Airbus by the generous support it recives from the goverments of Europe has been steadily eroding the market share of the Boeing Corporation since its
existance. This support has taken on many forms and it may be what we may face from the EU in the future in other industries as well.
Airbus for most of Europe is really a great jobs program. Primarily subsidized by the taxpayers in the consortiums partner countries, they simply do
not care if Airbus loses money as long as jobs are greated. AIRBUS does not have to pay back loans on failed products. As long as jobs are created,
they simply don't care about profits. They are aggressively subsidizing the industry and using thier position to pressure and reward customers. Thier
goal and for now they have sucseeded is to take over the leadership of the industry from Boeing. Leaders in Europe have supported this:
Here's what British Prime Minister Tony Blair had to say last year - quote: "As a result of over 500,000 pounds in launch aid, Airbus is
today in a position where it can take over the leadership of the large aircraft market from Boeing in the United States. That would be tremendous for
British manufacturing and for European industry."
Here's what a 2001 report to the European Commission titled, "European Aeronautics: A Vision for 2020," states – quote: "European aeronautics has
grown and prospered with the support of public funds and this support must continue if we are to achieve our objective of global leadership."
The same report goes on to state – quote: "total funding required from all public and private sources over the next 20 years could go beyond 100
billion euros."
Development of new aircraft is a risky expensive business. Airbus, however due to generous subsidies is covered from start to finish. From launch, to
research, to facilities, to supplier subsidies, all aspects of airline development is covered
Europe's abuses have been well-documented by our own government. Here's what the United States Trade Representative said about Airbus subsidies in
its 2003 report on trade barriers -- quote: "Since the inception of Airbus in 1967, the governments of France, Germany, Spain and the UK have
provided direct subsidies to their respective Airbus member companies to aid the development, production and marketing of Airbus civil aircraft.
Airbus member governments have borne a large portion of development costs for all Airbus aircraft modes and provided other forms of support, debt
rollovers and marketing assistance including political and economic pressure on purchasing governments."
Because it never has had to assume any financial risk, the EU and Airbus has created an uneven playing field which makes it impossible for Boeing to
compete.
The help does not stop with the development of new aircraft either:
Airbus also competes unfairly by a variety of means:
In fact untill 2000 the Airbus Corporation and other French companies were allowed Tax deductions for bribes
this allows them to bribe others to
buy thier planes and deduct the cost of the bribe as a business expence.
Economist magazine said in June 2003 in an article titled, "Airbus' secret past – Aircraft and bribery."
Up until 2000, Airbus and other French companies were allowed to take a tax deduction for bribes. Imagine that – bribe someone to buy your airplane
and then take a tax deduction for the bribe you paid.
The Economist article details Airbus sales campaigns in India, Syria and Canada that involved corruption and bribes. The article notes that in 2001,
the Undersecretary for Commerce for International Trade, Grant Aldonas, testified before Congress on U.S. competitiveness in aircraft manufacturing.
The Undersecretary warned that bribery remains a threat to U.S. competitiveness. He said, quote: "This is an industry where foreign corruption has a
real impact. Bribery by foreign companies can have important consequences for U.S. competitiveness. Because of the critical role governments play in
selecting aircraft suppliers, and because of the huge sums of money involved in aircraft purchases, this sector has been especially vulnerable to
trade distortions involving bribery of foreign public officials." His remarks were directed squarely at Airbus and the European nations which
aggressively back Airbus sales campaigns throughout the world.
The article also notes that -- according to a 2001 European Parliament Report -- the U.S. National Security Agency intercepted faxes and phone calls
between Airbus, Saudi Arabian Airlines and Saudi government officials in early 1994. The NSA found that Airbus agents were offering bribes to a Saudi
official to ensure that Airbus received a $6 billion order to modernize Saudi Arabian Airlines fleet.
The EU governemnts also use other methods to drum up sales as well:
Airbus purchases have long been linked to landing rights at Europe's busiest airports. It's a very attractive incentive to offer airlines in
exchange for buying your planes, but it's a very questionable practice. I'd like to share four documented examples.
In 2002, an airline named easyJet placed a big Airbus order and then received favorable landing spots at Orly Airport in France.
In 2002, Malaysia Airlines received landing rights at Charles de Gaulle airport in Paris three days after buying six Airbus A380's.
Emirates Airlines and Qatar Airways both received extra landing rights after buying Airbus planes.
A source close to Emirates Airlines said - quote: "It seems that Airbus leans on Air France, which has the slots at Paris Charles de Gaulle and the
slots are given to the airline that has bought Airbus... This has been known for years. Airbus sells one of its planes to a customer and promises to
do its best to get slots for that airline."
Airbus also undercuts its prices at the expense of profitiability. Most recently the EasyJet purchase was reportedly offered at a 50% discount off of
the list price. Boeing officials said that the prices Airbus quoted were below the break even point. But if you are simply a giant jobs program who
cares about profits right?
Airbus also guaratees the value of its aircraft over the long term. This distorts the marketplace and puts Boeing at a disadvantage. If a plane looses
value Airbus will make up the difference. This again help buy market share
In 2003, Boeing and Airbus competed to sell planes to Iberia Airlines of Spain.
At the last minute, Airbus stepped in and undercut Boeing's price. It then offered Iberia a residual value guarantee on the future value of the
aircraft. Airbus got the deal.
An official with Iberia airlines said that Airbus got the deal because of the "extraordinary conditions" it offered at the last minute. Once again
-- because of its government support – Airbus was able to do things that a private, for-profit company could not.
Airbus used the same market-distorting approach with easyJet, a low-cost carrier that had a fleet of all Boeing aircraft. In 2002, easyJet agreed to
buy 120 planes from Airbus and take options on an additional 120 planes. Airbus offered significant price discounts and a residual value guarantee to
win the deal.
Not satisfied with with the above methods, EU officials often link airplane purchases with other trade agreements
Russia
First, Europe gives special rewards to countries for buying Airbus planes. It happened with Russia two years ago. After the Russian airline, Aeroflot,
bought Airbus planes, Russian exporters were given greater access in the European market, and Russia was given use of the EU’s space-launch site.
Thailand
It happened in Thailand as well. Following a 2002 Thai Airways Airbus purchase, Airbus lobbied the EU to lower trade barriers to Thai chicken and
shrimp exports.
Time and again, Airbus links plane purchases to other trade deals. But Airbus is not content to just use trade rewards, it also threatens to punish
other countries unless they buy Airbus planes. Let me share a few examples, the first involves Pakistan.
Pakistan
In April 2003, Pakistan media reported the EU retaliated in textile negotiations against Pakistan following a Boeing 777 purchase. Airbus is not
competing on the merits of its product. Instead, it uses threats of retaliation to pressure countries into going along.
Another example of these threats and pressure tactics involves Taiwan.
Taiwan
During an aggressive 2002 competition between Boeing and Airbus for an important Taiwan sale, the government of France threatened to terminate its
satellite cooperation program with Taiwan if Airbus was turned away.
Let me share a final example of these trade tactics, and it's one that I have personal knowledge of.
Europe
European governments have linked Airbus purchases to EU accession. I saw this myself on a trip to Central Europe in 1998 when I visited Poland,
Hungary and the Czech Republic. One Central European airline told me point blank that they are under pressure from the Europeans to buy Airbus because
it would ultimately make EU accession easier.
Not a very nice way to play ball now is it?
