|
|
|
|
|
|
|
|
|
|
Op-Ed: Boeing, Airbus and Glass Houses |
|
|
|
(Source: defense-aerospace.com; issued Sept. 10, 2004)
|
|
|
|
By Giovanni de Briganti
|
|
|
|
PARIS --- Whatever the merits of Boeing’s latest attacks against the illegal government subsidies it claims are flowing to Airbus, they are spectacularly ill-timed. Indeed, throughout the summer a succession of historical remembrances, current controversies and future plans for 7E7 production has repeatedly drawn attention to the recurring financial aid that Boeing has itself received from US taxpayers.
July 15th marked the 50th anniversary of the first flight of the Model 367-80, from which Boeing derived the 707 airliner on which it built its initial dominance of the civil airliner market.
Boeing says it “spent the equivalent of all its post-World War II profit” to develop the Dash 80, as the aircraft was known. While that may indeed be the case, just one month later the US Air Force awarded Boeing an initial order to build the Dash 80’s military variant, the KC-135 aerial tanker. Boeing over time produced more than 800 KC-135s, in addition to a large number of other derivatives.
The first civil 707 was ordered much later, in late 1955, thereby clearly demonstrating that the Pentagon, and not airline customers, funded Boeing’s entry into the jet airliner market.
Similarly, the Boeing 747 was originally a military design – it lost out to Lockheed’s C-5 Galaxy for a US Air Force contract -- whose development was also funded by the Pentagon. Thus, it was thanks to government R&D funding that Boeing developed the 747 jumbo, with which it extended its dominance of the civil airliner market and maintained it for another 30 years.
Given this historical background, it is somewhat ironic that Boeing should now complain that Airbus is illicitly benefiting from government loans to develop its new A380. It is even more ironic as, in the past, Airbus has always paid back its government loans, while it is not very likely that Boeing returned to the US Treasury the funds with which it developed the 707 and 747.
But the irony does not stop there. Since 9/11, Boeing has tried to provide the US Air Force with 100 new tanker aircraft, under a complex leasing deal under which it would have generated between $3 and 5 billion in extra profits. Originally, the motive was to find a way to help the company to recover from the post 9/11 slump in airline orders, but this was later camouflaged under a variety of different, and not always plausible, pretexts.
Thankfully for US taxpayers, this deal has been frozen, but it is nonetheless a brazen attempt by Boeing to receive a large dollop of Pentagon cash – clearly a subsidy by any name, and decried as such by a wide coalition of opponents in Washington.
Another, even more recent, Boeing initiative concerns its new 7E7 Dreamliner. Boeing has been promised various financing packages by state governments competing to host the 7E7 final assembly. This form of direct funding may be prohibited by World Trade Organization rules.
Another form of potentially illicit government subsidies to the 7E7 program comes from the three main Japanese partners. Fuji Heavy Industries (FHI), Kawasaki Heavy Industries (KHI), and Mitsubishi Heavy Industries (MHI) have joined the program on a risk-sharing basis, with a combined work-share of about 35%. This means they will also have to contribute 35% to the 7E7’s development and pre-production costs, which have been estimated at about $6 billion.
The issue here is that these firms will need loans and/or subsidies from the Japanese government to pay for at least part of their investment in the 7E7. Again, this funding could contravene WTO rules, as well as a 1992 Europe-US framework agreement on civil aircraft subsidies.
For a company that built its dominance of the airliner market on military R&D funds; that continues to seek cash handouts from the Pentagon; and that finances the development of a new aircraft with subsidies from state and foreign governments to now complain about “unfair subsidies” paid to Airbus is ludicrous.
Boeing – as well as US President George W Bush – has repeatedly called for an end to European “subsidies” to Airbus, and for a level playing field in the airliner market. But it is not clear that they realize that a level playing field works for all players, and would also require an end to the huge financial benefits that have long flowed to Boeing from the US government..
In calling for an end to Airbus “subsidies,” Boeing should remember the wisdom of not throwing stones when living in a glass house. In calling for a level playing field, company CEO Harry Stonecipher should remember that, in the words of Oscar Wilde, “when the gods wish to punish us, they answer our prayers.”
-ends-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
