48 Comments Add your own

• 1. don shuper  |  November 2nd, 2009 at 06:46

  

  RE the A330 and subsidy. One has to wonder ( not really ) why Airbutt did not try to match the 767 tanker with a version of the LIKE SIZED A330-200, instead of the 777 ‘ equivalent” A330/340 ??.

  Eight years ago, I prepared a detailed analyis of ‘ matching” Airbus planes to the equivalent Boeign plane- all as part of putting together a Countervailing duties petition against Airbus. Boeing at the last minute twisted the arms of a few SPEEA leaders, and submerged the filing. its a long- sordid- story starting in 2001.

  The reason I mention it now is that we had pretty well profved Airbust was getting significant subsidies and selling ( undercutting Boeing ) at such a price they were not really making any ‘ profit” min the normal sense.

  http://home.att.net/~dshuper/CVDPOSIT.html

  The L&PA Committee has made the following observations which lead to our belief that Airbus, through a variety of methods, is effectively selling their products below cost. Raw material, engines, avionics, landing gear, and similar parts cost the same for Boeing and Airbus. Assembly techniques, automation, certification, process controls, and computer-aided design techniques are essentially the same, and have no inherent cost differences. Additionally, labor costs are higher for EU countries, with differences from 15% higher in 1995 to about 5% in 1998. Finally, the EADS annual report shows that for the year 2000, Airbus’ share of EADS net consolidated profit was zero.
  We then compared the published selling prices of Boeing and Airbus commercial airplanes from 1998 - 2000, omitting figures for the Boeing 747. For 1999, the average cost of all airplanes sold by Boeing was $59 million per plane, whereas the average cost for Airbus was $46.4 million per plane. We then compared two comparable models of aircraft, the A320 and the 737-800. Figures reflected an average 737-800 costing (conservatively) about 10% more than the A320.
  Therefore, how can Airbus, with equal material and subassembly costs, higher labor costs and arguably lower productivity, and admittedly zero profits, still undercut Boeing prices by at least 10 percent? Our determination is that Airbus is selling most, if not all aircraft models into the U.S. at 10 25% below cost. Note: this does not include special lease, financial, or maintenance agreements, which even further harm our workers.
  In conclusion, the overall affect of the governmental subsidization of Airbus has caused distortions in international trade that support United States governmental action. Therefore, the SPEEA L&PA Committee is recommending the SPEEA Council and Executive Board take action to file the petition for countervailing duty relief with the United States Department of Commerce and International Trade Commission.

  and I now draw your attention to page four of the attached matrix cost analysis and the red box noted as tanker

  http://home.att.net/~dshuper/CVDanalysisRDX.pdf

• 2. ikkeman  |  November 2nd, 2009 at 10:51

  

  Yes, A330MRTT/KC-45 has a lot to prove - just like the KC-7A7. Don’t get all riled up, but Boeing still doesn’t know what to base their proposal on, so how can a cloud of options compare to a specific detailed offering.
  On the “soon to be released” WTO ruling - I thought the EUR vs US case initial draft ruling was due first. Anyhow - Should the USAF factor that WTO case as well?

  And ofcourse it’s unfair if your competitor in a competitions ruled primarily by price (if you’re 1% cheaper, you win no matter what - make a guess where Boeing will be aiming for) has detailed cost information on your product.
  The only question is whether the information is whether the info is “inaccurate, outdated and not germane to this source-selection strategy” as the USAF caims:
  The problem here is that the NG/EADS offering will be the same as for the last (2?) competitions. So it is not outdated. The inaccuracy depends on how much the AF (had to) share(d). But the last claim is the least supportable I think - how can pricing information on the competitor not be gemaine to an source selection strategy that is ruled primarily on price. It will give Boeing a much better insight into what price point they should use for their offer.
  What to do about it?: Nothing. Boeing had the right to see this information, and the AF had to release it. So it’s unfair - but tough luck. the AF is not allowed by the same regulations to provide similar info on KC-7A7 to NG/EADS.They lost and therefore thair information is still company property.

  1. don shuper | November 2nd, 2009 at 06:46
  I’m sorry but I do not follow your logic - because average cost per a/p was lower for Airbus than for Boeing (59 vs 46.4), and the average 320 list price was 10% lower than 737-800 list price - airbus must be cheating?
  Why do you assume Airbus subassembly cost is equal - and if it is, why would you assume the same amout of subassembly goes into airbus planes as Boeing planes. (why assume the manufacturing of an 80’s design is equal to that of an updated 60’s design?) Why would you argue lower productivity on Airbus side? and what is wrong with forgoing profit to enter an market - interest on loans is deducted prior to profit, aren’t they? - so why must this be subsidies?
  Why did you look only at 1998-H1′01, Im certain you had access to more exhaustive data.

  why would these… facts? lead to the inevitable conclusion that it must be subsidies that allow Airbus to undercut Boeing prices.
  Airbus always employed a distributed production line - Boeing is moving to that as well with the new 787 and declaring it’s their best new idea since putting the engines UNDER the wings! - have you provided any rationlisation why this could not be an factor in this comparison of yours.

  There’s lies, there’s damnable lies and then there’s statistics - without further bacground, this comparison resides in the latter category andI think Bo management was smart in preventing such an undefendable paper from being published under their name.

  I’m not contesting Airbus recieved subsidies. I’m not even contesting some of those monies were outside the transatlantic agreement on such subsidies. But Boeing recieved the same or similar support from it’s sponsor goverment.

• 3. Boeing Investor  |  November 2nd, 2009 at 12:13

  

  All this argumentation with statistics and pseudo statistics and claims and false claims and allegations and false allegations just confuses the truth and becomes tediously burdensome to understand.

  I hope the process is sufficiently clear to cut through all this nonsense

• 4. Vero Venia  |  November 2nd, 2009 at 13:20

  

  3. Boeing Investor | November 2nd, 2009 at 12:13

  Agree.

  I still hope the US Air Force will publish the final and definitive RFP with clear cut evaluation criteria.
  Once these elements are available, I hope they will run the selection properly.

  Frankly, I prefer to wait and see what the outcome will be. However, I am still asking myself whether one of the potential bidders will drop out from the contest.

• 5. 787Fan  |  November 2nd, 2009 at 13:28

  

  I still think all this is getting nowhere. I personally think that the AF should purchase 5 planes of each. And let the best plane win the entire contract. It would still give us 10 NEW Tankers ready to work. Then we could see which plane is best. Cost, operations, time frame and and quality would rule. I think Boeing could win that.
  GO BOEING…

• 6. Aurora  |  November 2nd, 2009 at 14:06

  

  Nice post, don shuper. I have no doubt that if the WTO issues a decision adverse to airbus, the powers at DOD/USAF will be (politically) unable to continue to ignore it. The reason that it has not been taken into account before now is that there is no “decision” per se, only a “draft”. As for selling their aircraft below cost, many people (myself included) have wondered about the source of John Leahy’s “magic”. Now we know.

• 7. Aurora  |  November 2nd, 2009 at 14:08

  

  BTW, I have no doubt that eads performed the boom test as a result of being “called out” by the FleetBuzz Editorial. Let’s see if the testing continues on a regular basis.

• 8. MPTA-098  |  November 2nd, 2009 at 14:27

  

  Don, did you ever read that cover story in BusinessWeek from MAY 20, 2002. It really puts things into perspective regarding Boeing’s current debacle with the 787, which btw, was launched by an unrealistic overconfidence in change management preparedness, and which now may have resulted in a catastrophic setback to the the company’s capabilities in new product development. The now seemingly panick-stricken and surprisingly incompetent Boeing Top management apparently did not know the basics that before launching transformational change initiatives, they should’ve assessed and upgraded their level of change readiness. Also, industrial best-practice recommendations suggest that new products should use existing processes and tools, the existing organisation and demonstrated technologies. Boeing broke all three and it’s been pretty clear, since even before that pathetic Potempkin roll-out, that evidently, no real assessment was done on their part on the company’s level of change readiness, or that it was only undertaken superficially.

  Boeing’s Secret: Did the aircraft giant exploit accounting rules to conceal a huge factory snafu?

  http://www.businessweek.com/magazine/content/02_20/b3783001.htm

  Quote: To mitigate this problem, the rules require companies to take an immediate charge as soon as they have evidence that a line’s long-term profit margin will disappear–or, in industry lingo, that the program will be in a “forward-loss” position. And that’s just what appears to have been happening to the 777 line in early 1997. Launched with great fanfare in the early 1990s, it had a development budget of $5 billion to $7 billion for initial design, production tooling, and flight-testing. By 1995, it had quietly overrun this budget by nearly 100%, according to two former high-ranking Boeing managers.

  So, for the sake of argument, let’s assume that the total costs for the intial 777 programme (not the R&D for the 77W/77L) was $12 billion, or nearly $17 billion evaluated in the dollars of today.

  Now, compare those $17 billions with the cost to Airbus for initial design, production tooling, and flight-testing of the A330/A340; in the order of $3,5 billion, or some $5 billion evaluated in the dollars of today.

  Source: http://www.flightglobal.com/pdfarchive/view/1991/1991%20-%201450.html

  Quote: Whatever the sales outcome, developing the A340 has cost considerably less than it would have to develop it on its own. Together, the A330 and A340 will cost S3.5 billion to develop, with growth versions of both costing an additional $500 million - $700 million. “There was a debate within Airbus,” reveals Pierson. “Some people said we should launch a twin, others a quad. Finally, the engineers promised that they could do both aircraft with a common airframe for half a billion less than if they were done separately. I said…let’s go!” Pierson launched the A330 and A340 against significant opposition from within Airbus. “It was a big fight,” he recalls. ” I defended the engineering point of view because it made sense. But that was not obvious to the partners four years ago.” He was also sure about the market. “When people open our market analysis in ten years time, they will see how right we were…that we’ll sell 800 aircraft of both types: one third of them A340s, the rest A330s. If you look at the ratio today, it’s 40/60. That’s not far off.”

  So, not only did Airbus develop the initial A330/A340 series for far less dollars spent than Boeing managed to do with the 777 (and in about the same time frame), but Airbus’ entire manufacturing infrastructure (mostly state-of-the-art) combined with their commonality philosophy, was the main reason why Airbus could produce large civilian aircraft some 10 to 20 percent cheaper than Boeing at the turn of the century. Fortunately for Boeing, the decline of the dollar vs the euro has somewhat closed that gap, if only temporarily.

  Source: Boeing: What Really Happened; Flawed strategy. Lax controls. A weak board. Personal shortcomings. CEO Phil Condit lasted longer than he should have.

  http://www.businessweek.com/magazine/content/03_50/b3862001_mz001.htm

  Quote: Despite the marketing hype and strong suggestions that Boeing would launch both jetliner programs, Condit did not pull the lever. While Airbus got bigger, Boeing stagnated. The failure to formulate a strategy that could keep up with an emboldened Airbus began to tell as Boeing fell behind in both technology and manufacturing efficiency during the ’90s. Boeing, once the manufacturing marvel of the world, now spent 10% to 20% more than Airbus to build a plane. The loss in market share — from nearly 70% in 1996 to roughly 50% today — has marked an astonishing reversal.

  It should be clear to most observers of the industry that “maximum commonality” was (and still is) the Airbus aim when they launched the A330/A340 programme; namely commonality between the A330 and the A340 and commonality with other Airbus products. The A330/A340 therefore shared the same 222-inch diameter fuselage cross-section of the A300 and A310, while the fuselage panels as well as nearly all of the fuselage frame sections, but not the centre section incorporating the wing carry through box, are built on the same jigs, though some have been replaced and/or upgraded since EIS, while the flightdeck, avionics, and digital fly-by-wire flight control system was largely based on those of the A320.

  Therefore, thanks to all the reason that I’ve mentioned and the fact that the major new hardware which Airbus had to develop on the A330/A340 was really “only” the wing, which in fact, was quite revolutionary in its design, Airbus could quite easily sell not only the A330/A340, but also the rest of their line-up profitably, and for at least 10 percent less (NB In the timeframe of your cost examples for the A320 and 737-800) than Boeing’s competing and roughly comparable products; most of which, of course, were (and still are) produced with all of that legacy production infrastructure.

  Finally, as for the KC-X competition, it should be clear to most observers that producing a KC-767 for the Air Force on a final assembly line (FAL) with a total monthly output of only some 2 aircraft for the next decade and a half (if Boeing gets the KC-X contract), is significantly less efficient than a FAL, such as the one for the A330/A340, producing some 7-8 slightly larger WB aircraft per month for the foreseeable future (even without KC-X production taken into account); the reasons for which is due partly thanks to the 787 debacle.

  As for productivity; surely it’s in the eye of the beholder:

  Europe: More Holidays and More Productive?
  For all their extra vacation days as compared with the U.S., workers in the EU are keeping pace—or better—in terms of productivity

  http://www.businessweek.com/globalbiz/content/aug2009/gb20090818_398605.htm

  Quote: Americans may take less vacation, but are they really more efficient than their European colleagues? Figures from the World Economic Forum certainly show the U.S. remains the world’s most competitive country. Yet other data, including countries’ GDP per hours worked, reveal Europe still gives America a run for its money. That means many parts of the Old World are at least as productive as the U.S., if not more, with the added bonus of up to eight weeks off a year.

  and

  Yet as many Europeans sun themselves on beaches from Croatia to Corsica, economic productivity will be the last thing on their minds. And by taking so much time off this summer, Europe’s workers are sure to be well-rested just as the economy begins to show signs of recovery.

• 9. Paula K  |  November 2nd, 2009 at 14:36

  

  @ Ikkeman

  The pricing Boeing has gotten means nothing. If the DoD claims something false then the whole contest is flawed.

  But if the old (2008) contest pricing is no longer an advantage, then you have no grounds, even less than NGC/EADS in fact to complain about it.

  Don’t forget, NGC has been warned about it before by the USAF and DoD.

• 10. ikkeman  |  November 2nd, 2009 at 15:22

  

  9. Paula K | November 2nd, 2009 at 14:36
  DOD/ USAF claimed teh last KC-X run was valid and teh best team won - I don’t believe they were right on the first issue, and I think they are not right in claiming this data does not effect the new KC-X run.

  If the old data is flawed and inaccurate Boeing has a case vs the USAF, as it is required by law to provide correct and detailed price data to the loosing bidder on a contract award. If the old data conforms to the rules under which it was released, NG/EADS is correct in pointing out this favors Boeing.
  Whichever one is true, there’s nothing to be done. The rule law was followed, and commonsence lost.

• 11. Paula K  |  November 2nd, 2009 at 17:04

  

  Ikkeman, how can common sense be lost when the DoD admitted that the data provides no benefit to Boeing?

  It cannot and does not constitute the EADS claim of favoring Boeing at all. The DoD has already shot itself in the foot once with the GAO lambasting them, unless you have something to disprove the comments by Undersecretary of Defense Carter, I think you should put up or shut up.

• 12. Mike M  |  November 2nd, 2009 at 17:19

  

  This whole episode would be well worth ending and awarding a sole-source contract to Boeing.

• 13. ikkeman  |  November 2nd, 2009 at 17:57

  

  11. Paula K | November 2nd, 2009 at 17:04
  read
  2. ikkeman | November 2nd, 2009 at 10:51

  DOD/USAF past performance on this contract award far from supports your implicit claim that “If the USAF says it is so, it must be true”

  I cannot see how having price information on the exact item you competitor is offering does not give you an edge in a competition played out primarily on cost. do you have anything to back up your belief, or do you just depend on the USAF’s say so?

• 14. don shuper  |  November 2nd, 2009 at 18:06

  

  re “2. ikkeman | November 2nd, 2009 at 10:51′”’m sorry but I do not follow your logic - because average cost per a/p was lower for Airbus than for Boeing (59 vs 46.4), and the average 320 list price was 10% lower than 737-800 list price - airbus must be cheating?
  Why do you assume Airbus subassembly cost is equal - and if it is, why would you assume the same amout of subassembly goes into airbus planes as Boeing planes. . . .”
  and others who question ‘my’ use of statistics . .
  ++++

  It appears that you did not read the other pages in the pdf file . . cvdanalysisRDX.

  1) On page one, I clearly listed the source of my data AECMA which is the European equivalent of AIA and the links ( which are now outdated after 8 years )

  2) on pages 7 and 8 I listed/plotted items such as labor rates and productivity data from those aecma reports and even listed the page and figure numbers

  On productivity - if one checks the definition AECMA used, along with their comparison to equivalent AIA data, the baseline definition is essentially $$ sales/ employee. While personally I do not completely agree with that- I used AECMA data for purposes of credibilty and traceability

  3) The pdf copy of the spreadsheet was designed to be included in the appropriate place in the basic CVD petition form to support the numbers to be inserted in the actual petition

  4) The CVD process requires that all data be supported and sourced. Obviously, we(I) had no access to either Boeing cost data or Airbust cost data, but we were at least ‘ aware” of typical discounts from list price, generall maintenance agreements, etc.

  had we filed, Airbust would hafve had a choice - probvide cost data to refute - or under the rules, the ITC can make their own estimates. And they would have access to the customs declaration data as well.

  In any case- my analysis was vetted by several people , one of whom was at the GATT92 meeting which set up the subsidy rules ( he is since deceased in 2004 - named Dan hartley - a Boeing Engineer with a VERY interesting background )

  That the WTO apparently found similar results 8 years later I beleive supports my basic analyis regarding subsidies. The analyis was essentialy complete and ready to be filed the 2nd week in september 2001.

  at that time, the tanker lease was not in the mix.

• 15. don shuper  |  November 2nd, 2009 at 18:20

  

  Btw … “There’s lies, there’s damnable lies and then there’s statistics - without further bacground, this comparison resides in the latter category andI think Bo management was smart in preventing such an undefendable paper from being published under their name.

  I’m not contesting Airbus recieved subsidies. I’m not even contesting some of those monies were outside the transatlantic agreement on such subsidies. But Boeing recieved the same or similar support from it’s sponsor goverment.”

  ++

  I suggest you take a close look at the FACTS instead of your assumptions regarding Boeing Name on the petition.

  Until Jan 2002, when we were again ready (after 911), Boeing provided NO help or hinderance. The filing was NOT up to Boeing to agree with or to prevent.

  http://home.att.net/~dshuper/CVDMOTION.html

  Countervailing Duty Petition Against Airbus Industries

  Whereas, for the past year, the SPEEA Legislative and Public Affairs (L&PA) Committee has been conducting an intensive investigation into whether Airbus Industries is selling their commercial airplanes below fair market prices, due to the subsidies it receives from EU governments.

  Whereas, SPEEA, acting on behalf of its members, does have legal standing to file a petition with the International Trade Administration (ITA) within the Department of Commerce and United States International Trade Commission (USITC) requesting relief under U.S. countervailing duty law.

  Whereas, the L&PA Committee has gathered data from various sources, including: annual reports from Boeing and the European Aeronautic Defence and Space Company (EADS) which includes Airbus; statistical surveys conducted by the European Aerospace Industry (EAI); Boeing and Airbus websites; numerous press accounts; and informal discussions with industry representatives.

  Whereas, the L&PA Committee’s evaluation has determined there is sufficient data to support our belief that Airbus is selling aircraft into the U.S. market at 10 to 25 percent below cost (not including special leases or other financial arrangements), with the resultant negative impact of lost jobs in the American commercial aerospace workforce.

  Whereas, the L&PA Committee has completed a draft of the petition requesting relief under U.S. countervailing duty law.

  Whereas, the L&PA Committee has completed a position paper which recommends filing the petition.

  MOTION:

  It is moved that: THE SPEEA COUNCIL RECOMMENDS THE EXECUTIVE BOARD FILE A PETITION WITH THE FEDERAL GOVERNMENT TO INITIATE A COUNTERVAILING DUTY INVESTIGATION AGAINST AIRBUS INDUSTRIES.

  Note : The above motion was passed on Aug 9th, 2001

  +++ had you bothered tom look at the other links on my site clearly labeled, you could have found the above.

  As I’ve said - the full story behind Boeing interference is in a word sordid.

  When rudy deLeon presented Boeing objections and some phony data in support - one Boeing Engineer stood up -waved the 2 pieces of paper rudy handed out as support - and said ” Rudy - this is a bunch of garbage - and proceeded to read Rudy the equivalent of Rocks and Shoals . . ” Rudy later apologized, and remarked that the next time he met with a group of engineers, he would be more careful about data persented. The meeting was an open and on the record meeting - and I was there. ;-P
  As to Who rudy was/is- at that time he had been at boeing for about 6 months, and had been assigned to work the Airbus issue by Phil Condit.
  Look him up on google to find out his prior occupation

  And his current occupation

• 16. Paula K  |  November 2nd, 2009 at 18:50

  

  Ikkeman -

  You miss my point. My point was that the GAO righted the wrongs of the USAF/DoD - and as Carter states, the pricing is not an issue now because the contest from 2008 is no longer relevant.

  You do know that there is a new RFP out, dont you?

  Thats why the pricing Boeing got out of its protest doesnt give it an edge because the requirements this time around are different.

  If they were unchanged, your position would be credible - but it isn’t.

• 17. MPTA-098  |  November 2nd, 2009 at 19:59

  

  Don Shuper said: “I suggest you take a close look at the FACTS instead of your assumptions regarding Boeing Name on the petition.”

  Don, isn’t it typical to blame “the competition” when the home team fumbles inside the 10 yard line, as Boeing evidently has managed to do in the execution of the 787 programme. Losers always have a tendency to blame others for their own failures. It’s not really Airbus’s fault that there’s been a long and steady decline of the Boeing Company. The cause of the company’s current misfortunes are mainly caused by three major factors:

  1) The 787 was launched by an unrealistic overconfidence in change management preparedness.

  2) A surprising level of engineering incompetence.

  3) Boeing’s pandering to investors.

  As for the last point, this is certainly the first time a paper airliner sold like hotcakes and drove stock value up by more than 100 percent even before the vehicle was rolled out. I would guess that clever shareholders who sold their stocks around the time of the infamous 07/08/07 potemkin charade, made more money with the 787 on Wall Street than what quite a few partners and suppliers will ever make over the life of the program.

  As for subsidies, direct or subtle; in Europe, at least; hypocrisy (particularly the self-serving variant) is viewed as on of the worst human traits; so when a person with a clear vested interest in the matter, such as yourself, categorically seems to be claiming that your company is “clean”, while the success of the competition is solely based on “illegal” and “unfair” subsidies, and not perhaps on such things as shrewed product developments and technical innovation; you’ve pretty much disqualified yourself from rendering a legitimate opinion outside of your self-righteous, and seemingly simplistic world.

  It’s interesting to note that apparently, the WTO did note that repayable launch aid — the raison d’etre of Boeing’s claim — can be an acceptable option for financing aircraft, although they did rule on some “excessive” subsides granted to Airbus for the A380 programme in particular.

  It’s worth noting that the general European view regarding aerospace subsidies, is such that the EU does not deny subsidies for Airbus, but that they are transparent and repayable (in the case of loans), unlike in the US.

  Also, with the latest developments from South Carolina, the subtle and indirect tax breaks for the 787 programme just seem to have been doubled-up; not only screwing their workers but also the state of Washington which had granted the Boeing Company massive giveaways at the expense of the State’s other taxpayers.

  Although I’m highly critical of the world view of libertarians, who perpetrate an ideology where rights are a function of property rather than personhood; here’s nevertheless a link to a 2005 paper from the Competitive Enterprise Institute (CEI); the ultimate libertarian think tank. It’s hardcore and seemingly intellectually honest on the issue of subsidies granted to US companies by the US government, and on how these subsides relate to the matter of international trade issues; which is in stark contrast to the intellectual dishonesty often shown by quite a few of the resident Airbus bashing “contributors” to this blog.

  Boeing vs. Airbus, Clash of the Corporate Welfare Titans.

  http://www.cei.org/pdf/4679.pdf

  Quote: That Boeing is comfortable with direct subsidies in aircraft manufacturing is evident from the fact that its strategic partners in Japan are funding a share of the development of the 787. The Japanese partners are receiving repayable grants and, in addition, other low-interest repayable loans that is coming from the Development Bank of Japan. They will be worth almost $1 billion in total. Boeing’s Japanese partners on the 787 will receive at least $1.4 billion in subsidies, and some of that will not even be repayable. This demonstrates, of course, that the direct support which Boeing and the US Government believe is completely unjustified when adopted in Europe, is acceptable if granted to a major partner working on the 787.

  On the government contracts, the definition of the word “subsidy” is a nuanced question. But one aspect of the federal government’s support for Boeing is unquestionably a subsidy: Export-Import Bank financing.

  The Export-Import Bank of the United States (Ex-Im) is a government agency that loans money or guarantee private loans to foreign buyers — governments or private companies — so that they will buy American goods. These low-interest Ex-Im loans or Ex-Im guaranteed loans shift part of the cost of the purchase from the foreign buyer to the US taxpayer. In effect, this functions as a direct payment from the US taxpayer to the US exporter, with the foreign buyer only a conduit, and then a deptor to Ex-Im.

  Ex-Im is also known as “Boeing’s Bank”, and for good reason. Between 1998 and 2004, Ex-Im issued loans and long-term guarantees for $53 billion of US exports. Just under $28 billion of those deals were Boeing sales. That means that this federal agency exists not just primarily, but mostly, to subsidize Boeing’s overseas aircraft sales.

  The World Trade Organization will encounter all of these subsidies, and likely more, as it sifts its way through the benefits Airbus and Boeing each receive from their respective governments. Which is the worse offender will be difficult to judge, because of the incalculable financial benefit that some of these government favors yield. Considering how heavily subsidized Boeing is, though, one must wonder whether President Bush’s Trade Representative, by complaining about Airbus, is throwing stones from the front porch of a glass house.

• 18. Buster  |  November 2nd, 2009 at 21:04

  

  7. Aurora | November 2nd, 2009 at 14:08

  Yep, you’re spot on. EADS only reason for testing the ARBS on the A330 (let’s not forget it had already undergone extensive testing on the A310 testbed) was because of redneck comments on a blog.

  Delusion is alive and well.

• 19. Falcon  |  November 2nd, 2009 at 21:39

  

  To follow up on Buster’s comment.

  Even better, EADS was so good in predicting what would happen they announced what they were about already during the summer. Not that our friends read that kind of stuff.

• 20. Skeptic  |  November 2nd, 2009 at 21:51

  

  Buster, is a “redneck” similar to a chav?

• 21. don shuper  |  November 2nd, 2009 at 22:07

  

  Geeze - where did i say or infer that BA is clean on any aspect of the tanker issue ?

  1) Note date of my analyis
  2) note in my first post I said .” .Boeing at the last minute twisted the arms of a few SPEEA leaders, and submerged the filing. its a long- sordid- story starting in 2001. . . ”
  3) note that I mentioned the BS by rudy de leon

  Note that I mentioned the ‘lease” game -

  (which at the time in 2001-2 we did not know of the mess rudy and pals were about to make .

  Check out if you want to just how Airbust could offer the tanker lease for 40% less as described by rudy de leon and comments in the washington post.

  extract from minutes of meeting

  . .Mr. DeLeon started with his resume, which included the important fact that he had only been with the Boeing Company for the past six months or so. He continued wit the fact that he was here today to discuss three issues: 1) Air Force 767 tanker program; 2) FSC tax, and 3) the plusses and minuses of a trade filing at this point in time. Mr. DeLeon has a team of 12 looking at the Airbus issue which was commissioned by Phil Condit. Tankers – the KC135’s are approximately 40 years old. The Air Force wanted leases to make it easier to get a new fleet of tankers. This is due to the budget constraints over the next several years. Leasing the tankers allows the money to come from another pocket where money is available. The Air Force wanted 767s because Boeing built almost all the tankers the Air Force ever had. They were also getting lots of support from Congress. Washington Post ran an Airbus story the day before Christmas saying they could build the tankers and for 40% less money . . .

  What we did not fully realize at that time that the McDummy Klan - IDS had in their classical method of hosing uncle had jacked up the price by probably a double digit percent. even so, that would have left Airbus somehow able to cut a further 20 percent?

  that was in 2001-2 - and what equivalent plane were they going to use against the 767.

  BTW- the concept of the lease arrangement came about withing a few weeks of 911- and not from Boeing mis-management - but from my friend Dan Hartley. When BA management found out - they worked overtime to screw it up.

  Look up the King county journal (archived) in march 2004 for a bit of the details. search on hartley, SPEEA,boeing, Mulally

• 22. ikkeman  |  November 2nd, 2009 at 22:07

  

  14. don shuper | November 2nd, 2009 at 18:06
  I’m sorry, I gathered from your first post that it was Boeing that didn’t want the CVD published. I assumed that Boeing had some connection or interest that gave it cause to intervene. my assumption, my bad.

  I do not contest your claim that Airbus benefited from government subsidies that were not even covered by the agreement, let alone what the WTO has to say about them.

  but I still don’t agree with your comparison.
  I must admit I don’t quite follow your math - something I usually don’t have a problem with - But from your sums I surmise you’re basing your claim that Airbus is unfairly benefiting from govt subsidies on the fact that you can pick up an 320 for less than an 738.
  Why you claim an 79t, almost 4000NM ‘97 update of an ‘67 design should costs as much as an 77t, 3600NM ‘88 design is beyond me. Your premise that Airbus must be selling at below costs simply because the average costs of an Airbus is less than the average cost of “comparable” Boeing article is unfounded and undefended without an detailed comparison of the actual effort required to manufacture said a/p - production hours - # of assemblies, subassy’s and parts - # of fasteners - anything like that.

  again - I do agree with your conclusion, I just have serious questions about your method.

  16. Paula K | November 2nd, 2009 at 18:50
  The GAO righted no wrongs - they upheld protests. they didn’t even provide recommendation about the process other than the recommendation to hold funding.

  You do know NG/EADS have no other option than to propose the same platform Boeing received pricing information on?

  The RFP attempts to describe the same overall requirement. Just using new wording/layout doesn’t change the contents of the bids.

  the USAF requirement is unchanged - my argument stands.

  remember - I’m not saying it’s a decisive benefit, but it does help at least a bit. Nor am I saying there’s anything to be done about it - it’s unfair, but so is more in this life.

  17. MPTA-098 | November 2nd, 2009 at 19:59
  you do realize the CVD is from before the 787… repeated delays.
  nice link - so Boeing and Airbus receive roughly similar state support - Shocker.

• 23. USAF Fan  |  November 2nd, 2009 at 22:13

  

  Buster, post 18; you conveniently forget that a working boom on an A310 is not the same as a working boom on an A330.

  I agree, the boom has and continues to undergo testing, but it was only recently that the mated components of the A330/boom combination actually worked.

  And smartass comments from you Falcon dont help - EADS also said they’d deliver 18 A380s this year, that was cut to what, 11 IIRC?

  But as you say “EADS was so good in predicting what would happen they announced what they were about already during the summer.”

  And look how that turned out.

• 24. don shuper  |  November 2nd, 2009 at 22:14

  

  — MPTA-098 | November 2nd, 2009 at 19:59

  Don Shuper said: “I suggest you take a close look at the FACTS instead of your assumptions regarding Boeing Name on the petition.”

  Don, isn’t it typical to blame “the competition” when the home team fumbles inside the 10 yard line, as Boeing evidently has managed to do in the execution of the 787 programme. Losers always have a tendency to blame others for their own failures. It’s not really Airbus’s fault that there’s been a long and steady decline of the Boeing Company. The cause of the company’s current misfortunes are mainly caused by three major factors: - - -

  And that has to do with the current subject just how ?

  GATT92 referred only to commercial aircraft - military by definition were excluded.

  GATT92 did not cover ‘ conversion ” of commercial to military issues

  GATT 92 covered LCA large commercial Aircraft - but never defined just what that met. About the ONLY planes that would not fall under that category would be the piper super cub derivitives

• 25. Paulo M (Johannesburg, RSA)  |  November 2nd, 2009 at 22:23

  

  Fabulous arguments here tonight. Great links.

  As a Boeing supporter, I’ve always respected the initial push by Airbus to do the A330/A340 as they did - together, leveraging as much commonality with/to existing programmes/all Airbus history as was possible. And that possible was maximum. Unfortunately, the did their level best to cock-up the A380 programme.

  Of course, later on, the rules and regulations changed as did the technology - improve. And so the 777 clearly beat the A340. Airbus did its programmes as cheaply as it should have - so the A340 cost nothing. But as we can see from Boeing’s monumental cock-up of the 787, the A330 was given a nice push - and it really isn’t a bad plane at all. So, 777 and A330/A340 programmes where at parity somewhere in the 1000’s ordered last time I checked. Some of these arguments show why the Boeing 777 is more expensive than comparative models, and this is especially the case where the larger 77L/W basically are the market rulers.

  By the way, is it true that the 777 cost 100% more than budget. Everything I’ve read on the 777 says that it was on time, in budget - the world’s first paperless, fully CAD airliner (thus eliminating countless expensive mock-ups), the first with 180min ETOPs clearance at EIS, Boeing’s first fly-by-wire airliner, etc, etc.

  The posts here really are quite WTO-messy for this USAF contract this going to get uglier again. Apart from one comment above on floor beam strengthening for the A330 MRTT - and the resultant CoG shifts - it really is Northrop Grumman that’s cocked-up their duties on their share of this programme - if the refuelling boom doesn’t work.

• 26. Erik Bloodaxe  |  November 2nd, 2009 at 23:04

  

  Ikkeman, Airbus and their sockpuppet NOC are not FORCED to offer anything. They chose to offer the same thing, well then that’s just stupidity on their part, especially considering their first offer was LACKING and did NOT meet the LAST RFP, let alone this new one. In fact, one of the things the GAO found was the Airbus/NOC offer was actually UNAWARDABLE, and the USAF violated procurment law by “overlooking” some things, like ability to refuel all fixed wing aircraft, and the failure (after numerous prompts) to provide a support package.

  Paula, ignore Falcon and MPTA, they are Airbus Fanboi’s their world has but two colors, black and white. Everything Airbus does is solid gold, and anything Boeing does is crap to them. There is zero chance to change their minds, they are both too fixated on Airbusien visions of glory. They even reject when Airbus itself anounces bad news. Airbus uber Alles. Hey bois how you like the latest A380 announcements? 18 to 14, to 13, now maybe 10… yep… spin that one.

• 27. ikkeman  |  November 2nd, 2009 at 23:10

  

  try (re)reading this:

  “Tanker choice in mathematical terms”
  http://www.seattlepi.com/opinion/375048_tanker15.html

• 28. Buster  |  November 2nd, 2009 at 23:30

  

  20. Skeptic | November 2nd, 2009 at 21:51

  Not that similar - Chavs don’t marry their sisters.

• 29. Buster  |  November 2nd, 2009 at 23:32

  

  23. USAF Fan | November 2nd, 2009 at 22:13

  I didn’t forget anything. An ARBS is an ARBS regardless of whether it’s attached to an A310 or an A330.

  The ARBS had also passed thousands of pounds of fuel in dozens of ground tests on the A330 before the test in question.

• 30. don shuper  |  November 2nd, 2009 at 23:42

  

  Uhh MPTA ? …It’s worth noting that the general European view regarding aerospace subsidies, is such that the EU does not deny subsidies for Airbus, but that they are transparent and repayable (in the case of loans), unlike in the US. …..

  Suggest you first take the time to read GATT92 on that issue

  Those so called loans are of tghe kind YOU could never get.

  They are structured such that IF specific sales/delivery targets are NOT met within X years, the loan gets forgiven .

  they are at a VERY good rate besides.

  Thus, if one examines the targets which were predicted - versus the targets which were met, one might notice that rarely have all the loans beern paid back.

  There is no question that the A380 ( A 3 piggy ) loans will never meet the targets. Thus it is easy to game the system. the reason is that for the EU- the issue is NOT profit - but JOBS JOBS JOBS PERIOD.

  Airbust has used US NASA.NACA winglets for example, research which was funded by then U.S taxpayer. EADS and forerunners have used the Whitcomb area rule for supersonic flight - funded by U.S taxpayers. etc

  As to BA subsidies, please explain or show where BA has gotten a forgiveable loan for their commercial products.

  And please take the time to READ ALL of my analysis in context of the dates and time it was made.

  http://home.att.net/~dshuper/CVDanalysisRDX.pdf

  and the rest of the info available at

  http://home.att.net/~dshuper/ABOUTCVD.html

  http://home.att.net/~dshuper/CVDPOSIT.html

  http://home.att.net/~dshuper/CVDMOTION.html

  http://home.att.net/~dshuper/BLANKCVD.html

  thank you

• 31. don shuper  |  November 2nd, 2009 at 23:47

  

  8. MPTA-098 | November 2nd, 2009 at 14:27

  Don, did you ever read that cover story in BusinessWeek from MAY 20, 2002. It really puts things into perspective regarding Boeing’s current debacle with the 787, which btw, was launched by an unrealistic overconfidence in change management preparedness, and which now may have resulted in a catastrophic setback to the the company’s capabilities in new product development.

  Actually I know a lot more about that than most will believe . . . ;-PP no need to go into that here- since it is off subject

• 32. USAF Fan  |  November 3rd, 2009 at 05:04

  

  Buster

  Until late Oct 09, the A330 still hadnt passed gas in the air, so your statement is not an accurate one.

• 33. NH  |  November 3rd, 2009 at 05:15

  

  So, looking forward, what will happen with this competition? It’s a kind of “damned if you do damned if you don’t” situation.

  This cost data debate adds an unwelcome dimension. If the 767 wins, its feasible that NG will protest the win on the basis of the cost data sharing from the previous bid. If the GAO decides the data did not give an advantage, then win stands, but if they disagree, we are back to square one, again. We don’t know exactly what the cost data was, and we don’t know if it actually provided an advantage or not, but if required, the GAO could make a call one way or the other. Yes, it was in the rules to share the data, but that doesn’t solve the big picture necessarily…

  That is all on top of the ever present political issues (WTO, buy-American, WA vs AL, and the rest).

  Tensions are high and it seems that both camps are becoming ever more polarized. It will be a rough ride with potentially no real end in sight under the current format of this selection process.

• 34. don shuper  |  November 3rd, 2009 at 05:29

  

  awww ikemann….. - But from your sums I surmise you’re basing your claim that Airbus is unfairly benefiting from govt subsidies on the fact that you can pick up an 320 for less than an 738.
  Why you claim an 79t, almost 4000NM ‘97 update of an ‘67 design should costs as much as an 77t, 3600NM ‘88 design is beyond me. Your premise that Airbus must be selling at below costs simply because the average costs of an Airbus is less than the average cost of “comparable” Boeing article is unfounded and undefended without an detailed comparison of the actual effort required to manufacture said a/p - production hours - # of assemblies, subassy’s and parts - # of fasteners - anything like that. . .

  ++++

  Please oh please read all the pages in the CVD file I posted. My comments were NOT based on the simple fact of lower price. I compared the productivity , wages, and other factors, including that about 40 percent of said airbutt ( by $$ or quantity ? ) had parts made in U.S.A ( Airbutt claims not mine ).

  As to the lease arrangements consider that I had many discussions on the issue with the person who proposed it- and why. he was very familiar with the concepts of several decades ago laid down by thyen sec defense David packard. he was more than on a first name basis with Senator Stevens who called him a few days after 911. He was at the Gatt92 meetings, and had been working the issue of subsidy for years.

  “Hartley, a Manhattan, Kan., native who retired as a navigator from the U.S. Air Force, joined Boeing in 1961. He was laid off for a time at least once, in 1971, and recalled to active duty in the Air Force twice.

  He joked that he was “the most-fired guy at Boeing,” said Rick Lentz, who worked with Hartley in Flight Test Operations.

  Hartley dove into issues and made himself an expert in such complicated matters as international trade and tariff law. Lentz said Hartley followed the careers of politicians and bureaucrats and established working relationships with them.

  President Richard Nixon appointed Hartley to a position as citizen adviser to Secretary of Defense David Packard, a role he didn’t resign from until the Reagan administration.

  “When I first met Dan, I couldn’t believe he knew all these people,” Lentz said. “But he’d show me e-mails he sent and received from these guys and I realized `By golly, he really knows about these things.”’

  Indeed, Hartley may have planted the seeds of the idea that the Air Force might lease Boeing 767s for use as aerial refueling tankers if the service couldn’t buy them. Lentz said he thinks that subject came up when Alaska Senator Ted Stevens called Hartley after the Sept. 11, 2001, terrorist attacks. . .

  http://web.archive.org/web/20040401111615/http://www.kingcountyjournal.com/sited/story/html/159134

  “`Dan really was one of my heroes,” Mulally said after learning of Hartley’s death. He had visited with the engineer in his hospital room earlier this month.

  “I’ve known him most of my career at Boeing,” the company’s top executive in the Northwest said. “He was an engineer’s engineer. He loved Boeing and he loved commercial airplanes. … He was a Renaissance man, a student of global trade issues, global competitiveness … His ideas were solicited by congressmen and senators and government leaders.”

  +++

  BTW there is really no reason that same CVD petition could not now be filed.

  In early 2002 - BA was afraid if we filed it would upset their EU customers … and BA ( rudy de leon ) “arm twisted “the SPEEA executive director ( long story not appropriate here ) to sandbag the petition at the last minute

  IMO and belief one reason was that had we filed, then one branch of the government would have had access to the true cost of a basic 767 airframe - and another branch ( pentagon ) could have discovered just how much of an inflated price Rudy and Pals were using for the tanker lease. And that was just part of the deal . .

• 35. ikkeman  |  November 3rd, 2009 at 08:24

  

  26. Erik Bloodaxe | November 2nd, 2009 at 23:04
  they are “forced” to offer the same by reality - not anyone’s arm twisting.
  They have only one product that could fit the DRFP - as has Boeing, based on the DRFP the KC-777 is not a contender (though it would make a superb tanker)

  and wouldn’t that claim make the airbus fanboi world gold and brown rather than black and white - though of course there’s white gold and sometimes after I’ve eaten something disagreeable…

  30. don shuper | November 2nd, 2009 at 23:42
  and supersonic was first defined by… Ernst Mach - not an American.
  But you’re right, most of the research data produced by NASA/NACA is open to the public - this is not part of any dispute. The research data funded by NASA/NACA not open to the public is part of the debate.
  and what would you call the 3 billion in Boeing specific tax breaks? Why claim compensation for the funding of the one, when the other is just as heavily and illegally funded?

  32. USAF Fan | November 3rd, 2009 at 05:04
  A330MRTT had passed gas - just not through the ARBS (it has hose/drogue’s as well you know). The ARBS had also passed gas in the air AND the ARBS passed gas while connected to an 330 - just not while in the air AND connected to the 330.
  BTW - If the design/build of an boom is such an challenge, shouldn’t Boeing really start doing something about it - as I understand, their current boom (on the japan versions) does not meet the mandatory requirements of the DRFP. An automatic fail, according to the USAF.

  33. NH | November 3rd, 2009 at 05:15
  I agree - don’t you just love an discussion with 2 clear sides.

  34. don shuper | November 3rd, 2009 at 05:29
  I’m sorry but I did check your complete pdf. it only has price data and such.
  you compared productivity, wages and such - OK, did you find out how many man hours it takes to get a typical A320 from first metal cut to delivery, and the same for 737. if not - wouldn’t the 10% below cost you claim fall within you accuracy and be statistically insignificant. the 25% just cannot be true - even by your own claims, Airbus did not post a loss in these years, so that would mean the rest of their production would have to be sold at 5-12% above cost(if 30% of their total output went to the US), or 15 to 37% more than a US costumer would pay. That’s over and above any standard discount a customer could expect in aerospace. Why weren’t all airbuses bought up by US holding companies or lease firms. you think and extra 37% off the price wouldn’t move Emirates to lease all their a/p from ILFC?
  On the 40% - let’s assume the most positive explanation and the marketing department didn’t just get the figure out of thin air - than it means that the maximum US content in any Airbus (must you use derogatory versions of their name) by whatever measure you can imagine is 40%.
  of course, there’s always good old guesstimation, also known as spin.

• 36. JustSomeDude  |  November 3rd, 2009 at 10:48

  

  Split the deal already, so then we can get going.

  After all, there is still all of NATO and other countries in the world, some will want a Boeing some will want an Airbus…

  …the USAF is not the only game in town.

• 37. ikkeman  |  November 3rd, 2009 at 11:59

  

  36. JustSomeDude | November 3rd, 2009 at 10:48
  at 35BUSD for just 1/3 or 1/2 of the requirement - it might as well be.

• 38. Leelaw  |  November 3rd, 2009 at 12:36

  

  “…is it true that the 777 cost 100% more than budget…”

  AFAIK, the only place you’ll find that high an estimate of the cost overrun on the 777 development program is in the 2003 Business Week article cited earlier. BCA’s earnings performance circa 2003-2007 suggests it’s overblown. However, the most strident “Airbusiers” consider it as dispositive proof that the 777 is a commercial failure.

• 39. don shuper  |  November 3rd, 2009 at 15:26

  

  re . . . and what would you call the 3 billion in Boeing specific tax breaks? Why claim compensation for the funding of the one, when the other is just as heavily and illegally funded? . .

  ++

  try reading GATT as to source of subsidies- e.g ( paraphrased ) “loans at preferential rates by governments ” - and which can be forgiven if targets are not met.

  As to airbus not claiming any profits for certain years - check again and see if you can find ANY claim by airbus prior to about 2003-4 regarding profits OR LOSS

  also read the format for the CVD petition
  http://home.att.net/~dshuper/BLANKCVD.html

  as to what/where the numbers were supporting. Obviously there was more to the petition than just the numbers background I provided

  And since the draft WTO findings at least agreed that there was some illegal or out of rule subsidies, even If I was off by 10 percent - I (we) were still on the right track - and mthat was 8 years ago.

  And yes - for those who wonder- BA in about 2003 or 2004 did get a copy AFIK.

• 40. MPTA-098  |  November 3rd, 2009 at 15:35

  

  Don, just by taking a glance at the second sentence of your first post in this thread, indicate that you’re not really interested in intellectual discourse, that you are “right” and they (”Airbutt”) are “wrong”, and that’s all there is to it. Using the word “Airbutt” pretty much disqualifies you from rendering a legitimate opinion. Also, it doesn’t help your (technical) credibility that you seem to be confusing the A330-200 with the 767 “like-sized” A300/A310.

  Original quote from Don Shuper: “RE the A330 and subsidy. One has to wonder ( not really ) why Airbutt did not try to match the 767 tanker with a version of the LIKE SIZED A330-200, instead of the 777 ‘ equivalent” A330/340 ??.

  Now, why should I waste my time going through all of your “FACTS”, when apart from that second sentence, your follow up arguments were seemingly so clueless regarding the crux of the matter on why Airbus (in the time period you mentioned) could produce similar sized LCAs at about 10-20 percent less than your employer (covered in my first post). However, thanks to the efforts of ikkeman, one could perhaps say that your analysis doesn’t really pass the mustard for high scolarship and accuracy?

  So, what has the 787 debacle to do with the current “subject” (as defined by you)? It’s got quite a lot to do with it, actually.

  First, please do note that I originally linked the 787 with that cover story in BusinessWeek from MAY 20, 2002 (essentially the crux of my initial argument). As I said, it really puts things into perspective regarding Boeing’s current debacle with the 787 which was launched by an unrealistic overconfidence in change management preparedness, or somewhat similar to what transpired following the merger with MacDac. Also, the 787-8 was not only launched as a 767 “replacement”, but also designed to compete with the increasingly successful A330-200. However, at the turn of the century, Boeing apparently wasn’t that “concerned” about the long term viability of the 767 line as the company seemed to be pretty confident and cocky that the Air Force would lease 767-based tankers on their terms. However, the tanker lease plan collapsed around the same time the 787 was officially launched, putting further pressure on the new composite dreamliner to deliver dividends ASAP.

  One could argue that Boeing’s top management’s desicion to launch the programme was pretty close to throwing a last desperate Hail Mary pass, and that they knew, or should have known, that their design for a first generation composite fuselage in a civilian airliner, was essentially compromised and rushed. Combined with the other reasons that I’ve mentioned in my two earlier posts in this thread, one could potentially infer that the 787 is not only the riskiest business desicion ever in the LCA business, but was undertaken on the backdrop of the 1997 production debacle and the downturn post nine-eleven, and that consequently, Airbus had to be “fought” by “all means”. So, the United States therefore terminated the 1992 Agreement in October 2004, just 7 months after the 787 programme had officially been launched. This was indeed no coincidence. That the following three years would see the paper dreamliner sell like hotcakes and helping the stock value to shoot up by more than 100 percent, even before the vehicle was “rolled out”, was apparently not part of the game plan, but it somehow “reinforced” Boeing’s top management to prematurely conclude that they somehow had been “vindicated”.

  -

  http://www.news.indianaerodef.com/2006/09/18/boeing-bets-big-on-mid-size-jets/

  Quote: Top executives at US aerospace giant Boeing say the latest developments in the industry have vindicated their strategy against European rival Airbus. Boeing, which has been betting heavily on its new mid-size, long-range 787 ‘Dreamliner’ jet, appears poised to catch or overtake its European counterpart in the highly competitive civil aviation marketplace.

  -

  As for the 1992 agreement, it was about the balancing of equity between two completely different systems of government support, balancing Airbus launch aid against the benefit Boeing accrues from (i) research and development funded by NASA, the DoD and US Defense Advanced Research Projects Agency (DARPA), and (ii) massive benefits accruing to Boeing’s LCA business from overpriced DoD contracts (i.e. capital infusion to the entire company), and sales of subsequently converted civil airplanes to DoD at highly inflated prices, and (iii) the massive subtle and indirect tax breaks from Washington State, Kansas (etc.), and which now, with the latest developments from South Carolina, has just about doubled-up the tax-breaks for the 787 programme.

  Don Shuper: Those so called loans are of tghe kind YOU could never get. They are structured such that IF specific sales/delivery targets are NOT met within X years, the loan gets forgiven . they are at a VERY good rate besides. Thus, if one examines the targets which were predicted - versus the targets which were met, one might notice that rarely have all the loans beern paid back.

  Did you say rarely?

  The 1992 agreement actually put a ceiling on the amount of direct government support (33 percent of the total development costs) for new aircraft programmes; and interestingly, of only eight of Airbus’ aircraft launched since 1990 (new products as well as derivatives), only three programs (A332, A345/6, A380) were launched with government investments

  Its known that the A300 and A310 Reimbursable Launch Investment (RLI) repayment was payable per aircraft delivered, with balance payable on the programmes’ closure, but little else is known about the detailed terms of the RLI on the programmes launched before the 1992 agreement came into effect. While the A320 and A330/340 were all launched before the 1992 agreement, there is a significant payment returning to the respective governments for those projects, while the programmes started after the 1992 agreement came into effect, are not yet mature enough to show royalty profits (for the UK), except perhaps for the A330-200.

  Here’s some further details from the UK government:

  http://www.publications.parliament.uk/pa/cm200405/cmselect/cmtrdind/151/15107.htm

  — Restriction of launch aid to 33 percent of total development cost, with 25 percent to be repaid at the cost of government borrowing and the remaining eight percent to be repaid at the cost of government borrowing plus one percent;

  — A maximum reimbursement period of 17 years, and 20 percent of the repayments to be made over the first 40 percent of aircraft deliveries (and 70 percent over the first 85 percent);

  — An overall limit per annum on indirect support equivalent to three percent of the civil aircraft industry’s annual commercial turnover in the country concerned and four percent of the annual commercial turnover of any one firm; and

  — Controls on general purpose loans and sales inducements.[174]

  Hmm, 17 years isn’t really that long, is it? Quite a few banks have been more than willing to give me a 30 year loan for a house, or a 15 year unsecured loan for home improvements.

  It looks like the UK made a profit on the A320 loans, they made no investment on the A300/310 programme, and they expect to make a profit on the A330-340.

  http://www.publications.parliament.uk/cgi-bin/newhtml_hl?DB=semukparl&STEMMER=en&WORDS=airbu%20launch%20invest%20repay&ALL=Airbus%20launch%20investment%20repayments&ANY=&PHRASE=&CATEGORIES=&SIMPLE=&SPEAKER=&COLOUR=red&STYLE=s&ANCHOR=muscat_highlighter_first_match&URL=/pa/cm200405/cmselect/cmtrdind/151/5011109.htm#muscat_highlighter_first_match

  -

  A320: RLI paid back to the governments of France, Germany and Spain while the UK Tresury continues to receive royalties on every copy sold.

  A330/A340: It looks like the RLI have been paid back. (but not for the A345/A346).

  Now, I would agree that if a program funded under the 1992 agreement were to fail commercially, 33 percent of the initial programme investment would be written of by the respective governments, but Airbus would still be held accountable for the remaining 67 percent by the other non-governmental investors (including Airbus itself). So, in theory, the company could still go bust, even though one can be 99 percent certain that EADS/Airbus would be bailed out by France, Germany, Spain and the UK.

  Interestingly, were Boeing to fail completely on the 787, the US government would bankroll the company, just as they did with Lockheed when that company was busy running up a USD 2 billion (in then dollars) in cost overruns (just as a h’or deuvre) on the C-5A, the first real procurement scandal in US defense-industry history. At the same time, Lockeed was also building the L-1011, which was plagued from EIS by equipment problems. In addition, Lockheed apparently bribed the Japanese prime minister to buy the Tristar for ANA. What made these problems truly noteworthy, though, was that Lockheed only survived back then thanks to a $250 million (approximately USD 1.33B in 2008 dollars) government bailout.

• 41. MPTA-098  |  November 3rd, 2009 at 16:09

  

  On a further note, it’s worth mentioning that governments throughout the world generally support economically strategic industries. Up until last year, it seems, the United States would not readily admit that they did this as well. Now we live in a “changed” world due to what primarily has transpired in the US over the last 12+ months, and consequnetly therefore, in the future US governmental officials will surely have some nerve if they dare to criticise other countries’ continuation of their support for strategic industries.

  So, to recap, there was never a time when “strategic technology” wasn’t supported by public funding either in the US, or the rest of the world. Due to heavy government subsidies through its military sector and partly through annexing German technology and scientists, the US appeared after WW II as an almost monopolized world leader with its Boeing, Lockheed and Douglas aircraft companies. The global civil aircraft market reflected this situation back then: The costs were simply passed on to the “buyers”, and with the accompanying disadvantages for the aircraft-buying airlines and ultimately their passengers.

  Without an equally massive support by European governments for “Airbus Industries” this unbalanced market-situation would have continued indefinitely. Therefore it was back then also in the interest of the world community to counterbalance this, competition wise, unhealthy status quo, with the “pushed” launch of an alternative civil aircraft producer.

  Unless the US government doesn’t want to stop funnelling money into the R&D coffers of Boeing IDS***, the status quo will remain, although in a decade hence, we just might see a “government sponsored” and successful Chinese competitor arise on the horizon.

• 42. Falcon  |  November 3rd, 2009 at 16:35

  

  @USAF Fan,
  I notice you attack me instead of the published fact I used. Then you through in a blanket statement for good measure ignoring that it is completely unrelated.

  The issue is that Saj claims Airbus scheduled the wet contact to silence him criticizing them, with Aurora clapping hands on the sideline..

  The question then is – Since the boom testing was scheduled for starting in September and leading up to wet contacts a few weeks later and this was announced well before Saj “called Airbus out” could this be a reaction to his post?

  There is no doubt that Airbus is having serious problems with the A380 and what you said is just one way it shows. However, it is completely different from scheduling a wet contact to silence Saj.

  @Erik Bloodaxe,
  Where have I said Boeing is crap? Where have I stated everything Airbus does is gold? Where have I rejected bad news announced by Airbus?

  My interest in the aviation industry is from the amazing logistics that goes in to keeping the entire supply chain working, all the way from how to create the right products to maintaining them through scrapping of individual frames to entire lines. This is an interest that started when I was in the computer distribution business and made me a member of the i2 design team. Not sure if you’re familiar with i2’s products but they are used by most large manufacturers including Boeing.

  I honestly have no interest in the brand of any product. I want to understand how things got to where they are and what can be done to make the future better by understanding that. I’m implementing management systems for a living and thus deal with similar problems on a daily basis. Right now I’m working on a complete rework on our production model at the same time as I’m installing the current model in factories in Asia, Africa, Caribbean and USA.

  Based on my experience I see that very few people posting here are interested in the better of aviation. They fight for their preferred vendor with no worries about facts or they just piss on everything. Having often been in the situation of having to fix the problems created by others and during that process having to deal with the ignorance of people whose goals are not related to the best of the companies and people involved I have very little tolerance for those kind of comments. Most of what you post is nothing but crap and that is what I’m calling you and your ignorant pears out on.

  Try to explain it away by calling me a fanboi, it just shows your bigotry.

• 43. Buster  |  November 3rd, 2009 at 17:29

  

  32. USAF Fan | November 3rd, 2009 at 05:04

  My statements are entirely accurate.

  ARBS passed fuel in the air on the A310 testbed, now the A330MRTT.

  ARBS on A330MRTT had passed fuel on the ground before it passed fuel in the air.

  An ARBS is an ARBS - it doesn’t matter if it’s hanging off an A310, an A330 or even a 767.

  Try getting over it. The ARBS works, Boeing’s Gen VI boom still only exists on paper.

• 44. Falcon  |  November 3rd, 2009 at 22:03

  

  There is a lot of people calling for Airbus to be excluded or carry a severe penalty because of the preliminary WTO result. WTO has a well established process for dispute resolution and all member states have agreed on following it. Essentially the process is that a member files a complaint against someone and it then first goes to consultations, to a panel, through reports and appeals to implementation of measures to bring the faulty party in compliance. Not unless the implementation fails can the member state who filed the complaint start to “compensate” and even then they have to start by negotiating the compensation with the other party and only if that fails will WTO establish compensation by retaliation.
  Members have agreed to not retaliate in any way before they have reached that state of the process. Since USA is a full member they too much follow these rules.

  Now we have a lot of people calling for USA to break WTO rules and use WTO rules as justification.

  There is an old saying that two wrongs do not make a right. Can the people who are calling for this please justify it. I know you rarely explain and much less justify your positions but this is the time to step up. I challenge you to put some though in to it., can you?

  http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp2_e.htm

• 45. don shuper  |  November 3rd, 2009 at 22:06

  

  40. MPTA-098  |  November 3rd, 2009 at 15:35

  As for the 1992 agreement, it was about the balancing of equity between two completely different systems of government support, balancing Airbus launch aid against the benefit Boeing accrues from (i) research and development funded by NASA, the DoD and US Defense Advanced Research Projects Agency (DARPA), and (ii) massive benefits accruing to Boeing’s LCA business from overpriced DoD contracts (i.e. capital infusion to the entire company), and sales of subsequently converted civil airplanes to DoD at highly inflated prices, and (iii) the massive subtle and indirect tax breaks from Washington State, Kansas (etc.), and which now, with the latest developments from South Carolina, has just about doubled-up the tax-breaks for the 787 programme.
  ======

  Uhhh lets not forget that EADS military side is also a major defense ( defence) contractor who also gets bucu help from various EU countries.

  And military planes ( and related ? ) were specifically excluded from GATT92

  While everyone knows/knew that over the years there are a relatively few ‘ commercial ‘ aircraft/helicopters converted to military useage, the number and cost issues was not really an issue.

  There is no question that BA management fouled up the tanker deal from day one regarding the lease game. However- at that time - right after 911- the issue was JOBS- and keeping the 767 line open

  Of course NOW- the issue is ( for different reasons ) still JOBS - and the best use of taxpayer dollars.

  After the first fieasco - as the sordid facts came out re Dryun and friends, and having little use for Rudy deLeon, AND looking ahead at the eventual replacement of the KC10/11 tankers, I have suggested the best solution would be to start both sizes. BOTH sizes are needed. Most do not realize that it will take AT least a decade at planned rates to replace the old KC fleet with roughly comparable planes. The Airbus/EADS tankeer would appear to be a good replacement for the Kc10/11 fleet, and building it in the U.S would be tolerable and maybe even advantageous. The biggest problem with that solution is money and the budgeting process.

• 46. boeing investor  |  November 3rd, 2009 at 23:16

  

  Depending on the final RFP, the Boeing Gen 5 boom will do the job just fine Buster.

  I dont think we should center the focus on booms, its about meeting the 370~ requirements of the US Air Force. Thats the real challenge.

• 47. keesje  |  November 4th, 2009 at 00:35

  

  I hope Boeing can develop their KC767T boom flawless and fast. Maybe it would be more realistic to focus on that one now the KC30 boom works.

• 48. ikkeman  |  November 4th, 2009 at 10:48

  

  40. MPTA-098 | November 3rd, 2009 at 15:35
  thank you for the compliment, But I don’t think the fact that I don’t agree with Don prooves any inadequacy in his work. Only that I don’t agree with his train of thought, and that the data I reviewed so far doesn’t convince me otherwise.

  41. MPTA-098 | November 3rd, 2009 at 16:09
  it is also interesting to note that govts around the world have hard reciprocal requirments in their military contracts - something I think the USAF should look into to get the process more acceptable. (minimum US content - minimum taxes payed from program payments in the US (paycheck taxes, profit taxes…))

  45. don shuper | November 3rd, 2009 at 22:06
  what about the 330 replacing the 135 and an 777 to replace the -10s - keep more valuable, high tech jobs goeing in the US by KC-777 engineering and allow airbus some low value-adding activities by building KC-330 in the US (would be required in my proposal). B could then, at a later date, have the A factory build some sub assy’s for future contracts and completely avoid this problem.
  Spirit (used to be Boeing direct) is doing it (buidling for Airbus), why not the other way around?

  46. boeing investor | November 3rd, 2009 at 23:16
  but based on the DFRP, Boeing Gen V boom will not do the job? interesting.
  I think the final RFP will have fewer “mandatory” requirements and more trade space requirments. Have the toilet suction pressure at the same importance as the boom operating pressure seems ludricus (both in the 373 mandatory requirements)

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