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The Greatest Competition in Business

Book Review – Boeing versus Airbus by John Newhouse

John Newhouse

Price:    USD 26.95  CAD 34.95 

Pages:   254

Reviewed by Archie D’Souza

Books on Aviation, especially the aerospace industry, are a rarity and ones written in an exciting Robert Ludlum or Dan Brown style are even scarcer.  John Newhouse in Boeing versus Airbus provides the reader with just that kind of un-put-down-able excitement, from cover-to-cover.

John Newhouse covered foreign policy for the New Yorker through the 1980s and early 1990s.  Among his assignments are:

• Assistant Director, US Arms Control and Disarmament Agency
• Senior Policy Advisor for European Affairs in the US State Department

Both these were under President Clinton.

Before Airbus came into existence, Boeing was by far the largest supplier of large commercial aircraft (LCAs).  For long it’s been USA’s most successful and admired corporation.  It is also its largest exporter.  Up to the early eighties, “four companies divided the turbulent business of making and selling passenger airplanes.  One of them, the Boeing Company was dominant.”  In a short span of time the two other big American players, Lockheed Aircraft Corporation and the McDonnell Douglas Corporation, merged and the merged entity was later bought by the Chicago headquartered Boeing.  Then its headquarters was at Seattle, where Boeing’s aircraft plant – the largest aircraft factory in the World – is situated, is in the US eastern state of Washington.

By the 1990s, Airbus became the number one player only to lose its place to Boeing in 2006.  John Newhouse’s Boeing versus Airbus – the inside story of the greatest international competition in business – traces the history and politics of rivalries between these two players.  Accusations and counter accusations, disputes taken to the WTO, government intervention and the political strategies that go into aircraft purchases are all put together in a plot that makes it look like a Geoffrey Archer or Sydney Sheldon thriller.

Airbus’s unique style of ownership and management together with Boeing’s initial arrogance, the main cause for it losing its numero uno position, are very vividly dealt with.  How did Airbus lose its first place and Boeing regain it?  Read the book to know.

There is a chapter that deals with the follies and hypocrisies (Chapter III – Folly and Hypocrisy) which actually shows the extent of government involvement in the “free market economy” business.  The two companies often entered agreements that would make OPEC ashamed.  Reneging on these was a very regular practice though.

There came a series of incidents that include the 11/9/2001 (9/11 to the Americans) bombings, the SARS epidemic and rising oil prices that saw a decline in air travel and increase in airfreight rates.  A great deal of space has been devoted to these factors as well as how airlines adjusted or collapsed once deregulation came into being?  Deregulation also saw changes in the way aircraft were purchased and configured.

There is also a lesson in finance and accounting where he talks about the advantages of leasing an aircraft as opposed to owning one.  This practice, viz. leasing, which gained tremendous importance in devoted to the Aircraft Leasing Industry.  Two companies dominate here, the International Lease Finance Corporation (ILFC) and GE Commercial Aviation Services.  Newhouse dwells at length on the genesis of these companies and their contrasting styles of management and doing business.  Again lessons in management for all.

From reports one has been reading in newspapers & periodicals and the audiovisual media one would think that the only story of aircraft rivalries was between the A380 and B787, the Dream-liner – both different types of aircraft catering to different segments.  However, long before this rivalry came into being there were rivalries between the B737 & A320, the A350 & B777, and many more.  The A380 should actually be compared to the B747 and not the B787, which still has no peer.  But such was the intensity of competition at that time, as it is now, that in every announcement made one tried to outdo the other.

No review is complete without an excerpt from the book.  This is from Chapter IV Market Share – the Airlines’ Enemy.  This is about BA’s aborted attempt to buy a stake in USAir, following a veto by President George HW Bush after intense lobbying by the Fat Four – the Big Three, consisting of American, United and Delta plus Fedex, the fourth.

“Their case, a political potent one as it turned out, was that allowing BA to absorb USAir would lead to the creation of a preeminent domestic carrier, one whose global reach would give it heavy and unique advantages.  The issue for the administration of President George HW Bush was whether USAir might have to join the lengthening list of airline fatalities or be allowed to merge with BA and thereby threaten the wellbeing of the bid three, the backbone of America’s airline industry.  Where did the consumer’s interest lie?  Where did national interest lie?”

Boeing versus Airbus is a must-read for every aviation buff.  For students and connoisseurs of economics and management this is a great case study in monopolistic competition and oligopoly.  I’ve written elsewhere that the Airbus experience can be a great learning for the BRICS aerospace industry.  I do wish someone with the capacity to invest is reading and will act on the same.