Boeing May End Exclusive Contracts to Appease EU
Boeing Co. may offer to alter a “sole supplier” provision in jetliner sales contracts with three U.S. airlines to win European Union antitrust approval for its $15-billion purchase of McDonnell Douglas Corp., an attorney familiar with the transaction said Wednesday.
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 will probably occur as early as Tuesday, when the U.S. antitrust review period expires, the attorneys said.
The exclusivity provisions have been the main sticking point for European Commission officials reviewing Boeing’s proposed purchase of McDonnell Douglas. They essentially could cut off 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. signed contracts with Boeing that contain these clauses.
An EU commission official said Wednesday that Boeing had not 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, and Airbus had made a strong case in recent hearings that the provisions give Boeing an unfair advantage.
Boeing spokesman Jerry Hendin on Wednesday wouldn’t say whether the plane maker is considering abandoning the exclusive provisions, which was first reported in the Wall Street Journal Europe.
“We’re going to continue to talk to the commission and not settle this in the press,” he said.
Seattle-based Boeing has said the issue of whether the contracts are fair had nothing to do with its purchase of St. Louis-based McDonnell Douglas. Both companies’ shareholders are expected to vote on the transaction at meetings scheduled for July 25.
Shares of McDonnell Douglas rose $1.125 to close at $69.125, while shares of Boeing lost 31.25 cents to close at $55.8125. Both trade on the New York Stock Exchange.
In a separate development Wednesday, McDonnell Douglas received a $230-million U.S. Navy contract to begin purchasing parts for production of F/A-18E/F fighter planes, the Defense Department said in a statement.
Although 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, and the European companies that own Airbus. Van Miert has been the EU’s most vocal opponent of the contracts.
Airbus Industrie, based in Toulouse, France, is a consortium made up of British Aerospace, Germany’s Daimler-Benz, France’s Aerospatiale and Spain’s Construcciones Aeronauticas.
The commission began a full probe of the merger in March and has said it plans to complete the review next month. Boeing Chairman and Chief Executive Phil Condit has said he expects to complete the purchase by August.
