Boeing-Airbus dispute: a truce in the air industry

BOEING-AIRBUS

Boeing-Airbus dispute: a truce in the air industry

The United States and the European Union agreed on June 15 a truce in their near 17-year conflict over aircraft subsidies. The two sides have been battling since 2004 in parallel cases at the World Trade Organization over subsidies for U.S. planemaker Boeing (BA.N) and European rival Airbus (AIR.PA), which each argued exposed the other to unfair competition.

On June 17, the United States and Britain reached a similar agreement to resolve their dispute over aid for Boeing and Airbus and focus on tackling Chinese subsidies, echoing the five-year tariff truce announced by Washington and Brussels.

The announcements come at a moment in which the aerospace industry is wrestling with the reluctance of most airlines to take delivery of jets as they struggle to save cash, and a drop in air traffic that Airbus says could take until 2023 or 2025 to regain the pre-pandemic levels of 2019. In the same context, China aims to challenge Boeing and Airbus with the development of its own single-aisle plane.

A 17 year-old conflict

2004

The U.S. seeks talks with the EU and Airbus host nations over alleged unfair subsidies

The WTO issues an interim ruling that some European aid provided to Airbus violated a ban on export subsidies

2009

2011

A WTO panel partially backs the EU alleging $19 billion of support for Boeing from the U.S. government, NASA and various states and municipalities

WTO largely clears the United States of maintaining unfair support for Boeing but says it has failed to withdraw the earlier Washington state tax breaks

2017

The United States announces an increase in tariffs on aircraft imported from the EU to 15% from 10%.

 

The WTO grants Brussels permission to impose tariffs on $4 billion of U.S. goods over subsidies for Boeing.

2020

2021

TRUCE

A 17 year-old conflict

TRUCE

2004

2011

2017

2020

2021

2009

The U.S. seeks talks with the EU and Airbus host nations over alleged unfair subsidies

The WTO issues an interim ruling that some European aid provided to Airbus violated a ban on export subsidies

A WTO panel partially backs the EU alleging $19 billion of support for Boeing from the U.S. government, NASA and various states and municipalities

WTO largely clears the United States of maintaining unfair support for Boeing but says it has failed to withdraw the earlier Washington state tax breaks

The United States announces an increase in tariffs on aircraft imported from the EU to 15% from 10%.

 

The WTO grants Brussels permission to impose tariffs on $4 billion of U.S. goods over subsidies for Boeing.

A 17 year-old conflict

TRUCE

2004

2009

2011

2017

2020

2021

The U.S. seeks talks with the EU and Airbus host nations over alleged unfair subsidies

A WTO panel partially backs the EU alleging $19 billion of support for Boeing from the U.S. government, NASA and various states and municipalities

WTO largely clears the United States of maintaining unfair support for Boeing but says it has failed to withdraw the earlier Washington state tax breaks

The United States announces an increase in tariffs on aircraft imported from the EU to 15% from 10%.

 

The WTO grants Brussels permission to impose tariffs on $4 billion of U.S. goods over subsidies for Boeing.

The WTO issues an interim ruling that some European aid provided to Airbus violated a ban on export subsidies

A 17 year-old conflict

2004

The U.S. seeks talks with the EU and Airbus host nations over alleged unfair subsidies

The WTO issues an interim ruling that some European aid provided to Airbus violated a ban on export subsidies

2009

2011

A WTO panel partially backs the EU alleging $19 billion of support for Boeing from the U.S. government, NASA and various states and municipalities

WTO largely clears the United States of maintaining unfair support for Boeing but says it has failed to withdraw the earlier Washington state tax breaks

2017

The United States announces an increase in tariffs on aircraft imported from the EU to 15% from 10%.

 

The WTO grants Brussels permission to impose tariffs on $4 billion of U.S. goods over subsidies for Boeing.

2020

2021

TRUCE

In 2020, Airbus delivered 566 aircraft, a 34% drop from 2019. This was the end to 17 years of consecutive record production. In the same period, Boeing delivered 157 aircraft, a 57% less than in 2019 and just 20% of 2018’s record production of 806.

Beyond the effects of the pandemic felt across the whole industry, the grounding of the 737 MAX weighed heavily on Boeing deliveries last year.

Net orders

Units

AIRBUS

BOEING

1.5k

1k

589

500

268

492

0

500

1k

-1,026

2000

2005

2010

2015

2020

Note: Net orders are adjusted for cancellations,

conversions between models

Net orders

Units

AIRBUS

BOEING

1.5k

1k

589

500

268

492

0

500

1k

-1,026

2000

2005

2010

2015

2020

Note: Net orders are adjusted for cancellations, conversions between models

Net orders

Units

AIRBUS

BOEING

1.5k

1k

589

500

268

492

0

500

1k

-1,026

2000

2005

2010

2015

2020

Note: Net orders are adjusted for cancellations, conversions between models

Net orders

Units

AIRBUS

BOEING

1.5k

1k

589

500

268

492

0

500

1k

-1,026

2000

2005

2010

2015

2020

Note: Net orders are adjusted for cancellations,

conversions between models

Deliveries

Units

AIRBUS

BOEING

1k

800

600

492

566

400

311

200

157

0

2000

2005

2010

2015

2020

Deliveries

Units

AIRBUS

BOEING

1k

800

600

492

566

400

311

200

157

0

2000

2005

2010

2015

2020

Deliveries

Units

AIRBUS

BOEING

1k

800

600

492

566

400

311

200

157

0

2000

2005

2010

2015

2020

Deliveries

Units

AIRBUS

BOEING

1k

800

600

492

566

400

311

200

157

0

2000

2005

2010

2015

2020

At the same time, the revenue passenger miles —the metric that shows the number of miles traveled by paying passengers in the air industry— dropped dramatically in 2020 as a consequence of the pandemic after years of sustained grow with consecutive annual records since the 2008–09 financial crisis. Global airlines reported losses of about $370 billion.

Revenue passenger miles

Percent change

2017

2018

2019

2020

8%

7.3%

10%

4.2%

0

-10

-20

-30

-40

-50

-60

-70

-65.9%

Revenue passenger miles

Percent change

2017

2018

2019

2020

8%

7.3%

10%

4.2%

0

-10

-20

-30

-40

-50

-60

-70

-65.9%

Revenue passenger miles

Percent change

2017

2018

2019

2020

8%

7.3%

10%

4.2%

0

-10

-20

-30

-40

-50

-60

-70

-65.9%

Revenue passenger miles

Percent change

2017

2018

2019

2020

8%

7.3%

10%

4.2%

0

-10

-20

-30

-40

-50

-60

-70

-65.9%

The two companies have been for decades the two main competitors in the market of commercial aircrafts.

Although the underlying trade relationship remains fragile with many unresolved disagreements, according to diplomats and trade experts, both companies agreed to set aside tariffs to focus on fighting China’s clear ambition to build and sell its own commercial aircraft.

Industry sources told Reuters that United Airlines (UAL.O) is in talks to buy around 200 single-aisle jets in a multibillion-dollar revamp set to benefit both Boeing (BA.N) and Airbus (AIR.PA).

Commercial jetliner competition

U.E.’s AIRBUS

U.S.’s BOEING

China’s COMAC

SEATING

0

200

400

600

800

2k

737 Max

After nearly two years of grounding as a consequence of a recurring failure, the Boeing 737 MAX was recertified in January 2021 and cleared to fly in a growing number of countries.

4k

Comac 919

6k

A320neo

787-8

A321neo

8k

10k

A330-300

12k

A330-200

A330-900

777-9

14k

777-300-ER

A380

16k

A350-1000

RANGE

(Km)

Commercial jetliner competition

U.E.’s AIRBUS

U.S.’s BOEING

China’s COMAC

The last assembled A380 rolled out of Airbus’ Toulouse facility in February 2020 as Airbus announced in 2019 that it would shutter production of its A380 four-engine civil aircraft

A380

SEATING

800

600

777-9

A350-1000

After nearly two years of grounding as a consequence of a recurring failure, the Boeing 737 MAX was recertified in January 2021 and cleared to fly in a growing number of countries.

A330-900

A330-300

400

A330-200

777-300-ER

787-8 Dreamliner

737 Max

A321neo

200

A320neo

Comac 919

RANGE (Km)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Commercial jetliner competition

U.E.’s AIRBUS

U.S.’s BOEING

China’s COMAC

The last assembled A380 rolled out of Airbus’ Toulouse facility in February 2020 as Airbus announced in 2019 that it would shutter production of its A380 four-engine civil aircraft

A380

SEATING

800

600

777-9

A350-1000

After nearly two years of grounding as a consequence of a recurring failure, the Boeing 737 MAX was recertified in January 2021 and cleared to fly in a growing number of countries.

A330-900

A330-300

400

A330-200

777-300-ER

787-8 Dreamliner

737 Max

A321neo

200

A320neo

Comac 919

RANGE (Km)

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Commercial jetliner competition

U.E.’s AIRBUS

U.S.’s BOEING

China’s COMAC

SEATING

0

200

400

600

800

2k

737 Max

After nearly two years of grounding as a consequence of a recurring failure, the Boeing 737 MAX was recertified in January 2021 and cleared to fly in a growing number of countries.

4k

Comac 919

6k

A320neo

787-8

A321neo

8k

10k

A330-300

12k

A330-200

A330-900

777-9

14k

777-300-ER

A380

16k

A350-1000

RANGE

(Km)

A Chinese alternative?

COMAC’s C919 aircraft is a planned medium-haul jet with 158 to 168 seats, and a range of 4,075 to 5,555 kilometers, expected to be certified by China later this year after delays.

Comac 919

8.6 M

4.7 M

38.9 m

8.1 M

3.4 M

35.8 m

Comac 919

8.6 M

4.7 M

38.9 m

8.1 M

3.4 M

35.8 m

Comac 919

8.6 M

4.7 M

38.9 m

8.1 M

3.4 M

35.8 m

Comac 919

8.6 M

4.7 M

38.9 m

8.1 M

3.4 M

35.8 m

The C919 is designed to compete with the Boeing 737 MAX and Airbus 320neo families. Russia is mounting a similar challenge with its MS-21 and Brazil’s Embraer is established in the market for slightly smaller jets.

Experts say China’s COMAC is a future third option in the market for planes with more than 100 seats due to Beijing’s finances and the size of its domestic market. The Chinese supplier claims a total of 815 orders have been obtained from 28 customers.

Sources

Airbus, Boeing, Comac, PWC: REUTERS;

Graphics by

Samuel Granados

Edited by

Jon McClure, Tim Hepher and Frances Kerry