Prepared for:
Professor Nicolas Kuzm

Topic Paper 3:
Boeing Aircraft Company vs. Airbus

Managerial Economics
Fall 1, 2012
Section OB

September 2, 2012

Introduction:

For decades, Boeing and Airbus have struggled for dominance in the large commercial aircraft market. In 2010 and 2011, the World Trade Organization ruled that each firm has received illegal subsidies from the governments of the United States and the European Union, which have enhanced their competitive positions. This paper considers the nature of these rulings and the future competitive environment in the global jetliner industry. This paper will also demonstrate how Boeing and Airbus approach the aircraft marketplace, how they are alike and different …show more content…
Therefore, they have a different source of revenue, and owing to the amount that US DoD spends on military aviation they get a much bigger source of revenue for R&D. They also have an impressive range of fighter and transport aircrafts to show for this effort.
Airbus on the other hand has a limited presence in the defense sector and primary focuses on transport aircrafts. Therefore, they have to depend on the subsidies provided by the European governments in long term R&D projects. This is a matter of contention between the companies and they are fighting it out in courts with some rulings expected this year.
The other difference between the two is the scale of outsourcing. Airbus is owned by multiple European governments and hence is more focused on keeping the work in Europe. One major exception was Airbus's decision to open an assembly plant for the A320 in China. Boeing on the other hand has outsourced most of the work and focuses on product development, project management, and implementation and testing. Most of the components of the planes they make come from other companies. Then there is the fight for what engines to use in their jets. Today both companies offer the option of using engines from any of the three major producers: GE, Pratt & Whitney, and Rolls Royce. Depending on local requirements the consumers might have a preference for a particular engine brand and hence the