Thursday, December 10, 2015

On unfair state subsidies to Airbus and Boeing, and the effect on the rest of the world

  • Because Boeing regularly receives very-large-sized defence/military contracts from the US government and earns billions and billions in profits on those contracts, it remains awash in cash and this financial firepower can be redirected towards the development of its commercial aircraft [or to undercut Airbus on prices, effectively a discount]. The American taxpayer thus subsidizes both the R&D required to develop passenger planes, as well the end-customer price of these planes.
    • US gives billions in military aid to Israel, much of which flows back to the US in the form of purchase of US weaponry and fighter planes, thus effectively being a US-taxpayer provided subsidy despite giving the appearance of being a normal foreign-customer purchase.
  • Further, many of the best practices, designs, materials, parts, processes and technologies that Boeing develops for its military products can be/are used in its commercial products. Again, this is nothing but Boeing's military product line giving additional "funds" to its passenger product line. What's more, sharing of components/parts leads to economies of scale [through increased production volume for these shared components/parts], thus lowering the per-unit cost compared to a purely-commercial manufacturer.
  • Similarly, Airbus receives both cash and designs/materials/parts/technologies, although likely to a lesser extent than Boeing.
  • In summary, both of these top manufacturers receive state subsidies, which harm the other, much-smaller aircraft manufacturers in the rest of the world. The subsidies that these two manufacturers receive create a roughly level playing field for these two [relative to each other], but severely curtail the ability of other manufacturers to challenge this cozy duopoly.

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