With federal approval Tuesday of Boeing’s acquisition of McDonnell Douglas, the Seattle aerospace company takes a giant step toward becoming the undisputed titan of the skies.
In a divided decision, the Federal Trade Commission approved Boeing’s purchase of St. Louis-based McDonnell Douglas for $13.3 billion, creating an aerospace behemoth nearly twice the size of its nearest competitor.
The next step for Boeing might be the most difficult: winning approval from European antitrust authorities, whose stricter guidelines permit them to take into consideration the impact on Boeing rival Airbus Industrie.
A European antitrust task force finishes its work on Friday, and authorities are expected to announce their decision by the end of the month. The European Commission has claimed the right to review the U.S. merger because of its impact on the European marketplace. Under a 1991 U.S.European agreement, the United States has recognized that right.
Assuming problems with the Europeans are resolved and shareholders of both companies approve the merger as expected Saturday, the merged defense and commercial-aircraft company - the largest in the world - could begin operation Aug. 4.
FTC approval came down to four members of the five-member commission deciding the deal would not result in any substantial lessening of competition for either defense and space aircraft or commercial jetliners. Facing their critics head on, four commissioners acknowledged that, on its face, the proposed merger appears to raise serious antitrust concerns.
The FTC not only decided that McDonnell Douglas “no longer constitutes a meaningful competitive force in commercial-aircraft markets,” but also decided that “there is no economically plausible strategy that McDonnell Douglas could follow, either as a stand-alone concern or as part of another concern, that would change that grim prospect.”
With implicit backing from the Pentagon on the merger of the defense parts of the companies, the remaining question was whether McDonnell’s jetliner division, Douglas Aircraft, was realistic competition. With market share dwindling to 3 percent last year, the FTC decided Douglas wasn’t a viable competitor.
During the six-month review, FTC staff members interviewed 40 airline executives to find out if they thought the merger would cause higher prices from Boeing.
While some airlines preferred that Douglas remain in the bidding, they were virtually unanimous in acknowledging that they were unlikely to buy from Douglas because it appeared not to be making investments necessary to remain viable, according to an attorney who worked for McDonnell Douglas.
Not leaving anything to chance overseas, Boeing has been waging a public-relations war, coupled with a legal battle behind the closed doors of the European Commission’s antitrust task force.
Some antitrust lawyers said the FTC decision would bolster the pressure in Europe, though different criteria can be used for approving mergers.
Boeing, for its part, has signaled that it might be willing to rewrite its deals to be the exclusive jetliner manufacturer for three major U.S. airlines by allowing Airbus a shot at some business.
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