.597 billion (FY 2008)

[2]

Employees 52,000 Parent EADS

Subsidiaries

Website www.airbus.com

Produced 1988 -

Number built 4,425 as of 30 September 2010[1]

Unit cost A318: US$56.0 to $62.1m (2008)[2] A319: $63.3 to $77.3m (2008) A320: $73.2 to $80.6m (2008) A321: $87.7 to $92.8m (2008

Boeing

Airplane Families 2008 $ in Millions

737 Family

737-600 51.5 -- 58.5

737-700 58.5 -- 69.5

737-800 72.5 -- 81.0

737-900ER 76.0 -- 87.0

747 Family 747-400/ -400ER 234.0 -- 266.5

747-400/ -400ER Freighter 238.0 -- 268.0

747-8 293.0 -- 308.0

747-8 Freighter 301.5 -- 304.5

767 Family

767-200ER 127.5 -- 139.0

767-300ER 144.5 -- 161.5

767-300 Freighter 155.0 -- 166.0

767-400ER 158.0 -- 173.0

777 Family

777-200ER 205.5 -- 231.0

777-200LR 237.5 -- 263.5

777-300ER 257.0 -- 286.5

777 Freighter 252.5 -- 260.5

787 Family

787-3 150.0 -- 155.5 787-8 161.0 -- 171.5

787-9 194.0 -- 205.5

Orders and deliveries summary

Model Series Orders Deliveries Unfilled

Commercial Jets

737-600 69 69 -

737-700 1,527 1,041 486

737-700C 15 13 2

737-800 3,390 2,004 1,386

737-900 52 52 -

737-900ER 244 77 167

Commercial Jets Total 5,297 3,256 2,041

Business Jet

737-700BBJ 119 103 16

737-800BBJ 19 15 4

737-900BBJ 7 4 3

Business Jets Total 145 122 23

Grand Total 5,442 3,378 2,064

Competition between Airbus and Boeing (sometimes referred to as the "Airliner Wars") is a result of the two companies' domination of the large jet airliner market since the 1990s, which is itself a consequence of numerous corporate failures and mergers within the globalaerospace industry over the years. Airbus began its life as a consortium, whereas Boeing took over its former arch-rival, McDonnell Douglas, in 1997. Other manufacturers, such as Lockheed and Convair in the USA and Dornier and Fokker in Europe, have pulled out of the civil aviation market after disappointing sales figures and economic problems. The collapse of the Eastern Bloc and its trade organisationComecon around 1990 has put the former Soviet aircraft industry in a disadvantaged position, although Antonov, Ilyushin, Sukhoi, Tupolev andYakovlev develop new aircraft and gain a small market share. All this has left Boeing and Airbus in a near-duopoly in the global market for large commercial jets comprising narrow-body aircraft, wide-body aircraft and jumbo jets. However, Embraer has gained market share with their narrow-body aircraft in the Embraer E-jets series. There is also a similar competition in regional jet manufacturing between Bombardier Aerospace and Embraer.

In the decade between 2000 and 2009 Airbus received 6,452 orders, while Boeing received 5,927. Airbus had higher deliveries between 2003 and 2009, but fell slightly short of Boeing's deliveries, delivering 3,810 aircraft compared to Boeing's 3,950. The competition is intense, and each company regularly accuses the other of receiving unfair state aid from their respective governments.

y y y y y y y y 1 Competition by product

o 1.1 Range overlap

o 1.2 Passengers/range km (statute miles) for all models

o 1.3 Airbus A320 vs Boeing 737

o 1.4 and vs Boeing 767 and Boeing 777

o 1.5 Airbus A350 XWB vs Boeing 787 and 777

o 1.6 Airbus A380 vs Boeing 747

o 1.7 A330 MRTT - KC-45A

 1.7.1 EADS A330 MRTT - KC 45 A versus Boeing KC-767 y 2 Competition by outsourcing y 3 Competition through use of technology y 4 Competition through provision of engine choices y 5 Effect of currency on competition y 6 Orders and deliveries y 7 Boeing's Product Plan y 8 Safety y 9 Controversies

o 9.1 Subsidies

o 9.2 World Trade Organization litigation y 10 See also y 11 References y 12 External links

Competition by product

[edit]Range overlap

Though both manufacturers have a broad product range in various segments from single-aisle to wide- body, manufacturers' offerings do not always compete head-to-head. As listed below they respond with slightly different models.

 The A380, for example, is substantially bigger than the B747.  The A350 XWB competes with the high end of the B787 and the low end of the B777.  The A320 is bigger than the 737-700 but smaller than the 737-800.  The A321 is bigger than the B737-900 but smaller than the previous B757-200.  The A330-200 competes with the smaller B767-300ER.

Airlines can use this as a benefit since they get a more complete product range from 100 seats to 500 seats than if both companies offered identical aircraft. [edit]Passengers/range km (statute miles) for all models

A chart comparing the passenger capacity (2-class typical) and range (maximum in nautical miles) of in-production, future, and out-of-production since 2000 Airbus and Boeing aircraft. 2,645 5,600 9,000 12,250 13,300 14,900 15,400 6,800 to 14,200 to to to to 10,500 to to to to to 16,700 to 7,700 14,800 3,185 5,900 10,200 11,300 12,500 13,900 15,200 16,000 17,400 (4500 sm (9000 sm (2400 s (3500 s (5900 s (6800 sm) (7700 s (8500 s (9300 s (9800 s (10500 sm) ) ) m) m) m) m) m) m) m)

100 A318- (B717- - 100B73 200)

139 7-600

140 B737- B737-

- A319-100

700 700ER 156

148 B737- - 800A32

189 0-200

(A310- 177 A321- (B757- 200) B767- B767-

- 200B73 B787-8

200) (A310- 300ER 200ER

255 7-900 300)

243 B767- (B757- - 400ERB74 300)

375 7SP

253 A350- (A300- A330-

- (A300) A340-200 800B78

600) 200

300 7-9

295 A340- B777- A350-

- B787-3 B777-200 A330-300 B777-200LR

300 200ER 900 440

313 A340- A340- - 500HGWA3

500

366 50-900R

358 B747- B777- B747- B747-

- 100SRB7 B777-300 300ERA3

100 200

550 47-300SR 50-1000

380 A340- - 600A340-

419 600HGW

B747- B747- 410

400 400ER - 568

<46

B747-8 7

525

- A380 853

[edit]Airbus A320 vs Boeing 737

Airbus A320 family Boeing 737

737- A318 A319 A320 A321 737-300 737-400 737-500 737-600 737-700 737-800 900ER

Cockpit Two Two crew

117 (1- 142 (1- 180 (1- 220 (1- Seating 148 (1- 168 (1- 149 (1- 189 (1- 204 (1- 132 (1-class) class) class) class) class) capacity class) class) class) class) class)

31.45 m 36.5 m 31.1 m 31.2 m 33.6 m 39.5 m 42.1 m 33.84 m 37.57 m 44.51 m 28.6 m (103 ft Length (119 ft (101 ft (102 ft (110 ft (129 ft (138 ft (111 ft) (123 ft) (146 ft) (94 ft) 2 in) 6 in) 8 in) 6 in) 4 in) 6 in) 2 in)

12.56 m 12.6 m 11.3 m (41 ft 11.76 m (38 ft 7 in) Height 11.1 m (36 ft 5 in) (41 ft 12.5 m (41 ft 2 in) (37 ft) 2 in) 3 in)

Wingsp 28.3 m 34.10 m (111 ft 10 in) 28.9 m (94 ft 8 in) 34.3 m (112 ft 7 in) an (93 ft)

Wing 25° Sweepb 25° 25.02° ack

Aspect 8.83 9.16 9.45 Ratio

Cabin 3.70 m (12 ft 1 in) 3.54 m (11 ft 7 in) Width

2.20 m (7 ft 3 in) Cabin

Height

Fuselag 3.95 m (13 ft) 3.76 m (12 ft 4 in) e Width

Fuselag e 4.11 m (13' 6") Height

28,120 k 33,200 k 31,300 k 36,378 k 38,147 k 41,413 k 44,676 k Typical 39,300 k 40,600 k 42,400 k 48,200 k g g g g g g g empty g g g g (61,864 l (73,040 l (68,860 l (80,031 l (84,100 l (91,108 l (98,495 l weight b) b) b) b) b) b) b)

68,000 k 75,500 k 77,000 k 93,500 k Maximu 49,190 k 68,050 k 60,550 k 66,000 k 70,080 k 79,010 k 85,130 k g g g g m take- g g g g g g g (149,90 (166,50 (169,00 (206,10 off (108,21 (149,71 (133,21 (145,50 (154,50 (174,20 (187,70 0 lb) 0 lb) 0 lb) 0 lb) weight 8 lb) 0 lb) 0 lb) 0 lb) 0 lb) 0 lb) 0 lb)

Maximu 44,906 k 56,246 k 49,895 k 55,112 k 58,604 k m g g g g g 66,361 kg landing (99,000 l (124,00 (110,00 (121,50 (128,92 (146,300 lb)

weight b) 0 lb) 0 lb) 0 lb) 8 lb)

Maximu 40,824 k 53,070 k 46,720 k 51,936 k 55,202 k m zero- g g g g g 62,732 kg fuel (90,000 l (117,00 (103,00 (114,50 (121,70 (138,300 lb)

weight b) 0 lb) 0 lb) 0 lb) 0 lb)

Cargo 38.9 m³ 45.1 m³ 52.5 m³ 18.4 m³ 23.3 m³ 21.4 m³ 27.3 m³ Capacit (1,373 ft (1,591 ft (1,852 ft (650 ft³) (822 ft³) (756 ft³) (966 ft³) y ³) ³) ³)

1,355 m 1,950 m 2,090 m 2,180 m Takeoff 1,990 m 2,540 m 2,470 m 2,400 m 2,480 m (4,446 ft (6,398 ft (6,857 ft (7,152 ft run at (6,646 ft (8,483 ft (8,249 ft (8,016 ft (8,283 ft 2,450 m (8,181 ft) ) ) ) ) MTOW ) ) ) ) )

Cruising .74 .78 .78 Mach .74 Mach .785 Mach speed Mach Mach

Max. .82 Mach .82 Mach speed

5,950 k 6,800 k 5,700 k 5,600 k Range 3,440 k 4,005 k 4,444 k 5,648 k 6,230 k 5,665 k 4,996 k m m m m fully m m m m m m m (3,200 n (3,700 n (3,078 n (3,050 n loaded (1,860 n (2,165 n (2,402 n (3,050 n (3,365 n (3,060 n (2,700 n m) m) m) m) m) m) m) m) m) m) m) (5,510 n [5,925 k m on ER m variants. (3,200 n ) m ) 2- class layout w/2 aux. tanks]

23,860 L 29,840 L Max. 17,860 L 23,170 L 23,800 L 29,660 L 29,680 L 26,020 L 6,300 U 7,885 fuel 4,725 6,130 6,296 7,837 7,842 US gal 6,875 US gal S gal US gal capacity US gal US gal US gal US gal

Service 35,000 f 39,000 ft 37,000 ft 41,000 ft Ceiling t

PW6022 A, Engines CFM56- CFM56- CFM56- CFM56- CFM56- CFM56- CFM56- IAE V2500, CFM56-5 CFM56- (x2) 3B-1 3B-2 3B-1 7B20 7B26 7B27 7 5

Max 20,000 l 22,000 l 20,000 l 20,600 l 26,300 l 27,300 lbf Thrust bf bf bf bf bf

Engine Ground 51 cm 46 cm (18 in) 48 cm (19 in) Clearan (20 in)

ce

[edit]Airbus A330 and Airbus A340 vs Boeing 767 and Boeing 777 Measurement A340-200 A340-300 A340-500/-500HGW A340-600/-600HGW

Cockpit crew Two

Seating capacity 261 (3-class) 295 (3-class) 313 (3-class) 380 (3-class)

59.39 m 63.60 m 67.90 m 75.30 m Length 194 ft 10 in 208 ft 8 in 222 ft 9 in 247 ft 0 in

60.30 m 63.45 m Wingspan 197 ft 10 in 208 ft 2 in 361.6 m² 439 m² Wing area 3,892 ft² 4,725 ft²

Wing sweepback 30° 31.1°

16.70 m 16.85 m 17.10 m 17.30 m Height 54 ft 9 in 55 ft 3 in 56 ft 1 in 56 ft 9 in

Cabin width 5.28 m (17.3 ft)

Fuselage width 5.64 m (18.5 ft)

23.24 m 25.60 m 27.59 m 32.89 m Wheelbase 76 ft 3 in 84 ft 0 in 90 ft 6 in 107 ft 11 in

Typical empty 129,000 kg 129,275 kg 170,400 kg 177,000 kg weight 284,396 lb 295,503 lb 375,668 lb 390,218 lb

Maximum take-off 275,000 kg 276,500 kg 372,000/380,000 kg 368,000/380,000 kg weight 606,300 lb 609,600 lb 820,100 /837,800 lb 811,300/837,800 lb

Mach 0.82 (896 km/h, 484 knots, Cruising speed Mach 0.84 (905 km/h, 490 knots, 560 mph) 557 mph)

Take off run 2,990 m 3,000 m 3,050 m 3,100 m at MTOW 9,810 ft 9,840 ft 10,000 ft 10,170 ft

14,800 km 13,700 km 16,020/16,700 km 14,360/14,630 km Range fully loaded 8,000 NM 7,400 NM 8,650/9,000 NM 7,750/7,900 NM

155,040 L 140,640 L 214,810/222,000 L 195,881/204,500 L Max. fuel capacity 40,957 gal 37,153 gal 56,750/58,646 gal 51,746/54,023 gal

Cargo capacity 18 LD3s/6 pallets 30 LD3s/10 pallets 32 LD3s/11 pallets 42 LD3s/14 pallets

11,887 m Service ceiling 39,000 ft

CFM56- CFM56- 5C2(138.78 kN) 5C2(138.78 kN) CFM56-5C3 CFM56-5C3 (144.57 kN) Rolls-Royce Trent Trent 556/560 Engines (4x) (144.57 kN) CFM56-5C4 553/556 (236/249 kN) (249/260 kN) CFM56-5C4 (151.25 kN) (151.25 kN) CFM56-5C4P (149.9 kN)

Boeing 777 Airbus A330 Series Boeing 767 Series Series

A330-200 A330-300 A330-F 767-200ER 767-300ER 767-300-F 767-400ER 777-200LR

Cockpit Two Two crew

253 (3 cl.) 295 (3 cl.) Seating 293 (2 cl.) 335 (2 cl.) - 181-255 218-351 - 245-375 301-440 capacity 405 (1-cl.)[1] 440 (1 cl.)

58.8 m 58,8 m 63,6 m (192 ft 11 in Length 48.5m 54.9m 61.4m 63.7m (192 ft 11 in) (208 ft 8 in) )

17.40 m 16.9 m (55 ft 5 in) Height 15.8m 15.9m 16.8m 18.8m

Wingspa 60.3 m (197 ft 10 in) 47.6m 51.9m 64.8m n

Cabin 5.28 m (17 ft 4 in) Width

Hull 5.64 m (18 ft 6 in) 5.03 m [2] Width

Maximu 179,170 kg 204,110 kg m take- 347,450 kg 233,000 kg (513,700 lb) (395,000 lb 186,880 kg (412,000 lb) (450,000 lb off (766,000 lb) ) ) weight

Maximu 182,000 kg m 187,000 kg (412,300 lb) (401,200 lb) landing

weight

Takeoff 2,200 m 2,500 m run

0.82 Mach (896 km/h) 0.80 Mach 0.84 Mach Cruising speed

0.85 Mach (913 km/h or 490 knots at Max 0.86 Mach 0.89 Mach 35,000 ft.) Speed

Range 7,400 km 12,250 km 11,300 km 6,100 km 10,500 km 17,450 km 12,500 km 10,500 km fully (4,000 nm) (6,600 nm) (6,100 nm) (3,270 nm) (5,645 nm) (9,420 nm) loaded

139,100 L 97,170 L 181,280 L Max. fuel 90,770 L (36,750 US ga (25,670 US ga 139,100 L (47,890 US ga capacity (23,980 US gal) l) l) l)

Cargo 136 m³ 162 m³ 150 m³ 475 m³ (volume) 81.4 m³ 106.8 m³ 454 m³ 129 m³ 26 LD3s 32 LD3s 6 LD3s /ULDs

PW PW406 PW PW406 PW PW406 PW PW406 2 2 PW PW4000 Engines 2 2 GE CF6- GE CF6- GE CF6-80E1 GE 90-110B1 (x2) GE CF6- GE CF6- 80C2B7F 80C2B7F RR Trent 700 80C2B7F 80C2B8F RR RB211- RR RB211- 524H 524H

Max 303-320 kN Thrust 68,000-72,000 lbf (x2)

Engine Ground 0.81 m (2 ft 0.56 m (1 ft 10 in) Clearanc 8 in)

e

[edit]Airbus A350 XWB vs Boeing 787 and 777

A350 XWB Boeing 777 Boeing 787

A350- A350- A350- A350- A350- 777- 777- 777- 787-9 787-10 [7] 800[3] 900[4] 1000 900R[5] 900F 200LR 200F 300ER[6]

Cockpit Two Two crew

90t Passengers 103t 270 314 350 310 301 365 263 310[8] cargo (3cl) cargo 60.7 m 67.0 m 74.0 m 67.0 m Length 63.7 m 73.9 m 63.0 m 68.9 m

17.2 m Height 18.8 m 18.6 m 18.7 m 16.5 m 17.0 m

64.8 m Wingspan 64.8 m 60.0 m 60.1 m

Fuselage 19 ft 6 in (5.96 m)[9] 20 ft 4 in (6.19 m) 18 ft 11 in (5.75 m) Width

Cabin 18 ft 4 in (5.59 m) 19 ft 3 in (5.86 m) 18 ft (5.49 m) Width

31.9° Wing sweep 31.64° 32.2°

LD3 contain 37 28 36 44 32[10] 44[11] 36 44 ers pallets

347.45 248 268 298 MTOW (t) 347.452 351.534 244.940 272.150 0

Max landing 185 205 228.5 183.7 197.3 (t)

115.7[EW Empty 145.2[EW 167.8[EW 115.3[EW 125[EW 3] 1] weight (t) 2] 2] 3]

181,28 129,000 138,000 156,000 Max fuel (l) 202,287 181,280 138,700 145,000 0

Cruise 0.85 0.84 0.85 speed (M)

Max speed 0.89 0.89 (M)

Thrust (lb) 75,000 84,000 93,000 115,300 68,000 88,200 (× 2)

GE90- RR Trent XWB Engines GE90-110B RR Trent 1000 or GE GEnx 115B

8,300 n 8,100 n 8,000 n 9,500 n 5,000 n 9,420 n 4,990 n 7,900 n 8,500 n m m m m m m m m m 7,500 nm[8]13,89 Range 15,400 k 15,000 k 14,800 k 17,600 k 9,250 k 17,445 k 9,065 k 14,630 k 15,750 k 0 km m m m m m m m m m $232.5 $178.5 $208M $244M $270M TBA TBA Price $237M $219M TBA M M

Empty weight EW:

1. ^ Proposed manufacturer's weight empty including expected overweight.

a b 2. ^ Final operating empty weight

a b 3. ^ Proposed operating empty weight not including expected overweight [edit]Airbus A380 vs Boeing 747

Airbus A380 Boeing 747

A380-800 [12] 747-400 [13] 747-400ER [14] 747-8I [15][16]

Two Cockpit crew Two

525 / 644 / 853 (3/2/1- Passengers 416 / 524 (3/2-class) 467 (3-class) class)

73 m Length 70.6 m (231 ft 10 in) 76.4 m (250 ft 8 in)

24.1 m Height 19.4 m (63 ft 8 in) 19.5 m (64 ft 2 in)

79.8 m Wingspan 64.4 m (211 ft 5 in) 68.5 m (224 ft 7 in)

Main deck: 6.58 m (21 ft 7 in) Cabin width 6.1 m (20.1 ft) Upper Deck: 5.92 m (19 ft 5 in)

633 m² (333 + 300) Useful cabin-area

38 LD3 containers 30 28 36

276,800 kg (608,400 lb) Empty weight 178,756 kg (393,263 lb) 184,570 kg (406,900 lb) 214,500 kg (473,000 lb)

361,000 kg (796,000 lb) Max zero-fuel weight 246,074 kg 251,744 kg 291,000 kg (640,000 lb)

560,000 kg

MTOW 396,890 kg (875,000 lb) 412,775 kg (910,000 lb) 442,000 kg (970,000 lb) (1,235,000 lb) 310,000 L 216,840 L 241,140 L 241,619 L Max fuel (81,890 US gal) (57,285 US gal) (63,705 US gal) (64,221 US gal)

Mach 0.85 (567 mph, Mach 0.85 (900 km/h) Cruise speed Mach 0.855, (567 mph, 913 km/h at altitude) 912 km/h at altitude)

Mach 0.96 Max Operating Mach Mach 0.92 (987 km/h) (1030 km/h)[17]

63,300 lbf PW 63,300 lbf PW 311 kN (70,000 lbf) Thrust (× 4) 62,100 lbf GE 66,500 lbf 62,100 lbf GE 59,500 lbf RR

PW 4062 PW 4062 GP7270, Trent 970 Engines GE CF6-80C2B5F GEnx-2B67 GE CF6-80C2B5F RR RB211-524H

2,750 m (9,020 ft) Takeoff run at MTOW 3,018 m (9,902 ft) N/A

15,200 km (8,200 nmi) Range (3 class) 13,450 km (7,260 nm) 14,205 km (7,670 nm) 14,815 km (8,000 nm)

Cross-section comparison of Airbus A380 versus Boeing 747-400

The widebody 747-8, as the latest modification of Boeing's largest airliner, is notably in direct competition on long-haul routes with the A380, a full-length double-deck aircraft now in service. For airlines seeking very large passenger airliners, the two have been pitched as competitors on various occasions. Following another delay to the A380 programme in October 2006, FedEx and UPScanceled their orders for the A380-800 freighter. Some A380 launch customers deferred delivery or considered switching to the 747-8 and 777F aircraft.[18][19] Boeing advertising claims 747-8I to be more than 10% lighter per seat and consume 11% less fuel per passenger with a trip-cost reduction of 21% and a seat-mile cost reduction of more than 6% versus the A380. For the 747-8F's empty weight is expected to be 80 tonnes (88 tons) lighter and 24% lower fuel burn per ton with 21% lower trip costs and 23% lower ton-mile costs than the A380F.[20] In order to counter a perceived strength of the 747-8I, from 2012 Airbus will offer, as an option, of improved maximum take-off weight, thus providing a better payload/range performance. The precise size of the increase in maximum take-off weight is still unknown. British Airways and Emirates will be the first customers to receive this new option.[21] As of April 2009 no airline has canceled an order for the passenger version of the A380. Boeing currently has only two commercial airline orders for the 747-8I: Lufthansa (20) and Korean Air Lines (5).[22] [edit]A330 MRTT - KC-45A

In March 2008 the announcement that Boeing had lost a $40bn contract to Airbus to build parts for the new in-flight refuelling aircraft KC-45Afor the USAF drew angry protests in the US Congress.[23] Upon review of Boeing's protest, the Government Accountability Office ruled in favor of Boeing and ordered the USAF to recompete the contract. Later, the entire competition was first rescheduled, then canceled, with a new competition expected to be decided by March 2010.[24] [edit]EADS A330 MRTT - Northrop Grumman KC 45 A versus Boeing KC-767

Data are preliminary and partially copied from A330-200 and 767-200ER.

A330 MRTT - KC-45 KC-767 Advanced Tanker

Length 59.69 m 48.5 m

Height 16.9 m 15.8 m

Fuselage Width 5.64 m 5.03 m

Wingspan 60.3 m 47.57 m

Surface area 361.6 m²

2x RR Trent 700 or 2x Pratt & Whitney Engines GE CF6-80 PW4062

Thrust (× 2) 316 kN 282 kN Passengers 226 - 280[25] 190

Range 12,500 km 12,200 km

Cruise speed 860 km/h Mach 0.80 (851 km/h)

Max speed Mach 0.86 (915 km/h) Mach 0.86 (915 km/h)

Max takeoff weight 230 t 181 t

Max landing weight 180 t 136 t

Normal fuel load 250,000 lb (113,500 kg) 161,000 lb (73,100 kg)

250,000 lb (113,500 kg) plus 95,800 lb (43,500 kg) Maximum fuel load over 202,000 lb (91,600 kg) of additional cargo or fuel load

Cargo (standard pallets) 32 (463L) pallets 19 (463L) pallets

[edit]Competition by outsourcing

Because many of the world¶s airlines are wholly or partly government owned, aircraft procurement decisions are often taken according to political as well as commercial criteria. Boeing and Airbus seek to exploit this by subcontracting production of aircraft components or assemblies to manufacturers in countries strategically important in order to gain competitive advantage.

For example, Boeing has offered longstanding relationships with Japanese suppliers including Mitsubishi Heavy Industries and Kawasaki Heavy Industries by which these companies have had increasing involvement on successive Boeing jet programs, a process which has helped Boeing achieve almost total dominance of the Japanese market for commercial jets. Outsourcing was extended on the 787 to the extent that Boeing¶s own involvement was reduced to little more than project management, design, assembly and test operation, outsourcing most of the actual manufacturing all around the world.[citation needed] Boeing has since stated that it "outsourced too much" and that future airplane projects will depend far more on Boeing's own engineering and production personnel.[26]

Partly because of its origins as a consortium of European companies, Airbus has had fewer opportunities to outsource significant parts of its production beyond its own European plants. However, in 2009 Airbus has opened an assembly plant in Tianjin, China for production of its A320 series airliners.[27]

[edit]Competition through use of technology

One of the ways Airbus sought to compete with the well-established Boeing in the 1970s was through the introduction of advanced technology. For example, the A300 made the most extensive use of composite materials yet seen in an aircraft of that era, and by automating the flight engineer's functions, was the first large commercial jet to have a two-man flight crew. In the 1980s Airbus was the first to introduce digital fly-by-wire controls into an airliner (the A320).

Now that Airbus has established itself as a viable competitor to Boeing, both companies use advanced technology to seek performance advantages in their products. For example, the Boeing 787 will be the first large airliner to use composites for most of its construction.

[edit]Competition through provision of engine choices

The competitive strength in the market of any airliner is considerably influenced by the choice(s) of engine available. In general, airlines prefer to have a choice of at least two engines from the major manufacturers General Electric, Rolls-Royce and Pratt & Whitney. However the engine manufacturers clearly prefer to be single source, and sometimes succeed in striking commercial deals with Boeing and Airbus to achieve their objective. Hence several notable aircraft have only provided a single engine offering: the Boeing 737-300 series onwards (CFM56), the Airbus A340-500 & 600 (Rolls-Royce Trent 500), the Airbus A350 (Rolls-Royce Trent XWB - so far) and the Boeing 747-8(GEnx-2B67).[28]

[edit]Effect of currency on competition

Boeing's production costs are mostly in US dollars, while Airbus' production costs are mostly in euro. When the dollar appreciates against the euro the cost of producing a Boeing aircraft rises relative to the cost of producing an Airbus aircraft, and conversely when the dollar falls relative to the euro it is an advantage for Boeing. There are also possible currency risks and benefits involved in the way the aircraft are sold. Boeing typically prices its aircraft only in dollars, while Airbus, although pricing most aircraft sales in dollars, has been known to be more flexible and has priced some aircraft sales in Asia and the Middle East in multiple currencies. Depending on currency fluctuations between the acceptance of the order and the delivery of the aircraft this can result in an extra profit or extra expense - assuming Airbus has not purchased insurance against such fluctuations.[29] [edit]Orders and deliveries

Orders

201 200 200 200 200 200 200 200 200 200 200 199 199 199 199 199 199 199 199 199 199 198 0 9 8 7 6 5 4 3 2 1 0 9 8 7 6 5 4 3 2 1 0 9

134 105 Airbu 328 271 777 790 370 284 300 375 520 476 556 460 326 106 125 38 136 101 404 421 1 5 s

141 104 100 Boein 392 142 662 272 239 251 314 588 355 606 543 708 441 125 236 266 273 533 716 3 4 2 g

Sources 2010: Airbus net orders until September 30 (http://www.airbus.com/en/corporate/orders_and_deliveries/) Boeing net orders until October 7 (http://active.boeing.com/commercial/orders/index.cfm)

Deliveries

201 200 200 200 200 200 200 200 200 200 200 199 199 199 199 199 199 199 199 199 199 198 0 9 8 7 6 5 4 3 2 1 0 9 8 7 6 5 4 3 2 1 0 9

Airbu 380 498 483 453 434 378 320 305 303 325 311 294 229 182 126 124 123 138 157 163 95 105 s

Boein 346 481 375 441 398 290 285 281 381 527 491 620 563 375 271 256 312 409 572 606 527 402 g

Sources 2010: Airbus deliveries until September 30 (http://www.airbus.com/en/corporate/orders_and_deliveries/) Boeing deliveries until September 30 (http://active.boeing.com/commercial/orders/index.cfm?content=displaystandardreport.cfm&optReportType=CurYrDelv)

e r or er Y a ly d s. Yearly deliveries. Orders/Deliveries overlay.

[edit]Boeing's Product Plan

Since the 1970s Boeing has faced increasing competition from Airbus, which has expanded its family of aircraft to the point where Airbus and Boeing now cover an almost identical market. Airbus has delivered more planes than Boeing every year from 2003 onwards. Airbus orders have exceeded Boeing's in every year since 1999 except for 2000 and 2006, which went to Boeing. In 2005 Airbus won more orders by number, but Boeing won 55% by value. In summary, of the last 10 years (2000±2009), Airbus won 6,452 orders while delivering 3,810, Boeing won 5,927 orders while delivering 3,950.

The A320 has been selected by 222 operators (Dec. 2008), among these several low-cost operators, gaining ground against the previously well established 737 in this sector; many full-service airlines also have selected it as a replacement for 727s and aging 737s, such as United Airlines and Lufthansa; and after 40 years the A380 now challenges the Boeing 747s dominance of the very large aircraft market. The 747-8 is a stretched and updated version of the venerable 747-400 and will offer greater capacity, fuel efficiency and longer range. Frequent delays to the Airbus A380 program caused several customers to consider cancelling their orders in favour of the refreshed 747-8[30], although none has done so and some have even placed repeat orders for the A380. However, all A380F orders have been canceled. To date, Boeing has secured orders for 78 747-8F and 28 747-8I with first deliveries scheduled for 2010 and 2011 respectively, while Airbus has orders for 234 A380s, the first of which entered service in 2007.

Several Boeing projects were pursued and then canceled, like the Sonic Cruiser, launched in 2001. Boeing is now focused on the 787 Dreamliner as a platform of total fleet rejuvenation, which uses technology from the Sonic Cruiser concept. Despite having been delayed by more than two years, the 787 is the fastest selling wide body airliner in history. The 787's rapid sales success and pressure from potential customers forced Airbus to revise the design of its competing A350.

In 2004, Boeing ended production of the 757 after 1055 were produced. More advanced, stretched versions of the 737 were beginning to compete against the 757, and the proposed 787-3 will fill some of the top end of the 757 market. Also that year, Boeing announced that the717, the last civil aircraft to be designed by McDonnell Douglas, would cease production in 2006. The 767 was in danger of cancellation as well, with the 787 replacing it, but recent orders for the freighter version have extended the program and the uncertainty of the deliveries of the 787 also prolongs the deliverance. The passenger version of the Boeing 747-400 ceased production on March 17, 2008. However, the freighter version will remain in production until the first delivery of the 747-8F.

Recently, Boeing launched five new variants of existing designs: the ultra-long-range 777-200LR, 737- 900ER, 737-700ER, 777 Freighter and the 747-8. The 777-200LR has the longest range of any commercial aircraft and was designed to compete with the Airbus A340-500. It was first delivered in 2006. The 737-900ER and 737-700ER are the extended range variants of the -900 and -700 models. Due to rising fuel costs, the more efficient twinjet 777 has been winning orders at the expense of the four- engined Airbus A340.

There are 5,417 (April 30, 2009) Airbus aircraft in service, with Airbus managing to win over 50 per cent of aircraft orders in recent years. Airbus products are outnumbered by in-service Boeings (there are about 4,495 Boeing 737s alone in service[31], about 13,000 total[32]).

[edit]Safety

Both aircraft manufacturers have good safety records on recently-manufactured aircraft. By convention, both companies tend to avoid safety comparisons when selling their aircraft to airlines. Most aircraft dominating the companies' aircraft sales, such as the Boeing 737-NG andAirbus A320 families (as well as both companies' wide-body offerings) have good safety records as well. Older model aircraft such as theBoeing 727, Boeing 737 Original, Boeing 747, Airbus A300 and , which were respectively first flown during the 1960s, 1970s, and 1980s, have had higher rates of fatal accidents.[33]

[edit]Controversies

The Boeing 787 (above) will compete with the Airbus A330 and the Airbus A350on the medium to long range market. [edit]Subsidies

Boeing has continually protested over launch aid in form of credits to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.

In July 2004 (then-Boeing CEO) accused Airbus of abusing a 1992 bilateral EU-US agreement providing for disciplines for large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI, called "launch aid" by the US) from European governments with the money being paid back with interest, plus indefinite royalties if the aircraft is a commercial success[34]. Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support[35]. Airbus claims that since the signing of the EU-U.S. agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.

Airbus argues that the pork barrel military contracts awarded to Boeing (the second largest U.S. defense contractor) are in effect a form of subsidy (see the Boeing KC-767/EADS KC-45 military contracting controversy). The significant U.S. government support of technology development via NASA also provides significant support to Boeing, as does the large tax breaks offered to Boeing which some claim are in violation of the 1992 agreement and WTO rules. In its recent products such as the 787, Boeing has also been offered substantial support from local and state governments[36]. However, Airbus' parent, EADS, itself is a military contractor, and is paid to develop and build projects such as the A400M transport and various other military aircraft.[37]

In January 2005, the European Union and United States trade representatives, Peter Mandelson and (since replaced by , and then , and the present office holder, ) respectively, agreed to talks aimed at resolving the increasing tensions. These talks were not successful with the dispute becoming more acrimonious rather than approaching a settlement.

In September 2009, the New York Times and Wall Street Journal reported that the World Trade Organization would likely rule against Airbus on most, but not all, of Boeing's complaints; the practical effect of this ruling would likely be blunted by the large number of international partners engaged by both plane makers. as well as the expected delay of several years of appeals. For example, 35% of the Boeing 787 is manufactured in Japan. Thus, some experts are advocating a negotiated settlement.[38] In addition, the heavy government subsidies offered automobile manufacturers in the United States have changed the political environment; the subsidies offered Chrysler and General Motorsdwarf the amounts involved in the Airbus-Boeing dispute.[39] [edit]World Trade Organization litigation

"We remain united in our determination that this dispute shall not affect our cooperation on wider bilateral and multilateral trade issues. We have worked together well so far, and intend to continue to do so."

Joint EU-US statement[40]

On 31 May 2005 the United States filed a case against the European Union for providing allegedly illegal subsidies to Airbus. Twenty-four hours later the European Union filed a complaint against the United States protesting support for Boeing.[41]

Tensions increased by the support for the Airbus A380 have erupted into a potential trade war due to the upcoming launch of the Airbus A350. Airbus would ideally like the A350 programme to be launched with the help of state loans covering a third of the development costs although it has stated it will launch without these loans if required. The A350 will compete with Boeing's most successful project in recent years, the 787 Dreamliner. EU trade officials questioned the nature of the funding provided by NASA, the Department of Defense, and in particular the form of R&D contracts that benefit Boeing; as well as funding from US states such as the State of Washington, Kansas, and Illinois, for the development and launch of Boeing aircraft, in particular the 787.[42] An interim report of the WTO investigation into the claims made by both sides was made in September 2009.[43]

In March 2010, the WTO ruled that European governments unfairly financed Airbus.[44] The WTO has delayed its ruling on the European Union's complaint against US state aid for Boeing.[45]

Mach number (Ma or M) (generally pronounced /Rm\Rk/, sometimes /Rm\Rx/ or /Rmæk/) is the speed of an object moving through air, or any other fluid substance, divided by the speed of sound as it is in that substance for its particular physical conditions, including those of temperature and pressure. It is commonly used to represent the speed of an object when it is travelling close to or above the speed of sound.

where

is the Mach number is the speed of the source (the object relative to the medium) and is the speed of sound in the medium

The Mach number is named after Austrian physicist and philosopher Ernst Mach. Because the Mach number is often viewed as a dimensionless quantity rather than a unit of measure, with Mach, the number comes after the unit; the second Mach number is "Mach 2" instead of "2 Mach" (or Machs). This is somewhat reminiscent of the early modern ocean sounding unit "mark" (a synonym for fathom), which was also unit-first, and may have influenced the use of the term Mach. In the decade preceding faster-than-sound human flight, aeronautical engineers referred to the speed of sound as Mach's number, never "Mach 1."[1]

The Boeing Company

Type Public (NYSE: BA)

Dow Jones Industrial Average Component

S&P 500 Component

Industry Aerospace and Defense Founded Seattle, Washington (1916)

Headquarters Chicago, Illinois, U.S.

Key people W. James McNerney, Jr., CEO

James A. Bell, CFO

J. Michael Luttig, General Counsel

Products Commercial airliners

Military aircraft

Munitions

Space systems

Computer Services

2008 [1] Revenue Ÿ US$60.9 billion (FY )

2008 [1] Operating income Ÿ US$3.93 billion (FY )

2008 [1] Net income Ÿ US$2.67 billion (FY )

03-31-2010 [2] Total assets Ÿ US$63.0 billion ( )

03-31-2010 [2] Total equity Ÿ US$2.94 billion ( )

[3]

Employees Ÿ 159,392 (05-27-2010)

Divisions Boeing Commercial Airplanes

Boeing Defense, Space & Security

Others

Subsidiaries Aviall, Inc.

CDG

Jeppesen Boeing Aircraft Holding Company

Boeing Australia

Boeing Canada

Boeing Defence UK

Boeing Store

Website Boeing.com

Unethical conduct

In May 2003, the US Air Force announced it would lease 100 KC-767 tankers to replace the oldest 136 of its KC-135s. In November 2003, responding to critics who argued that the lease was more expensive than an outright purchase, the DOD announced a revised lease of 20 aircraft and purchase of 80. In December 2003, the Pentagon announced the project was to be frozen while an investigation of allegations of corruption by one of its former procurement staffers, (who began employment at Boeing in January) was begun. The fallout of this resulted in the resignation of Boeing CEO Philip M. Condit and the termination of CFO Michael M. Sears.[23] Harry Stonecipher, former McDonnell Douglas CEO and Boeing COO, replaced Condit on an interim basis. Druyun pleaded guilty to inflating the price of the contract to favor her future employer and to passing information on the competing Airbus A330 MRTT bid. In October 2004, she was sentenced to nine months in jail for corruption, fined, given three years of supervised release and 150 hours of community service.

In March 2005, the Boeing board forced President and CEO Harry Stonecipher to resign. Boeing said an internal investigation revealed a "consensual" relationship between Stonecipher and a female executive that was "inconsistent with Boeing's Code of Conduct" and "would impair his ability to lead the company".[24] James A. Bell served as interim CEO (in addition to his normal duties as Boeing¶s CFO) until the appointment of Jim McNerney as the new Chairman, President, and CEO on June 30, 2005.

Subsidy disputes

In 2004 the EU and the US agreed to discuss a possible revision of the 1992 EU-US Agreement provided that this would cover all forms of subsidies including those used in the US, and in particular the subsidies for the Boeing 787; the first new aircraft to be launched by Boeing for 14 years. October 2004, the US began legal proceedings at the World Trade Organization by requesting WTO consultations on European launch investment to Airbus. The US also unilaterally withdrew from the 1992 EU-US Agreement.[27]

In October 2004, Boeing filed a complaint at the World Trade Organization (WTO), claiming that Airbus had violated a 1992 bilateral accord when it received what Boeing deems as ³unfair´ subsidies from several European governments. Airbus retaliated by filing another complaint, contesting that Boeing had also violated the accord when it received tax breaks from the U.S. Government. Moreover, the E.U. also complained that the investment subsidies from Japanese airlines violated the accord.

On January 11, 2005, Boeing and Airbus agreed that they would attempt to find a solution to the dispute outside of the WTO. However, in June 2005, Boeing and the United States government reopened the trade dispute with the WTO, claiming that Airbus had received illegal subsidies from European governments. Airbus has also retaliated against Boeing, reopening the dispute and also accusing Boeing of receiving subsidies from the US government.[28]

On September 15, 2010, the World Trade Organization ruled that Boeing had received billions of dollars in illegal government subsidies.[29]Boeing responded that the ruling was a fraction of the size of the ruling against Airbus and would require few changes in its operations.[30]

Employment by Location[3]Location Employees Alabama2,971Arizona4,853California24,499Kansas2,586Missouri15,594Pennsylvania5,900Texas5,727 Washington72,352Other Locations22,591Total Company157,073

Employment by Group (Division)[3]Group Employees Boeing Defense, Space & Security68,341Commercial Airplanes59,958Engineering, Operations & Technology17,960Finance & Shared Services8,619Human Resources & Administration1,012Corporate1,183Total Company157,073

Numbers include all subsidiaries, leaves of absence less than 90 days, full- time and part-time contingent labor. Numbers are net of additions and reductions. Employment by Group Jan. 28, Feb. 25, Mar. 25, Apr. 29, May 27, June 24, 2010 2010 2010 2010 2010 2010

Commercial Airplanes 62,622 62,771 62,948 63,180 63,440 63,806

Defense, Space & Security 68,820 68,528 68,364 68,019 67,851 67,897

Corporate

Engineering, Operations & Technology 18,009 18,021 17,992 17,452 17,526 17,550

Shared Services Group 8,160 8,132 8,078 8,055 8,031 8,049

Other 2,588 2,590 2,566 2,559 2,544 2,554

Total Company 160,199 160,042 159,948 159,265 159,392 159,856

Employment by Group July 29, Aug. 26, Sept. 30, 2010 2010 2010

Commercial Airplanes 64,131 64,081 64,462

Defense, Space & Security 67,553 67,212 66,961

Corporate

Engineering, Operations & Technology 17,617 17,615 17,611

Shared Services Group 7,989 7,968 7,970

Other 2,589 2,637 2,644 Total Company 159,879 159,513 159,648

Numbers include all subsidiaries, leaves of absence less than 90 days, full- time and part-time contingent labor. Numbers are net of additions and reductions. Employment By Location Jan. 28, Feb. 25, Mar. 25, Apr. 29, May 27, June 24, 2010 2010 2010 2010 2010 2010

Alabama 2,904 2,896 2,876 2,830 2,818 2,798

Arizona 4,831 4,817 4,793 4,738 4,728 4,715

California 24,369 24,228 24,160 23,912 23,803 23,759

Kansas 2,449 2,374 2,363 2,330 2,291 2,259

Missouri 15,580 15,547 15,537 15,480 15,522 15,550

Pennsylvania 5,935 5,946 5,979 6,014 6,073 6,145

Texas 5,644 5,646 5,633 5,619 5,642 5,666

Washington 72,164 72,177 72,226 71,802 71,796 72,077

Other Locations 26,323 26,411 26,381 26,540 26,719 26,887

Total Company 160,199 160,042 159,948 159,265 159,392 159,856

Employment By Location July 29, Aug. 26, Sept. 30, 2010 2010 2010

Alabama 2,728 2,702 2,662

Arizona 4,717 4,690 4,671 California 23,616 23,516 23,412

Kansas 2,216 2,212 2,198

Missouri 15,516 15,520 15,436

Pennsylvania 6,169 6,177 6,222

Texas 5,671 5,652 5,706

Washington 72,215 72,285 72,511

Other Locations 27,031 26,759 26,830

Total Company 159,879 159,513 159,648

Corporate governance

[edit]Chairman of the board

1916ʹ1934 William E. Boeing [edit]Current board of directors 1934ʹ1939 Clairmont L. Egtvedt (acting)

 W. James McNerney, Jr. - Chairman, President & CEO 1939ʹ1966 Clairmont L. Egtvedt  John H. Biggs

1968ʹ1972 William M. Allen   David L. Calhoun 1972ʹ1987 Thornton "T" A. Wilson  Arthur D. Collins, Jr.

1988ʹ1996 Frank A. Shrontz  Linda Cook

 William M. Daley 1997ʹ2003 Philip M. Condit  Kenneth M. Duberstein 2003ʹ2005 Lew Platt  Admiral Edmund P. Giambastiani, Jr., U.S. Navy (ret)

 John McDonnell 2005ʹ W. James McNerney, Jr.  Susan C. Schwab [edit]President  Mike S. Zafirovski 1922ʹ1925 Edgar N. Gott[61] [edit]Chief executive officer

1933ʹ1939 Clairmont L. Egtvedt 1926ʹ1933 Philip G. Johnson

1933ʹ1939 Clairmont L. Egtvedt 1939ʹ1944 Philip G. Johnston

[59] 1944ʹ1945 Clairmont L. Egtvedt 1939ʹ1944 Philip G. Johnson

1944ʹ1945 Clairmont L. Egtvedt 1945ʹ1968 William M. Allen

1945ʹ1968 William M. Allen 1969ʹ1986 Thornton ͞T͟ A. Wilson

[60] 1968ʹ1972 Thornton ͞T͟ A. Wilson 1986ʹ1996 Frank A. Shrontz

1972ʹ1985 Malcolm T. Stamper 1996ʹ2003 Philip M. Condit

1985ʹ1996 Frank A. Shrontz 2003ʹ2005 Harry C. Stonecipher

2005 James A. Bell (acting) 1996ʹ1997 Philip M. Condit

1997ʹ2005 Harry Stonecipher 2005ʹ W. James McNerney, Jr.

2005 James A. Bell (acting)

2005ʹ W. James McNerney, Jr.

Numbering After World War II, Boeing decided to shift from building military aircraft back into building commercial aircraft, missiles, and spacecraft, and the engineering department assigned blocks of model numbers to each category. The 700s were set aside for jet transport aircraft. The two descendants of the Dash 80, being jet transports, were assigned to the 700 block, but the Boeing marketing department decided "707" was "a bit catchier" than the number "700". The marketing department then decided all remaining model numbers that began and/or ended in "7" would be reserved for commercial jets.[1]

Aircraft Purpose Seating

Boeing 707 & 720 Medium to long range narrowbody 141 (707); 112 (720)

Boeing 717 Short to medium range narrowbody 106

Boeing 727-100 Short to medium range narrowbody 131

Boeing 727-200 Short to medium range narrowbody 162

Boeing 737-100/200 Short range narrowbody 115

Boeing 737-300/400/500 Short to medium range narrowbody 128 (-300); 148 (-400); 108 (-500)

Boeing 737- 110 (-600); 126 (-700); 162 (-800); 215 (- Short to medium range narrowbody

600/700/800/900 900)

Boeing 747-100 Long range high capacity widebody 452

Boeing 747-200 Long range high capacity widebody 452

Boeing 747-300 Long range high capacity widebody 470 Boeing 747-400 Long range high capacity widebody 468

Boeing 747-8 Long range high capacity widebody 467

Boeing 747SP Long range high capacity widebody 440

Boeing 757-200 Medium range narrowbody 178

Boeing 757-300 Medium range narrowbody 228

Boeing 767-200 Medium to long range widebody 198

Boeing 767-300 Medium to long range widebody 269

Boeing 767-400 Medium to long range widebody 304

Boeing 777-200 Long and ultra long range widebody 440

Boeing 777-300 Long range high capacity widebody 550

Boeing 787-3 Medium range high capacity widebody 289

Long to ultra-long range high capacity

Boeing 787-8 217 widebody

Long to ultra-long range high capacity

Boeing 787-9 270 widebody

[edit]Image gallery

Boeing 7 series

Boeing 727 oe B ing 707 Boeing 737

Boeing 747 Boeing 757 Boeing 767 Boeing 777

Boeing 787

Divisions

The two largest divisions are Boeing Commercial Airplanes and Boeing Defense, Space & Security (BDS).[58]

  Boeing Commercial Airplanes  Boeing Defense, Space & Security  Phantom Works  Boeing Shared Services Group  Boeing Realty  Boeing Travel Management Company  Engineering, Operations & Technology  Boeing Research & Technology  Boeing Test & Evaluation  Intellectual Property Management  Information Technology  Environment, Health, and Safety[58]

Employment by Location[3]

Location Employees

Alabama 2,971

Arizona 4,853

California 24,499

Kansas 2,586

Missouri 15,594

Pennsylvania 5,900 Texas 5,727

Washington 72,352

Other Locations 22,591

Total Company 157,073

Employment by Group (Division)[3]

Group Employees

Boeing Defense, Space & Security 68,341

Commercial Airplanes 59,958

Engineering, Operations & Technology 17,960

Finance & Shared Services 8,619

Human Resources & Administration 1,012

Corporate 1,183

Total Company 157,073

Income Statement (USD) γ

Annual | Quarterly

30- 30- 31- 31- 30- 30- 31- 31- QUART 31- JU SE DE MA JU SE DE MA 30- ER MAR N P C R N P C R JUN ENDIN 2008 200 200 200 200 200 200 200 201 2010 G 8 8 8 9 9 9 9 0 γ

Total 16.0 15.6 17.0B 15.3B 12.7B 16.5B 17.2B 16.7B 17.9B 15.2B

Revenue B B

Cost of 12.2 12.1 13.5B 12.1B 10.8B 13.7B 13.4B 14.0B 14.0B 11.7B

Revenue B B

Gross 3.81 γ 3.44B 3.16B 1.86B 2.80B 3.73B 2.65B 3.90B 3.48B -

Profit B

Research & 869 1.00 1.00B 937M 957M 970M 960M 3.57B 1.00B 1.00B Developm M B

ent γ 775 778

SG&A 835M 740M 734M 791M 925M 868M 780M 953M M M

Amortizatio 364 454 364M 354M 409M 0 383M 437M 472M 410M n & Deprec M M

Other 0 -2.00M 0 -4.00M 0 0 0 0 0 0 γ

Expenses

Total 2.01 2.23 Operating 2.20B 2.03B 2.10B 1.76B 2.27B 4.88B 2.25B 2.36B B B Expenses

Operating 1.80 1.25B 1.15B -243M 1.02B 1.53B -2.15B 1.69B 1.17B - γ Income B

Other 158 88.0 167M 127M 34.0M -7.00M 114M 79.0M 13.0M 53.0M

Income M M

1.96 1.34

EBIT 1.41B 1.26B -203M 1.04B 1.58B -2.15B 1.66B 1.17B B B γ

Minority 0 0 0 0 0 0 0 0 0 0

Interest

Interest 108 132 107M 103M 107M 104M 80.0M 92.0M 110M 122M

Expense M M

Income 1.85 1.21 Before 1.30B 1.15B -310M 932M 1.50B -2.25B 1.55B 1.05B B B

Taxes

Income 647 421 448M 470M -224M 317M 499M -687M 267M 531M

Taxes M M

Net Income 1.21 789 from 851M 683M -86.0M 615M 997M -1.56B 1.28B 519M B M Continuing

Ops

Income - - 5.00 Discontinu 1.00M 12.0M 0 -5.00M 1.00M -4.00M -15.0M 0 2.00 M ed Ops M

Extraordin 0 0 0 0 0 0 0 0 0 0

ary Items

Effect of Accounting 0 0 0 0 0 0 0 0 0 0

Changes

Other 0 0 0 0 0 0 0 0 0 0

Items

Net 1.21 787 852M 695M -86.0M 610M 998M -1.56B 1.27B 519M

Income B M

0 0 0 0 0 0 0 0 0 0 Preferred Dividends

Net 1.21 787 Income to 852M 695M -86.0M 610M 998M -1.56B 1.27B 519M B M

Common

Data Sources: Market and financial statement data provided by NASDAQ, BATS Exchange, SEC and Xignite Inc. Industry and operating metrics collected from company filings via EDGAR online. For more information on sources and calculations click here.

Income Statement (USD)

Annual | Quarterly

31- 31- 31- 31-DEC 31-DEC FISCAL YEAR ENDING DEC DEC DEC 2005 2009 2006 2007 2008

Total Revenue 54.8B 61.5B 66.4B 60.9B 68.3B

Cost of Revenue 44.3B 48.5B 51.6B 48.6B 54.9B

Gross Profit 10.5B 13.0B 14.8B 12.3B 13.4B

Research & Development 2.21B 3.26B 3.85B 3.77B 6.51B

SG&A 4.23B 4.17B 3.53B 3.08B 3.36B

Amortization & Deprec 1.53B 1.56B 1.49B 1.49B 1.68B

Other Expenses 0 797M -38.0M -4.00M 0

Total Operating Expenses 7.96B 9.78B 8.83B 8.34B 11.5B

Operating Income 2.81B 3.01B 5.83B 3.95B 2.10B

Other Income 909M 566M 672M 488M 199M

EBIT 3.47B 3.79B 6.61B 4.42B 2.07B

Minority Interest 0 0 0 0 0

Interest Expense 653M 593M 491M 425M 339M

Income Before Taxes 2.82B 3.19B 6.12B 4.00B 1.73B

Income Taxes 257M 988M 2.06B 1.34B 396M

Net Income from Continuing Ops 2.56B 2.21B 4.06B 2.65B 1.33B

Income - Discontinued Ops -7.00M 9.00M 16.0M 18.0M -23.0M

Extraordinary Items 0 0 0 0 0

Effect of Accounting Changes 17.0M 0 0 0 0

Other Items 17.0M 0 0 0 0

Net Income 2.59B 2.21B 4.07B 2.67B 1.31B

Preferred Dividends 0 0 0 0 0

Net Income to Common 2.57B 2.21B 4.07B 2.67B 1.31B

Income Statement (USD)

Annual | Quarterly

30- 31- 31- 30-JUN 30-JUN QUARTER ENDING SEP DEC MAR 2009 2010 2009 2009 2010

Total Revenue 17.2B 16.7B 17.9B 15.2B 15.6B

Cost of Revenue 13.4B 14.0B 14.0B 11.7B 12.1B

Gross Profit 3.73B 2.65B 3.90B 3.48B -

Research & Development 960M 3.57B 1.00B 1.00B 1.00B

SG&A 925M 868M 780M 953M 778M

Amortization & Deprec 383M 437M 472M 410M 454M

Other Expenses 0 0 0 0 0

Total Operating Expenses 2.27B 4.88B 2.25B 2.36B 2.23B

Operating Income 1.53B -2.15B 1.69B 1.17B -

Other Income 114M 79.0M 13.0M 53.0M 88.0M

EBIT 1.58B -2.15B 1.66B 1.17B 1.34B

Minority Interest 0 0 0 0 0

Interest Expense 80.0M 92.0M 110M 122M 132M

Income Before Taxes 1.50B -2.25B 1.55B 1.05B 1.21B

Income Taxes 499M -687M 267M 531M 421M

Net Income from Continuing Ops 997M -1.56B 1.28B 519M 789M

Income - Discontinued Ops 1.00M -4.00M -15.0M 0 -2.00M

Extraordinary Items 0 0 0 0 0

Effect of Accounting Changes 0 0 0 0 0

Other Items 0 0 0 0 0

Net Income 998M -1.56B 1.27B 519M 787M

Preferred Dividends 0 0 0 0 0

Net Income to Common 998M -1.56B 1.27B 519M 787M

Balance Sheet (USD)

Annual | Quarterly

30- 31- 31- 30-JUN 30-JUN QUARTER ENDING SEP DEC MAR 2009 2010 2009 2009 2010

Cash & Equivalents 4.60B 6.09B 9.21B 4.52B 4.47B

Short Term Investments 171M 351M 2.01B 5.84B 5.56B

Accounts Receivable 6.59B 6.72B 5.79B 6.36B 6.57B

Inventories 17.2B 16.0B 16.9B 18.8B 20.4B

Pre-paid Expenses 0 0 0 0 0

Deferred Tax Assets 1.10B 741M 966M 1.03B 1.05B

Other Current Assets 463M 341M 368M 274M 316M

Total Current Assets 30.1B 30.2B 35.3B 36.8B 38.3B

Property, Plant & Equipment 8.81B 8.91B 8.78B 8.69B 8.58B

Goodwill & Intangibles 6.42B 7.21B 7.20B 7.20B 7.12B

Other Long-term Assets 8.51B 8.48B 7.74B 7.53B 7.34B

Total Long-Term Assets 27.6B 28.4B 26.8B 26.2B 25.4B

Total Assets 57.7B 58.7B 62.1B 63.0B 63.8B

Accounts Payable 6.66B 7.05B 7.10B 7.47B 6.96B

Accrued Expenses 0 0 0 0 0

Short Term Debt 416M 973M 707M 1.48B 1.51B

Other Current Liabilities 12.4B 11.8B 12.3B 12.3B 12.7B

Total Current Liabilities 31.3B 32.0B 32.9B 33.5B 34.1B

Long Term Debt 8.70B 10.1B 12.2B 11.5B 11.4B

Capital Lease Obligations 0 0 0 0 0

Deferred Income Tax 1.18B 998M 827M 896M 860M

Other Long-term Liabilities 16.2B 16.4B 13.9B 14.1B 14.2B

Total Long-term Liabilities 26.1B 27.5B 26.9B 26.4B 26.5B

Minority Interest 154M 151M 97.0M 97.0M -

Total Liabilities 57.5B 59.7B 59.9B 60.0B 60.7B

Preferred Stock 0 0 0 0 0

Common Par 5.06B 5.06B 5.06B 5.06B 5.06B

Additional Paid-In Capital 3.56B 3.96B 3.72B 4.26B 3.83B

Retained Earnings 23.7B 22.1B 22.7B 23.3B 23.4B

Treasury Stock -17.7B -17.7B -15.9B -15.7B -15.6B

Other Equity -14.4B -14.4B -13.5B -13.9B -13.6B

Total Shareholder's Equity 180M -1.03B 2.13B 2.94B 3.08B

Balance Sheet (USD)

Annual | Quarterly

31- 31- 31- 31-DEC 31-DEC FISCAL YEAR ENDING DEC DEC DEC 2005 2009 2006 2007 2008

Cash & Equivalents 5.41B 6.12B 7.04B 3.27B 9.21B

Short Term Investments 554M 268M 2.27B 11.0M 2.01B

Accounts Receivable 5.25B 5.29B 5.74B 5.60B 5.79B

Inventories 7.94B 8.11B 9.56B 15.6B 16.9B

Pre-paid Expenses 0 0 0 0 0

Deferred Tax Assets 2.45B 2.84B 2.34B 1.05B 966M

Other Current Assets 367M 370M 328M 425M 368M

Total Current Assets 22.0B 23.0B 27.3B 26.0B 35.3B

Property, Plant & Equipment 8.42B 7.67B 8.27B 8.76B 8.78B

Goodwill & Intangibles 2.80B 4.75B 5.17B 6.33B 7.20B

Other Long-term Assets 26.7B 15.3B 18.1B 8.61B 7.74B

Total Long-Term Assets 38.1B 28.8B 31.7B 27.8B 26.8B

Total Assets 60.1B 51.8B 59.0B 53.8B 62.1B

Accounts Payable 16.5B 17.1B 19.6B 18.6B 7.10B

Accrued Expenses 0 0 0 0 0

Short Term Debt 1.19B 1.38B 762M 560M 707M

Other Current Liabilities 10.5B 6.38B 6.22B 7.28B 12.3B

Total Current Liabilities 28.2B 29.7B 31.5B 30.9B 32.9B

Long Term Debt 9.54B 8.16B 7.46B 6.95B 12.2B

Capital Lease Obligations 0 0 0 0 0

Deferred Income Tax 2.07B 0 1.19B 0 827M

Other Long-term Liabilities 9.21B 9.20B 9.80B 17.2B 13.9B

Total Long-term Liabilities 20.8B 17.4B 18.4B 24.1B 26.9B

Minority Interest 0 0 0 0 97.0M

Total Liabilities 49.0B 47.1B 50.0B 55.1B 59.9B

Preferred Stock 0 0 0 0 0

Common Par 5.06B 5.06B 5.06B 5.06B 5.06B

Additional Paid-In Capital 4.37B 4.66B 4.76B 3.46B 3.72B

Retained Earnings 17.3B 18.5B 21.4B 22.7B 22.7B

Treasury Stock -11.1B -12.5B -14.8B -17.8B -15.9B

Other Equity -4.57B -11.0B -7.35B -14.7B -13.5B

Total Shareholder's Equity 11.1B 4.74B 9.00B -1.29B 2.13B

Airbus

The Airbus affair refers to allegations of secret commissions paid to members of the during the term of Prime Minister , in exchange for then-crown corporation 's purchase of a large number of Airbus jets. The Chairman of Airbus (a European consortium) at the time of the contract competition was (b.1915-d.1988), a high profile Germanpolitician in Bavaria.

The order in question had long been pending, and both Boeing and Airbus Industries had been competing heavily for the contract. Both offered shared production in Canada, and Boeing went so far as to buy de Havilland Canada to further strengthen their bargaining position, as well as gain access to the feederliner market where they, at that time, had no presence. The contract was eventually won by Airbus in 1988, with an order for 34 Airbus A320s, as well as the sale of some of Air Canada's existing Boeing 747 fleet. Boeing immediately put de Havilland up for sale, thereby putting that company in jeopardy, but the blame for this was generally placed on the government.

RCMP allegations

In 1995, the Royal Canadian Mounted Police (RCMP) accused Mulroney and of accepting kickbacks from Karlheinz Schreiberon the sale of Airbus planes to the government-owned airline during Mulroney's term as . The allegations were made in a letter sent by the RCMP to the government of Switzerland seeking access to banking records. Schreiber had earlier raised money for Mulroney's successful 1983 bid to win the leadership of the Progressive Conservative Party.

Mulroney denied the allegations, and launched a $50 million defamation suit against the Canadian government, alleging that the newly elected Liberal government of Jean Chrétien was engaging in a smear campaign against its predecessor. The government settled out of court in early 1997, and agreed to publicly apologize to Mulroney, as well as paying the former prime minister's $2.1 million legal fees.

Although there is no evidence that Mulroney accepted kickbacks while prime minister, it was acknowledged in 2003 that shortly after stepping down in 1993, Mulroney accepted $225,000 over 18 months from Schreiber, in three cash payments of $75,000 each. The characterization of these cash payments as not a bribe would be the way out. Mulroney was still a member of the Canadian House of Commons when one of the payments was made. Mulroney claims that this money was paid to him for consulting services he rendered to help promote a fresh pasta business, and to develop international contacts for Schreiber. Mulroney had not previously admitted accepting any commissions from Schreiber, especially during his lawsuit process against the Canadian government. The trouble so far is that Mulroney has not yet provided another living person other than himself that could substantiate any actual work Mulroney performed for that money. Schreiber described their dealings in pasta-macaroni as nothing more than being sent a single flyer.

[edit]Media/journalistic coverage

Journalist wrote about the Airbus scandal, and Schreiber's links to the Mulroney government, in her 1994 best-selling bookOn the Take: Crime, Corruption and Greed in the Mulroney Years. CBC's The Fifth Estate produced a documentary in March 1995 which revealed, for the first time, a secret side agreement between Airbus Industrie and a Liechtenstein shell company, International Aircraft Leasing, or IAL. The fifth estate reported that IAL received millions of dollars in secret commissions after the sale of Airbus aircraft to Air Canada in 1988. responded to Cameron and the CBC programme in his 1998 book Presumed Guilty, criticizing journalists for the paucity of evidence. Then, in October 1999, CBC's the fifth estate obtained new Swiss Bank Corporation records which revealed that had set up a secret bank account in Zurich with the code-name "Britan". The fifth estate programme revealed there had been three cash withdrawals out of the account, in 1993 and 1994, for a total of $300,000. Two years later, in 2001, Stevie Cameron and fifth estate producer Harvey Cashore, wrote a book about Karlheinz Schreiber The Last Amigo. In 2004, William Kaplan clarified his position in a further book A Secret Trial, by criticizing Cameron for her role as a confidential RCMP informant on the Airbus matter, and Mulroney for not disclosing the fact that he had received the $300,000 from Schreiber.

On February 8, 2006, The Fifth Estate reported that the $300,000 payment came through a Swiss bank account code-named "BRITAN" from another named "Frankfurt", linked with the Airbus affair. Karlheinz Schreiber said in an interview with the program that the money came at the request of a Mulroney aide, who told Schreiber the former prime minister was short of funds. Schreiber mocked Mulroney's claim that the money was a consulting fee for help given in a pasta business Schreiber had invested in. The programme also reported there was no evidence that Mulroney knew of the source of the funds.

On October 31, 2007 and The Fifth Estate reported new information about the cash transactions between Schreiber and Mulroney, revealing that Brian Mulroney filed a Voluntary Disclosure with Revenue Canada several years after accepting the cash envelopes from Karlheinz Schreiber.

[edit]Cash payments

The Globe and Mail reported on November 1, 2007 that Mulroney, who had by his own admission received $100,000 of Schreiber's $300,000 in cash in New York City on December 8, 1994, should have declared those funds when he crossed the border into Canada several days later, if he had not already spent the money. The story quoted retired RCMP inspector Bruce Bowie, who had played a role in preparing the original Canadian legislation, requiring that large cash transactions be reported, which was passed through parliament during Mulroney's own prime ministership. Internal United States rules also require that large cash transactions be recorded, and whether Mulroney did so for this transaction was an open question, according to the Globe and Mail article.

On November 8, 2007, an affidavit, including further allegations by Mr. Schreiber, was filed with the court. The following day, Prime MinisterStephen Harper announced that a third-party independent inquiry would be launched to review the dealings between Schreiber and Mulroney, in the light of the additional allegations raised by this new development.

On November 13, 2007, Prime Minister Harper announced that a full public inquiry would take place. The next day, Harper announced that the probe would be headed by David Lloyd Johnston, president of the University of Waterloo. Johnston will advise on the terms of reference for the inquiry, and will report by January 11, 2008. The RCMP announced on November 14, 2007, that they would also open a review process into these matters; the RCMP had been involved in an investigation of these matters from the late 1980s onwards. In June 2008, the Government of Canada established the "Commission of Inquiry into Certain Allegations Respecting Business and Financial Dealings Between Karlheinz Schreiber and the Right Honourable Brian Mulroney"[1]

On November 15, 2007, Schreiber lost his appeal of extradition to Germany, and he remained confined in the area, pending further developments. Extradition proceedings against Schreiber, launched by German authorities, began in 1999; Schreiber is wanted in Germany to answer for several criminal charges, including fraud and bribery, which had a role in bringing down a government there, and which damaged the legacy of former German Chancellor Helmut Kohl. Schreiber stated on November 16, 2007 that if extradited, he would not cooperate with the inquiry. [2] Minister of Public Safety said later that day that the inquiry would be structured to allow witnesses to testify regardless of their location, and that Schreiber would have to testify. Opposition parties in the Canadian House of Commons called for Schreiber's extradition to be delayed, to allow him to take part in the inquiry. Minister of Justice promised to delay the extradition until at least December 1, 2007, to allow potential appeals to be filed by Schreiber's lawyer Edward Greenspan.

[edit]Ethics Committee testimony

Schreiber was summoned from jail by a Speaker's Warrant issued by Commons Speaker , and was transported from Toronto toOttawa on November 28, 2007. He testified before the House of Commons Ethics Committee on November 29, December 4, and December 6, 2007. Schreiber obtained a stay of his extradition from the Ontario Court of Appeal on November 30, and obtained bail on December 4 by posting $1.3 million. Schreiber explained that the $300,000 he paid to Mulroney in three cash installments of $100,000 each, in 1993 and 1994, did not come directly from Airbus, but was drawn from 'success fees', money Schreiber earned in commissions for his lobbying work on behalf of Airbus, MBB, and Thyssen, in the late 1980s and early 1990s. Airbus and MBB had concluded large contracts, for airplanes and helicopters respectively, with the Canadian government while Mulroney was prime minister. Thyssen's project, a prospective new factory for manufacturing light armoured vehicles, had gained initial government approval, but was never built. Schreiber explained further that the money he paid to Mulroney was not for any work Mulroney did while he was prime minister from 1984-1993, but was a retainer for future work Mulroney would do for Schreiber after he left political office, as well as a reward for Mulroney's support for German reunification, which was achieved in 1991. This amount was originally set for $500,000, but was reduced because Mulroney did not in fact perform the work, according to Schreiber, who is suing Mulroney to recover that money. Mulroney refused to comment in advance of his scheduled appearance before the Ethics Committee on December 13, 2007[3]. However, six weeks following his appearance, Mulroney's lawyers submitted a letter to the Ethics Committee chairman, , indicating that their client would not be willing to appear again before the committee because of the "unfair" treatment he encountered on December 13.[4] On February 26, 2008, CTV News reported that Mr. Mulroney, through his lawyer, had reiterated his refusal to reappear before the Committee, scheduled for February 28.[5] After mulling the possibility of issuing a subpoena, the committee decided the next day that it would wrap up this activity without further testimony. [6]

Wikinews has related news:Brian Mulroney

testifies before House of Commons in Canada

On February 14, 2008, Mr. Schreiber's Swiss accountant told the Ethics Committee that he did in fact set up a Swiss account for Mr Mulroney but that he had no knowledge of any transactions made on that account by or for the former Prime Minister.

[edit]Oliphant Commission Report

In April and May of 2009, the next episode ensued as the Oliphant Commission inquiry began. Chaired by Mr. Justice Jeffrey Oliphant, Associate Chief Justice of the Court of Queen's Bench of Manitoba, it was specifically mandated to focus on the dealings between Schreiber and Mulroney. While the inquisitors and their questions were different, the answers by Mr. Schreiber in April and Mr. Mulroney in May were essentially paraphrasings and expansions on those of the Ethics Committee proceedings. Notable new revelations in Mulroney's testimonies included his explanation for the delay in declaring the cash payments as income (he considered them as advances on future activities, to be declared only when drawn upon), and that his accountant, without his knowledge, had arranged to pay tax on only half the amount. This was in accordance with a Canada Revenue Agency amnesty incentive, now discontinued, that was intended to encourage delinquent taxpayers to submit late declarations, thus garnering funds which would otherwise have been lost or, at minimum, require costly legal action to be collected.[7]

The Commission completed its hearings phase in the last week of July 2009. The following weekend Mr. Schreiber, after a last-ditch effort to find another means of avoiding extradition, was ordered to appear at the Toronto Detention Centre pending his return to Germany.[8] Within three hours, he was escorted onto a Europe-bound aircraft by two RCMP officers, and designated "surrendered to Germany."[9]

The Commission's report, released on May 31, 2010, included the following findings:[10]

 That Mulroney entered into an agreement with Schreiber while Mulroney was a Member of Parliament, but not while still prime minister  That Schreiber retained Mulroney to promote the sale of military vehicles in the international market (not within Canada), that three cash payments totaling at least CAD $225,000 were made by Schreiber to Mulroney in person, and that no services were ever provided by Mulroney for the monies paid  That these business and financial dealings were inappropriate given Mr. Mulroney's position and that Mulroney repeatedly acted inappropriately in disclosure and reporting of the dealings and payments

The report intentionally avoids "expressing any conclusions ... regarding civil or criminal liability" based on the Commission's mandate[11] and Oliphant wrote that he was "careful not to use language that would even hint at such a finding"[12].

The Lockheed bribery scandals encompassed a series of bribes and contributions made by officials of U.S. aerospace company Lockheed from the late 1950s to the 1970s in the process of negotiating the sale of aircraft.

The scandal caused considerable political controversy in West Germany, Italy, the Netherlands and Japan. In the U.S. the scandal nearly led to the corporation's downfall, as it was already struggling due to the commercial failure of the L-1011 TriStar airliner.

Contents

[hide]

1 Background 2 West Germany 3 Italy 4 Japan 5 Netherlands 6 Saudi Arabia 7 Aftermath 8 See also 9 References

Background

The U.S. Government had bailed out Lockheed in 1971, guaranteeing repayment of $195 million in bank loans to the company. The Government Emergency Loan Guarantee Board, set up to oversee the program, investigated whether Lockheed violated its obligations by failing to tell the board about foreign payments.[1]

In late 1975 and early 1976, a sub-committee of the U.S. Senate led by Senator Frank Church concluded that members of the Lockheed board had paid members of friendly governments to guarantee contracts for military aircraft.[2] In 1976, it was publicly revealed that Lockheed had paid $22 million in bribes to foreign officials[1] in the process of negotiating the sale of aircraft including the F-104 Starfighter, the so- called "Deal of the Century".[3][4]

[edit]West Germany

Former Lockheed lobbyist Ernest Hauser told Senate investigators that Minister of Defence Franz Josef Strauss and his party had received at least $10 million for West Germany's purchase of 900 F-104G Starfighters in 1961. The party and its leader denied the allegations, and Strauss filed a slander suit against Hauser. As the allegations were not corroborated, the issue was dropped.[5]

In September 1976, in the final phase of the 1976 Bundestag election, the controversy was re-opened when questions were asked about the whereabouts of the "Lockheed documents" within the Federal Ministry of Defence. Anonymous sources also distributed several, possibly falsified documents to the media. According to one of these documents, member of the German Bundestag and its defense council Manfred Wörner accepted an invitation by Lockheed to visit their aircraft plants in the US with the entire trip being paid by Lockheed.[6] In the course of the investigations, it emerged that most of the documents related to the Starfighter purchase had been destroyed in 1962. The whereabouts of the documents was again discussed in a committee of inquiry meeting of the Bundestag between January 1978 and May 1979.[2] An investigation of Lockheed documents by the US revealed that Wörner's trip had been financed by the German Bundestag, and was related to a test flight with the Lockheed A-3. Only part of the travel costs of Wörner's secretary, and Wörner's flight back from the USA to Germany was paid by Lockheed:

Woerner was accompanied by his secretary and a portion of her expenses were paid by Lockheed. Further, Woerner "lost" his government paid ticket back to Germany and Lockheed "accommodated" him by giving him another ticket.[7] [edit]Italy

The Italian branch of the Lockheed scandal involved the bribery of Christian Democrat politicians to favor the purchase by the of C-130 Hercules transport planes. The allegations of bribery were supported by political magazine L'Espresso, and targeted former Cabinet ministers Luigi Gui and Mario Tanassi, the former Prime Minister Mariano Rumor and notably then- President Giovanni Leone, forcing him to resign his post on June 15, 1978.[8]

[edit]Japan

An All Nippon Airways L-1011 at International Airport in 1992

The scandal involved the Marubeni Corporation and several high-ranking members of Japanese political, business and underworld circles, including Finance Minister Eisaku Sato and the JASDF Chief of Staff Minoru Genda. In 1957, the Japanese Air Self-Defense Force wished to buy theGrumman F-11 Super Tiger to replace the F-86 Sabre then in service, but heavy lobbying by Lockheed of the key LDP figures led to the adoption of the F-104 instead.

Later, Lockheed had hired right-wing nationalist underworld figure Yoshio Kodama as a consultant in order to influence Japanese parastatal airlines, including All Nippon Airways (ANA), to buy the L- 1011 instead of the McDonnell Douglas DC-10. On February 6, 1976, the vice-chairman of Lockheed told the Senate subcommittee that Lockheed had paid approximately $3 million in bribes to the office of Japanese Prime Minister Kakuei Tanaka for aid in the matter.

Lockheed paid ¥2.4 billion to earn the contract from ANA. ¥500 million of the total was received by the Prime Minister. ¥160 million was received by ANA's officials. ¥1.7 billion was received by Kodama.[9] On October 30, 1972, ANA announced its decision to purchase 21 Lockheed Tristar L1011s, which cost approximately $5 million each, even though it had previously announced options to purchase the DC-10.[10]

Tanaka was arrested on July 27, 1976 and was released in August on a ¥200 million ($690,000) bond. He was found guilty by a Tokyo court on October 12, 1983 for violations of foreign exchange control laws but not on bribery. He was sentenced to four years in prison, but remained free on appeal until his death of a stroke in 1993.[11][12]

[edit]Netherlands

The Dutch prince Bernhard and queen Julianareturning from Italy, (because of developments in the Lockheed scandal). In the backseat Juliana with her dog Sara. The Netherlands, 26 August 1976.

Prince Bernhard received a $1.1 million bribe from Lockheed to ensure the Lockheed F-104would win out over the Mirage 5 for the purchase contract. He had served on more than 300 corporate boards or committees worldwide and had been praised in the Netherlands for his efforts to promote the economic well-being of the country. Prime Minister Joop den Uyl ordered an inquiry into the affair, while Prince Bernhard refused to answer reporters' questions, stating: "I am above such things".[13] Prince Bernhard always denied the charges, but after his death on December 1, 2004, interviews were published showing that he admitted taking the money. He said: "I have accepted that the word Lockheed will be carved on my tombstone."[14]

[edit]Saudi Arabia

Between 1970 and 1975, Lockheed paid Saudi Arms dealer Adnan Khashoggi $106 million in commissions. Khashoggi himself is said to have made hundreds of millions from other corporations in this period, however as Khashoggi was a mediator for bribes, his payment included money destined for officials. His commissions started at 2.5% + and eventually rose to as much as 15%. Khashoggi "became for all practical purposes a marketing arm of Lockheed. Adnan would provide not only an entree but strategy, constant advice, and analysis," according to Max Helzel, then vice president of Lockheed's international marketing.[15] [edit]Aftermath

Lockheed chairman of the board Daniel Haughton and vice chairman and president Carl Kotchian resigned from their posts on February 13, 1976. The scandal also played a part in the formulation of the Foreign Corrupt Practices Act which President Jimmy Carter signed into law on December 19, 1977, which made it illegal for American persons and entities to bribe foreign government officials, which, additionally, may violate The Logan Act.[16]

According to Ben Rich, director of Lockheed's Skunk Works:

Lockheed executives admitted paying millions in bribes over more than a decade to the Dutch (Prince ͞ Bernhard, husband of Queen Juliana, in particular), to key Japanese and West German politicians, to Italian officials and generals, and to other highly placed figures from Hong Kong to Saudi Arabia, in order to get them to buy our airplanes. Kelly (Clarence "Kelly" Johnson, first team leader of the Lockheed Skunk Works) was so sickened by these revelations that he had almost quit, even though the top Lockheed management implicated in the scandal resigned in disgrace.[17]

The Airbus affair refers to allegations of secret commissions paid to members of the Government of Canada during the term of Prime Minister Brian Mulroney, in exchange for then-crown corporation Air Canada's purchase of a large number of Airbus jets. The Chairman of Airbus (a European consortium) at the time of the contract competition was Franz Josef Strauss (b.1915-d.1988), a high profile Germanpolitician in Bavaria.

The order in question had long been pending, and both Boeing and Airbus Industries had been competing heavily for the contract. Both offered shared production in Canada, and Boeing went so far as to buy de Havilland Canada to further strengthen their bargaining position, as well as gain access to the feederliner market where they, at that time, had no presence. The contract was eventually won by Airbus in 1988, with an order for 34 Airbus A320s, as well as the sale of some of Air Canada's existing Boeing 747 fleet. Boeing immediately put de Havilland up for sale, thereby putting that company in jeopardy, but the blame for this was generally placed on the government.

Subsidy conflicts

Boeing has continually protested over "launch aid" and other forms of government aid to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.[105]

In July 2004 former Boeing CEO Harry Stonecipher accused Airbus of abusing a 1992 bilateral EU-US agreement providing for disciplines for large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI), called "launch aid" by the US, from European governments with the money being paid back with interest plus indefinite royalties, but only if the aircraft is a commercial success.[102] Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 per cent of the programme cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support.[102] Airbus claims that since the signature of the EU-U.S. Agreement in 1992, it has repaid European governments more than U.S.$6.7 billion and that this is 40% more than it has received.

Airbus argues that the pork barrel military contracts awarded to Boeing, the second largest U.S. defence contractor, are in effect a form of subsidy, such as the controversy surrounding the Boeing KC- 767 military contracting arrangements. The significant U.S. government support of technology development via NASA also provides significant support to Boeing, as do the large tax breaks offered to Boeing, which some people claim are in violation of the 1992 agreement and WTO rules. In its recent products such as the 787, Boeing has also been offered direct financial support from local and state governments.[106]

In January 2005 the European Union and United States trade representatives, Peter Mandelson and Robert Zoellick respectively, agreed to talks aimed at resolving the increasing tensions.[107][108] These talks were not successful with the dispute becoming more acrimonious rather than approaching a settlement.[109]

In August 2010, the WTO ruled that the European Union's funding to Airbus through the use of loans with below market rates, and research grants and infrastructure/runway funding initiatives were illegal.[110]

[edit]International manufacturing presence

Engine codes

Code Manufacturing Company

0 General Electric (GE)

1 CFM International (GE/SNECMA)

2 Pratt & Whitney (P&W)

3 International Aero Engines (R-R, P&W, Kawasaki, Mitsubishi, and Ishikawajima-Harima)

4 Rolls-Royce (R-R)

6 Engine Alliance (GE and P&W)

Airbus aircraft numbering system

The Airbus numbering system is an alpha numeric model number followed by a dash and a three digit number.[123] The model number takes the form of the letter "A" followed by a '3', a digit, then followed normally by a '0' (except in the case of the A318, A319, A321 and A400M), e.g. A320. The succeeding three digit number represents the aircraft series, the engine manufacturer and engine version number respectively. To use an A320-200 with International Aero Engines (IAE) V2500-A1 engines as an example; The code is 2 for series 200, 3 for IAE and engine version 1, thus the aircraft number is A320-231.

An additional letter is sometimes used. These include, 'C' for a combi version (passenger/freighter), 'F' for a freighter model, 'R' for the long range model, and 'X' for the enhanced model.

Empresa Brasileira de Aeronáutica, S.A.

Type Public (BM&F Bovespa:EMBR3

NYSE: ERJ)

Industry Aerospace / Defense

Founded (1969)

Headquarters São José dos Campos,Brazil

Key people Maurício Novis Botelho, (Chairman)

Frederico Fleury Curado, (CEO)

Products Aircraft, aircraft components, mission systems for air

and ground operation

Revenue ź US$ 8,3 Billion (2009)

Net income Ÿ US$ 845 million (2009)

[1]

Employees 17.380 Website www.embraer.com

Embraer (BM&F Bovespa: EMBR3 / NYSE: ERJ) (Portuguese pronunciation: [Ùb\aR\\], short for "Empresa Brasileira de Aeronáutica, S. A." English: Brazilian Aeronautics Company, Inc.), is aBrazilian aerospace conglomerate that produces commercial, military, and corporate aircraft and provides related aerospace services.

Headquartered in São José dos Campos, Embraer is the third-largest aircraft company in the world in terms of yearly deliveries of commercial aircraft (behind Boeing and Airbus), fourth-largest in terms of workforce,[2] and was, from 1999 to 2001, Brazil's largest exporter. It remains in the top three.