Remember, this is all an air
We’ve done it now. We’ve crossed vertical stabilizers with the French.
Noel Forgeard, chief executive officer of Airbus, says the $3 billion package of incentives presented to Boeing Co. last year to ensure assembly of the 7E7 in Washington is the equivalent of roughly the same amount of financial support the Europeans have given his group’s efforts to build the giant A380.
How cheeky of us.
In the aerospace equivalent of the Apple Cup, the two manufacturers are over in Farnsborough, England, this week piling airplane order on airplane order, their way of claiming supremacy in commercial aviation. The Europeans, alas, apparently got the upper hand Wednesday with an announcement Etihad Airways will buy $7 billion worth of various aircraft models. Boeing had scored a $3 billion order from Emirates Airline on Tuesday.
How much of this is real business and how much stagecraft will not be clear until these planes start to roll off assembly lines in Everett and Toulouse, France. Production of the A380, further along in development than the 7E7, will probably start in 2006. The 7E7 would follow in 2008. Still, orders often do not translate into deliveries, as the industry’s post-9-11 made painfully clear.
But the announcements are more than air show bluster. The 7E7 and A380 embody different visions of the airline business.
With the 7E7, Boeing foresees a system that takes 200-300 passengers directly to their destinations from their home airports. The A380 will ferry 500-plus passengers from airline hub to airline hub, where they can be transferred to smaller planes for travel to their final destinations.
They also, supposedly, represent somewhat different approaches to aircraft development, with Boeing drawing on its own resources and Airbus relying on assistance from European governments, principally in “launch support” subsidies that can be forgiven if a particular program does not get off the ground. Airbus has taken advantage of about $15 billion in such aid to introduce several airplanes. The subsidies were supposed to have been phased out under a 1992 aerospace trade agreement.
Obviously, help from the governments of France, Britain, Germany and Spain have not ceased. And with their help, Airbus has overtaken Boeing as the leading maker of commercial airplanes. Their success has some calling for the United States to file a complaint with the World Trade Organization, which referees trade disputes.
Forgeard’s response: Bring it on.
“This is a game,” news reports quote him saying. “There is no ground to attack Airbus whatsoever.”
He adds that Airbus will focus on making airplanes, not litigation. “I’d rather pay engineers than lawyers.”
Pay or, more accurately, payroll, is the ultimate objective here. On that score, the news from Boeing has been positive for engineers, machinists and Washington. No word on lawyers. The company said last week it will add 2,000 to 3,000 more jobs in the Puget Sound area before the end of the year to support a variety of new and ongoing projects in commercial airplanes and defense. An analysis released last month by the Department of Trade and Economic Development estimates that by 2006 the 7E7 will create more than 7,000 jobs at Boeing and its suppliers in Washington. Income will exceed $500 million a year.
Not a bad return, if those projections hold true, on the $3.2 billion the state will have committed to training, transportation improvements and tax relief for the company, which already employs 56,000 in Washington.
As for Forgeard’s suggestion Washington was just as culpable as the Europeans when it comes to subsidies, the 7E7 project manager for the state is having none of it. Robin Pollard says the tax and other relief is not a subsidy.
“We’re talking apples and oranges,” she says, adding that the state is making significant headway on fulfilling some of the commitments made to Boeing.
Meanwhile, Sen. Patty Murray, D-Wash., has, with the support of the U.S. Aerospace Industries Association, put renegotiation of the 1992 trade pact in play. Boeing executives also say changes are in order.
All this could be puffery. As the Wall Street Journal reported Monday, Airbus and Boeing draw extensively on suppliers on both sides of the Atlantic Ocean. Many 7E7 components will originate overseas. Globalization is a fact of life. And Washington against the world just does not square with our state’s embrace of trade as an economic boon.
In fact, when you think about it, Forgeard’s suggestion we have muscled up on his government backers is flattering, n’est-ce pas?