The second half of the 20th century was the era of economic explosion and
modernity both in the West and in much of Asia. And it was also the time when Europe was rising
from the ashes of World War Two. Where once there had been constant fighting and conflict,
now suddenly there was agreement and cooperation. In fact, if this had not been the case,
Airbus would probably never have existed. The European aeronautics company par excellence
was launched in 1970. It was the result of a political negotiation between governments that
had already begun a few years earlier. Yes, that’s right. Airbus was not
the brainchild of some visionary entrepreneur or anything like that.
The idea came from the offices of the French and West German governments in the late 1960s.
To achieve this, these governments encouraged the union of the French aeronautical company,
Aerospatiale, with the German company, Deutsche Airbus. The consortium was
later joined by aeronautical companies from Spain and the United Kingdom.
In essence, the idea was to replicate the collaboration that the French and
the British had undertaken to create Concorde a few years earlier, but in this case with the
objective of creating a long-term structure that would make it possible to make aircraft
that were, shall we say, less exclusive. Aircraft that first had to be able to fill
a gap in which the American Boeing, Lockheed and McDonnell Douglas, which completed about
80% of the market, had no product. And later to compete with them, directly, on a large scale.
And so it is that the first aircraft to be launched was the Airbus A300, which was
the first wide-body aircraft to make commercial flights with two engines under ETOPS standards.
But, let's not get sidetracked and let's get into the situation.
With the Europeans manufacturing modern aircraft and gradually gaining more and
more market share thanks to the merger of several companies, Boeing had to do something. So in 1997
it tried to replicate the model by acquiring its direct US competitor, McDonnell Douglas.
However, with this purchase, the American giant inherited some of the company’s problems,
including economic and corporate culture problems that would sooner or later take their toll.
Be that as it may, the fact is that the era of what is perhaps the most important and powerful
duopoly of all had begun: that of aviation. Now, let's not go too fast. This is an industry
that requires a lot of capital investment, that is, to make it work you have to put
in a lot of money. As you can imagine, designing, developing and manufacturing aircraft is not easy.
The question is: Who was going to put up the money to develop the technology that
would allow each of the two companies to try to conquer the market? For the first time,
Boeing had a potential giant in front of it, capable of looking at them eye to eye,
but how exactly would they compete? How did the Europeans intend to eclipse the US giant?
Well, you see, let me say it again, in order to launch a new program, to create a new airplane,
two things are needed above all: the first is money, lots and lots of money.
But to give you a clearer idea of what we are talking about, let's take a concrete example,
let's take a look at the case of Airbus A380, the world's largest airliner,
which was discontinued in March 2021 when the last aircraft left the factory.
Well, take a look. The A380 program, which includes
the entire development cycle from conceptual idea to entry into service, was initially estimated
in 2000 to cost about $11.3 billion. However, estimates today point to the
development of this giant of the skies swallowing up more than $30 billion.
These are astronomical figures. And, keep in mind that Airbus itself acknowledges that the
A380 has never made a profit. Well, it is not that it has not generated profits, but that
billions of dollars were lost along the way. And this is where we come to the second thing
you need to launch a new aircraft. In addition to money, there obviously needs
to be sufficient demand. Given the numbers involved,
poor forecasts could turn the development of the new aircraft into a disaster.
Well, right here we come to the most controversial part of this duel of titans. The question is,
what has Airbus done better than the Americans? From the point of view of many Americans,
what Europe has done with Airbus is nothing short of unfair competition. A situation that
even provoked a trade war between the United States and the European bloc. Take a look.
(U.S. and EU Agree to Suspend Airbus-Boeing Trade Fight
The 17-year trade fight is the longest and most costly in the history of the WTO. U.S. importers
have paid more than $1.1 billion of tariffs since the duties in the dispute took effect in 2019,
according to data from U.S. Customs and Border Protection. – Wall Street Journal)
Throughout the history of the consortium, the governments of France, Germany,
the United Kingdom and Spain, later joined by others, have injected tons of cash.
Money in the form of both direct subsidies and loans at artificially low interest rates or,
directly, without any financial cost, that is, without interest.
We are talking about aid that could exceed 15 billion dollars, but whose
impact on the market could, according to some estimates,
be in the region of 200 billion dollars, all of which, logically,
works against Boeing in the United States. All this funding is what is known as "launch
aid" and forms one of the largest industrial policy plans in Europe in recent decades.
But what is clear is that the Americans don't like it one bit. The anger is monumental.
Both at Boeing headquarters and among politicians in Washington. In their view,
the Europeans have been torpedoing their aircraft industry with alleged illegal aid.
And in fact, the World Trade Organization went so far as to rule that such loans to
Airbus generated unfair competition. So, what can I say, they did have a point.
In order to make peace with Washington and comply with WTO guidelines, the European Union,
France and Spain had to raise the interest rates charged to Airbus for loans linked to
the launch of the A350, one of the European manufacturer's new flagship programs.