Re: ATR-72's and Airbuses

Date:         23 Dec 96 22:48:02 
From:         Chuanga@cris.com (H Andrew Chuang)
Organization: Concentric Internet Services
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In article <airliners.1996.2948@ohare.Chicago.COM> Alan Wong (Alan.Wong@anu.edu.au) wrote:
> H Andrew Chuang wrote:
> >
> > Boeing has to put a new wing (and various other things) on the B737 to
> > make it fly higher, faster, and farther.  Yes, Boeing is responding to
> > the competition (the A320 family), but Boeing is also responding to what
> > the market wants.
>
> And more importantly what the market can get from its competitor.

What the market wants is the foremost factor.  For example, Airbus has
the A340-200 which Boeing does not have a competing product.  If there
is no market demand, does Boeing need to answer the competition simply
because the competition has a product that it does not have?  (In the
past nine plus years, Airbus has sold 40 plus A340-200s.)

> > It's simply wrong to assume that Boeing would not
> > respond to the market if there were no Airbus.
>
> But not incorrect to say that the response will be less vigourous. To put it
> simply, if a product rating 5/10 (a pass) can sell without competition to
> bring the orders (and money) in, then why bother building something a lot better.
> Why not save the 10/10 product to a later date when the 5/10 product becomes
> outdated and when the market wants something better?

A "responsible" manufacturer should always design and build the best
possible product with the given market conditions.  The best product
of a non-competitive market may be less superior than the best product
of a competitive market.  However, it does not mean it is a 5-out-of-10
product; it is still a 10-out-of-10 product under the specific market
condition.

Furthermore, IMHO, the DC-8 was an effective competitor for the B707.
The B737-100/200 was Boeing's answer to the DC-9.  OTOH, the B727 was
Boeing's most successful jet program at the time, and it did not face
much competition.  Yet it was the first to be replaced (by the B757).

IMHO, the B747 which does not have any competitor (till now) is probably
a far superior product than the DC-10/MD-11.

> > Without Airbus, Boeing
> > would have to respond to a different competitor, most likely, McDonnell
> > Douglas (as well as the market).  In the beginning, Airbus was set out
> > to break the monopoly by US suppliers in the commercial avaition market.
> > They have done it successful (mostly at the expense of MDC).  Boeing had
> > never had a monopoly, nor will it likely to ever have in the future.
>
> OK. Suppose McDonnell Douglas were to be the competitor. Let's see what
> they needed to provide a full family of jets. How about a completely
> revamped narrowbody to replace the DC-9/MD-80 platform (something major along
> the lines of the new generation 737), a medium sized widebody to replace
> the DC-10/MD-11 and a large widebody like the once proposed MD-12. And
> this in the 1980s, not now. That's three programs! Did they have the money
> to do it?

Without Airbus, MDC would most likely have a lot more revenue.  Then,
they would have more money at their disposal to develop new programs
to compete with Boeing.  You simply have made a flawed assumption
that MDC would have the same stagnant product line irrespective of
Airbus's existence or not.

> I know this is all speculative. But given all the evidence, it is my opinion
> that Airbus was always going to be a stronger competitor to Boeing than
> McDonnell Douglas would have been.

As you said it in the first sentence, it's all speculative.  I'm not
going to argue with you whether MDC would have been an effective
competitor for Boeing or not.  My point is with or without Airbus, Boeing
would have competition.  Competition from Airbus is good.  However,
I can't find this as a justification for subsidies.  I can understand
Airbus's initial needs for the A300.  However, after having captured more
than 30% of the market, they still need help to launch the A3XX is
unexcusable.