Arrow-right Camera
The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Boeing May Scrap Special Deals

Anthony Effinger Bloomberg News

Boeing Co. may offer to alter sole-supplier provisions in jetliner sales contracts with three U.S. airlines to win the European Union’s antitrust approval for its purchase of rival McDonnell Douglas Corp., an attorney familiar with the transaction said.

In the U.S., the Federal Trade Commission is expected to allow the acquisition to proceed with few concessions, if any, said two attorneys familiar with the transaction. That approval is likely to come as early as Tuesday, when the U.S. antitrust review period expires, the attorneys said.

The sole-supplier provisions have been the biggest hurdle for European Commission officials reviewing Boeing’s proposed $15 billion purchase of McDonnell Douglas. They essentially could prevent Europe’s Airbus Industrie from doing business with three of the largest U.S. airlines for the next 20 years.

In recent months, AMR Corp.’s American Airlines, Delta Air Lines Inc. and Continental Airlines Inc. have all signed contracts with Boeing that contain these clauses.

An EU commission official said Wednesday Boeing hadn’t notified the agency of any plan to scrap the provisions. The official, who asked not to be named, said the agreements are a key obstacle to commission approval. Airbus had made a strong case in recent hearings that the provisions give Boeing an unfair advantage.

Boeing officials in Seattle declined to comment on whether they would change the contracts, a possibility first reported by the Wall Street Journal Europe on Wednesday.

“We’re going to continue to talk to the commission and not settle this in the press,” spokesman Jerry Hendin said.

Boeing officials have said the issue of whether the contracts are fair had nothing to do with its purchase of McDonnell Douglas and that the EU had no reason to lodge complaints about them in that context.

Analysts said changing the contracts wouldn’t affect Boeing much, since the airlines would still be likely to buy the planes.

Boeing still would be “as competitive as they were” with the solesupplier agreements, said Wolfgang Demisch, an analyst at Bankers Trust New York Corp. Demisch said he’s skeptical about how exclusive the contracts were in the first place because so little is known about them.

During its six-month review, the FTC subpoenaed major commercial airlines in the U.S. to explore how much competition from McDonnell Douglas constrained prices for Boeing aircraft, attorneys familiar with the review said.

Even those who told the FTC that McDonnell Douglas had kept Boeing prices in check in the past admitted that the company’s ability to do so was flagging along with its market share, the lawyers said.

Boeing holds two-thirds of the commercial jet market, compared with 5 percent for St. Louis-based McDonnell Douglas. An FTC spokeswoman declined to comment on the antitrust review.

While the EU can’t block the purchase outright, it can levy fines on Boeing’s business in Europe. A concession on sole-supplier contracts could help Boeing placate the EU’s antitrust chief, Karel Van Miert, the EU’s most vocal opponent of the exclusive contracts, and the European companies that own Airbus.