For the lost plane, NYMPH, one of the theories was that it was hijacked and crashed. Unfortunately, there are a lot of rumors but none confirmed as the plane is et to be found. For MM 17, it was shot down by pro-Russian rebels over the Ukraine-Russia border. QUIZ’S crashed into the Java Sea due to bad weather. As for the most recent crash, Flight 9625 by Germinating, it was discovered that the co-pilot had a mental illness and was suicidal. With every crash, manufacturers like Boeing and Airbus work harder to improve standards regarding safety and upgrade in technology.
Unfortunately, there are always risks that manufacturers cannot control: Human error. Despite the risks of flying, Boeing and Airbus sales remain high and both manufacturers are still competing in terms of sales figures. In 2014, Boeing’s net sales were worth $233 billion and Airbus’s net sales were worth $175 billion (Gates, D. , 2015). Source: CAP. Boeing Airbus share honors in 2013 orders/deliveries race- but it’s not about winners and losers, 2014. Recently, with oil prices dropping below $60/barrel, one major concern is that airlines might delay or even cancel their orders.
It is still too early to tell if airlines would delay or cancel their orders as both Boeing and Airbus are backlogged for over eight years but it IS a lingering issue. The drop in fuel rice may aggravate the overcapacity problem, as airlines will lower their fare prices to increase market share. Cheaper fuel means that airlines can offer lower airfares to its customers and prolong their older, gas-guzzler airplanes to save money (Clark, N. , 2015). Source: The New York Times, Oil Prices: What’s Behind the Drop? Simple Economics, 2015.
MAJOR PLAYERS Governments Governments play an important role in air transport regulation because it is a highly competitive and profitable industry that they want to control. They are often full or partial owners of airline companies and they eave the power to encourage competition to reduce oligopoly and monopoly. They can enforce a merger policy to save low performers from bankruptcy (www. Lempel. Com) as well as avoid job loss in the country. Besides, they are responsible for managing the environmental effects of carbon oxide emission as well as mitigating the high pollution risks associated with the airlines’ massive gas consumption.
Moreover, governments empower civil aviation authorities and other similar bodies to oversee and regulate the airline industry, and they pay close attention to any issue or development in he sector, as this is a major source of revenue in international trade. Aviation Authorities The aviation authority (AAA), whether civil or national depending on the legislation of the country, is mainly responsible for licensing airports, pilots, and engineer; ensuring passengers safety; regulating air traffic; examining and testing equipment; and also investigate accidents and incidents (Federal Aviation Administration, 2015).
The AAA is at the center of the heart of the aerospace industry because it plays a dual political and economical role, and it serves as an interface for all actors of the business. In certain countries, the Ass actions are equivalent to governmental decisions that need to be strictly enforced. In addition, the AAA is responsible for gathering and analyzing statistical data, which is used for monitoring and planning purposes, and to provide advice to the government on actions to take in the sector. The AAA also serves as a source agent collecting and disseminating news and information about events to the local and international press.
Airline Companies The 2014 Annual Review of the International Air Transport Association Airline reports that “air transport supports $2. 4 trillion in economic activity’ and that here are approximately 1,400 airlines operating worldwide (www. Data. Org). In such a competitive environment, airlines constantly battle to have the largest share of the market. An important milestone is the Airline Deregulation Act passed in 1978, which partially deprived the Civil Aeronautics Board (CAB) from its controlling power over airline prices, mergers, traffic, and other related issues (Smith & Cox, 2008).
This marked a new era in the industry, which saw passengers number increase from 679 million in 1978 to 2. 8 billion in 2011 (www. Data. Org). Air tickets gradually decreased providing customers tit innumerable options to choose from. Airline companies are the major clients of aircraft manufacturers. Their specific needs and requirement shape the industry trends, and manufacturers strive to offer their best and most efficient aircrafts in order to secure more orders. Aircraft Manufacturers Boeing and Airbus are on the top Of a long list Of aircraft manufacturers worldwide.
They built their reputation by offering several innovative models that their custom-made to fit every single need of their client. Being such important players in the industry, manufacturer not only represent their own rand’s and products at the local and international levels, but the success or failure of their business is also reflected on their country of origin. Thus, the fierce competition between Boeing and Airbus has not been a simple airline rivalry but it has escalated to a United States versus Europe challenge.
On one hand, Europeans accuse the US government of heavily subsidizing Boeing with research and development funding as well as waivers for patents dues; on the other hand, Americans claim that Airbus benefits from preferential treatment, substantial loan, as well as exclusive infrastructure support European Commission, 2007). Several disputes between these two giants have been brought to the attention of the VOW jurisdiction, and the latest ruling occurred in 201 2 in favor of Boeing, which was complaining about subsidies from five different European countries to Airbus.
ISSUES Boeing and Airbus have dominated the large civil aircraft industry (LLC) for decades so it was only a matter of time before issues from their intense competition made headlines. The biggest came in 2004 when Boeing filed a complaint with the WTFO regarding Airbus’s receipt of large subsidies from EX. overspent. Likewise, this prompted Airbus to file a complaint with the Buffo accusing Boeing of doing the same with the U. S. Government.
They each claimed that the other company abused the 1 992 ELK-SIS Agreement on Large Civil Aircraft, which limits the amount of government subsidies; each company could receive for both direct and indirect support. Under the 1992 EX.-SIS Agreement on Large Civil Aircraft, direct government support for new aircraft programs should not exceed 33% of total development costs (which had to be repaid over a 17 year period with set interest rates) and limit indirect support to 3% based on LLC turnover (ELI-SIS Agreement, 2004).
Both stipulations were agreed upon in order to create a fair trade deal since the E had multiple governments that could contribute to Airbus (Direct Support) while the U. S. Government was providing a lot of funding in the form of indirect support for national defense and space programs. The overall goal of the agreement was to level the playing field so that one company could not gain a competitive advantage over the other, but with multiple governments and major defense/space contracts involved this would prove to be a tough ask for the WTFO in determining a proper outcome.
Boeing accused Airbus of receiving large amounts of subsidies from various EX. governments, which exceeded the 33% ceiling for new jetliner programs. Boeing was under suspicion because of the amount of new jetliners that Airbus was able to produce within a short period of time and even if the funding was legitimate, how could Airbus afford to pay the loans back within the 1 7-year timeshare at the proper interest rate. Likewise, Airbus accused Boeing of taking subsidies from the U.
S. Government that were either never going to be paid jack or above the ceiling limit, especially indirect support due to the technology used from NASA in new jetliner models. In March of 2012, about eight years later, the WTFO determined that Boeing had received approximately $5 billion in illegal subsidies for its development of the 787 Adrenaline and other aircraft models giving Boeing an unfair advantage over Airbus (Drew & Clark, 2012).
Within that same ruling, it was determined that Airbus received around $15 billion in loans at below market interest rates and that Airbus was likely receiving various amounts of loans for decades. They noted that Airbus could not have jumped passed Boeing within 35 years without the additional funding, but did not provide exact amounts or details of the funding (Drew & Clark, 2012). Although both sides claimed victory, the complaints provided further insight to the lack of authoritative power the WTFO actually had.
If payments or restitution were to be paid by any party in this case, they would have to be worked out in good faith or by some other way such as the court systems. OPTIONS FOR RESOLUTION One of the glaring deficiencies of the WTFO is its lack of authoritative ewer, especially in attempting to resolve the long-time dispute between Boeing and Airbus. Although the WTFO ruled that both parties were not in compliance with international regulations and that they illegally accepted more subsidies than what they should have, the organization did not seem to be in a position to enforce its ruling.
An option for resolving the subsidy dispute would be to establish a new trade agreement, which could be upheld in the international courts. It seems that there was sufficient evidence from the Wet’s investigation to provide a ruling but overall authoritative power as lacking. If the authoritative power is bestowed to a court system, the international trading system should not be greatly affected. 2. Since Boeing and Airbus are publicly listed, which means that they have to issue annual reports to their shareholders.
Therefore, it is imperative that they disclose their financial reports as well as provide more details on their source of funding. Transparency is a key element that will play a major role in appeasing the tension and create a fairer competitive environment. With better-informed shareholders and stakeholders, both companies can focus n other issues such as building safer and better aircrafts rather than funding issues. 3. It is obvious that the Boeing and Airbus contention has as strong political root due to involvement of governments and other national bodies.