The USITC, an independent, nonpartisan, factfinding federal agency, recently concluded the investigation for the Ways and Means Committee of the U.S. House of Representatives. The report examines structural changes in the global LCA industry and market during 1992-97 that have affected the competitive position of the U.S. industry, including the Boeing-McDonnell Douglas merger; the restructuring of Airbus Industrie, G.I.E.; the emergence of Russian producers; the possibility of Asian parts suppliers forming joint ventures and consortia to manufacture complete airframes; the emergence of markets for regional and jumbo jets; and issues involving Open Skies and free flight systems. Highlights of the report follow.
-- Boeing acquired McDonnell Douglas with the reported intent to soften the cyclical fluctuations of the LCA business and bolster Boeing's position in the shrinking defense industry. Boeing may gain greater financial stability and cash flow; a quick-to-market entry in the 100-seat market niche; and valuable LCA engineering, product development, and production expertise from McDonnell Douglas staff. Boeing faces significant management challenges, however, as it works to merge the different corporate policies and cultures of the two companies.
-- The restructuring to a single corporate entity should allow Airbus to become a more formidable, profit-oriented competitor. The consolidation of decision making in a single management structure will likely create a more responsive, efficient corporate organization. Internal conflicts and self-imposed restrictions on operating flexibility, however, may hinder achievement of its full potential.
-- Boeing and Airbus have sacrificed historical price and profit levels to maintain or increase market share. At the same time, each are aggressively pursuing internal cost-saving measures to lower their production costs. Boeing's achievement of maximum operating potential depends on its ability to speed post-merger integrations and stabilize LCA manufacturing before a strengthened Airbus emerges from its restructuring.
-- The Russian LCA industry has devoted all available resources during the last 10 years to develop new LCA capable of competing in the global market with aircraft from Boeing and Airbus. Principally because of a lack of capital and a corporate structure that is not market oriented, Russian producers are not likely to be in a position to secure global market share in the next 10 years.
-- In recent years, China, Korea, Indonesia, and Singapore have become increasingly involved in aircraft-related programs through international collaboration and indigenous aerospace projects. However, due to the absence of a comprehensive technological base for aircraft development, an overall lack of experience in all phases of an aircraft manufacturing program, and lack of sufficient international and regional cooperation, Asian nations appear unlikely to produce an internationally competitive LCA for at least 15-20 years.
-- Increased price competition and resulting cost pressures within the airline industry have demonstrated a need for an airliner designed specifically for the 100-seat market. Of the prospective entrants, Boeing is currently the manufacturer closest to introducing an aircraft specifically designed as a 100-seater.
-- In the short to medium term, it is unlikely that an Airbus product will threaten Boeing's dominance in the over 400-seat market. Airbus plans to develop the A3XX, an entirely new ultra-high capacity aircraft, to address the projected market above that occupied by Boeing's current 747. Although the size of that market may ultimately be somewhat smaller than early projections indicated, Airbus needs a complete family of aircraft to enhance its competitive position vis-a-vis Boeing.
The Changing Structure of the Global Large Civil Aircraft Industry and Market: Implications for the Competitiveness of the U.S. Industry (Investigation No. 332-384) USITC Publication 3143, November 1998) will be available on the ITC's Internet site at www.usitc.gov. A printed copy of the report may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW, Washington, DC 20436. Requests may also by made by fax to 202-205-2104.