The Rivalry Between Boeing and Airbus Essay -- Economics Airlines Airc

The Rivalry Between Boeing and AirbusThe rivalry between Boeing and Airbus goes plunk for a long way, whenBoeing was by far the dominant supplier of commercial planing machines. Upuntil 1997, Boeing was the clear merchandise leader on the passengerairplane market. Now the situation is less certain, as Airbus hasovertaken its American competitor1 not only in the domestic marketbut also in the solid ground market, with its introduction of new models ofpassenger aircrafts. The main issue addressed in this article is thata 1992 U.S.-EU civilian aircraft pact allows too much Europeangovernment support for Airbus, helping it sell more jetliners thanBoeing, which had an 80% lot in the market a decade ago. Thus theU.S. government wants the E.U. to honk an end to any new subsidiesprovided by their government, which are aimed at defend theiraerospace industry.The market structure for the aerospace sector is oligopolistic i.e.there are few abounding firms to enable barriers to entry to new firmsbecause of several(a) reasons such as Brobdingnagian capital investments and hightechnology. Hence, Boeing and Airbus, which are the two giants in theaerospace industry, have some split the market. When Airbus wasfirst set up, it faced a lot of competition from Boeing. This civilianaircraft pact allowed the European government to take protectionistmeasures by providing various government subsidies to its developinghigh technology industry (i.e. Airbus) so that it could get by withBoeing in the international market. The diagram below illustrates theimpact of the subsidies on the total supplied by Airbus in thedomestic market.In the diagram we assume that the worldly concern supply is perfectly elastic atPw. Under conditions o... ... disputes and worsen artrealtionships between the U.S. and the E.U.The E.U. government was justified in providing subsidies to Airbusearlier. This is because Boeing were the clear market leadership and hadestablished a monopoly power (i .e. Boeing was the only major industryin the aerospace sector) not only in the world market, but also in thelocal European market. Hence, this posed as a big affright to Airbus,since they were not able to compete in the world and local market andthis could have lead to the decline of the aerospace industry ofAirbus. But now, since Airbus has established itself as one of themain producers in the aerospace sector, future subsidies are not desirable for free trade.References Essential of Economics John Slomanhttp//news.bbc.co.uk/1/hi/ business sector/125726.stm1 http//news.bbc.co.uk/1/hi/business/125726.stm