Airbus crackup benefits Boeing - Air France Splits Order

The Wichita Business Journal reports that Air France-KLM Group is splitting a $7.2 billion for new aircraft between Airbus and Boeing, with Boeing receiving the lion's share. The Airbus order is only worth $2.8 billion. This is enormously significant because of the French government's strategic interest in Airbus. Within the European model of developing "national champion" corporations that operate a significant share of their business for the benefit of their home country at the expense of higher profits, the move to order $4.4 billion worth of aircraft from Boeing reflects a growing realization that the troubles that have plagued the introduction of the Airbus A380 cannot be allowed to spread so far as to permanently damage the rest of French industry.

Boeing is not without its own difficulties in introducing its own "Dreamliner" aircraft, but the problems are clearly several orders of magnitude below Airbus's own.

It might be expected that Boeing would be gloating about its competitive success against Airbus, but company executives have been warning that the companies revenues could take a hit if the United States tries to realize a "peace dividend" following a pullout from Iraq. One executive even went so far as to speculate that as many as five major competitors could develop from countries like Brazil and India with the possibility of a Chinese corporation that could dominate the industry. While today this ranks as mere speculation, the undeniable truth is that the majority of the growth in the aircraft industry over the past few years has been in Asia. The development of a domestic aircraft manufacturer with government backing in China could cut into Boeing's long-term prospects.

Nonetheless, Boeing still intends to engage their Asian competitors - as if any other alternative would make any sense at this point.