In Asia, Boeing Deal May Boost Airbus Status
The new Boeing Co., despite its great size and market power, has hardly won the battle.
Its absorption of McDonnell Douglas in the historic $13.3-billion merger announced Sunday might work against the Seattle-based giant in the market where the future of commercial aircraft will be decided: Asia.
Immediately after the merger was announced in Washington, aviation officials in several Asian nations expressed misgivings about the deal, fearful that the disappearance of McDonnell Douglas would leave them even more dependent on Boeing.
Indeed, throughout Asia, aerospace officials are fearful that the demise of McDonnell will deprive them of a key source of technological knowledge--thus removing a powerful lever in their battle to gain a bigger role in building future aircraft.
For that reason, aerospace observers predicted, Europe’s Airbus Industrie--Boeing’s only remaining competitor--is bound to get a warmer reception from potential customers in fast-growing Far East, which is already the single largest market for aircraft and is projected to expand dramatically in the 21st century.
Geoffrey Tudor, a spokesman for Japan Air Lines, one of Boeing’s biggest foreign customers, acknowledged that the merger elevated Airbus’ stature because “they are the competition to Boeing, or to the New North American behemoth.”
Nor will the merger dissuade Asia’s emerging economies from their hopes of building a home-grown industry, perhaps an Asian-based counterpart to Europe’s Airbus. The region has already taken steps in that direction, and the Boeing-McDonnell Douglas deal could give such plans greater impetus.
Under an agreement signed Dec. 6, the European partners in Airbus have joined with China Aviation Co. and Singaporean aviation interests to develop a 100-seat aircraft called the AE 100.
The project will give the Asian partners direct participation in cockpit and wing technologies, a big step toward fulfilling their ambitions to create aircraft industries.
The collaboration with Airbus marks a departure for Beijing, which has been buying 70% of its planes from Boeing. And other Asian airlines will be looking to diversify their suppliers.
China, the world’s single largest airplane market, promises to be the most fiercely fought battle in this industrial face-off between the two remaining companies.
“China won’t want to become overdependent on one supplier, especially because of the political differences between the U.S. and China,” said Jim Eckes, managing director of Indoswiss Aviation in Hong Kong.
Beijing hinted last spring when it gave a $1.5-billion order for 30 jets to Airbus that it did so because of trade disputes with Washington--much as it gave automobile contracts to Volkswagen and Mercedes Benz rather than General Motors and Ford.
“Now Airbus has a better chance to sell more airplanes in China, because they’re only competing with one American company, not two,” Eckes said.
Meanwhile, Boeing inherits a troubled joint Chinese manufacturing venture by McDonnell Douglas to build MD-90 aircraft in four Chinese factories. The manufacturing relationship has never paid off in the way that the St. Louis firm initially hoped.
If it dies, Beijing will scramble all the harder to find new partners from whom to learn what it needs to know about building planes.
“There is no secret that the McDonnell Douglas joint venture has serious problems,” said the Western diplomat. “The intriguing question is what will Boeing do with that fairly extensive manufacturing operation based in Shanghai.”
Meanwhile, Japan continues to chafe at its inability so far to become a key player in the global aerospace business. For decades, a consortium of Japanese industrial giants Fuji, Kawasaki and Mitsubishi Heavy Industries has been relegated to the role of subcontractors for Boeing and McDonnell Douglas.
But while the Japanese have played an increasingly important role in Boeing projects--such as sharing the risk in the newest 777 airplane--they remain frustrated at their inability to become more than a glorified subcontractor.
To this day, the Ministry of International Trade and Industry remains committed to the idea that Japan’s economic survival depends on its mastery of the aerospace industry from the drawing board to the sales pitch.
Sunday’s merger means even greater Japanese reliance on Boeing--and less leverage for Japan--unless it can cultivate links with Airbus.
The same sentiment prevails in Taiwan and South Korea, where shocked officials expressed concerns Monday that their plans to collaborate with McDonnell Douglas on the MD-95, a 100-seat airplane, might be in jeopardy.
“We are very keen on what is going to happen with the MD-95,” said an employee of one big Korean aerospace manufacturer, which was slated to provide the cockpit technology for the proposed jet.
*
In Taiwan, David Chu, director of the Committee for Aviation and Space Industry Development, said he remained “optimistic” that Boeing would continue the MD-95 program in spite of its poor performance in the marketplace.
(It is symbolic of the woes that drove McDonnell Douglas into Boeing’s arms that the only customer for the proposed plane is ValuJet, whose fortunes have plummeted since this year’s crash in the Florida Everglades.)
Chu said cash-rich Taiwan, which was once considered a possible investor in the troubled Douglas aircraft company, will certainly step up its efforts to find a bigger role in the aerospace manufacturing arena--with or without Boeing.
A combination of Asian finance and Airbus technology could launch a 600-seat jumbo jet now dubbed the A-3XX that Airbus is considering. Airbus, moreover, is no slouch technologically, having built up a reputation for innovation and the ability to offer attractive, low-priced deals for customers giving it large orders.
The rewards of cracking the ranks of major aerospace players are clear: high skilled jobs for people and technological development for a host of industries.
But getting into the game is risky and hugely expensive. Price competition is severe--discounts of 40% and more are routine on technological wonders like jetliners, which cost $20 million to $100 million apiece. That helps explain why the aircraft industry has so few participants--and why the Asian nations cannot enter it casually.
Times staff writers David Holley in Tokyo, Rone Tempest in Beijing and Maggie Farley in Hong Kong contributed to this story.
* DOUGLAS PLANT
A cloud of uncertainty hangs over Long Beach facility. D1
* THE NEW BOSS
Boeing has won praise as an employer, but new workers may find it can be ruthless. D2
