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http://www.thehindubusinessline.com/industry-and-economy/article3700023.eceThe 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.
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