EU Objects to Boeing Merger

Date:         11 Jul 97 02:09:30 
From:         Robert Nielsen <>
Organization: AT&T WorldNet Services
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With the EU loudly proclaiming that the Boeing-McDonnell Douglas merger
should be prohibited unless certain (unspecified) remedies are offered,
it is prudent to recall the old adage, "Be careful what you wish for;
your wish might be granted."

Boeing has already backed down from exclusivity agreements negotiated
with three American airlines. Spinning off Douglas as a separate company
is absurd; Douglas couldn't sustain business by itself, couldn't borrow
(or pay back) enough money for new products, and has already failed to
find a partner or buyer. Operators of McDonnell Douglas commercial
airplanes would be left without parts or support, and with rapidly
devalued assets.

So let us suppose Boeing negotiates with the EU but cannot satisfy the
Europeans. The opportunity to merge with McDonnell Douglas and
strengthen its defense side is too good to pass up (and has been
approved by U.S. authorities), so the merger takes place and Boeing
regretfully announces that to comply with the wishes of the EU, it is
suspending sales of commercial airplanes to EU countries (but of course,
will maintain customer service and parts). It also announces it is
redoubling its sales efforts in the rest of the world -- and most
particularly in Asia -- to make up for the loss of market.

Where does this leave the EU? In the insane position of having
effectively dictated that its member countries may only purchase Airbus
airplanes -- the very sort of market exclusivity it has recently so loudly

The EU has also threatened to seize "Boeing" assets in Europe, to
include airplanes. Should this happen, the EU could be accused of theft
in international courts, because those airplanes do not "belong" to
Boeing, they belong to the airlines or banks or leasing companies who
have purchased them.

It is amusing to speculate what criticism the EU would bring down upon
itself from the international press (the American press aside), not to
mention the howls from European airlines who have been more successful
choosing equipment themselves rather than having it ordained by a
government (British Airways being a superb example).

And where does this leave Airbus? In the wretched position of having to
have "daddy" protect it from competition because it is too weak,
technically inferior, or so poorly run that it cannot really contend on
a global scale. And it faces an even hungrier Boeing, determined to
maintain market share without EU sales.

If the EU gets it wish and wrestles Boeing to the ground with threats of
fines and seizures, it may wake up one fine morning in August and find
it has a truly monstrous public relations problem on its hands, and no
graceful way to ameliorate it.

In my humble opinion, the EU would do well to end its pointless carping
about the Boeing merger and get to work putting Airbus together as a
truly competitive corporation. If this does not happen, Boeing will have
Airbus for lunch because the consortium will implode on its own
squabbling. And as an afterthought, might I add that the LAST thing
Airbus needs to do right now is pour $10+ billion into an airplane
larger than a 747. These are some of the people who gave the world the
FASTEST unsaleable airplane, must they now also provide the LARGEST
unsaleable airplane? It would make far more sense to attend to the
"middle" of the Airbus line, and fit the A300 and A310 with sidestick
controls, fly-by-wire, and payload and range improvements that really
are superior to the Boeing offerings. It can then market the truly
integrated family of airplanes that seems to exist, so far, only in
Airbus sales brochures.