Airbus versus Boeing: When is Intervention Not Intervention Essay

Where do you stand? Do you think the EU subsidies and soft loans to Airbus are fair? Why or why not? What advantages does Airbus gain from free financial support from the EU governments? Are complaints about the EU government intervention fair in light of Europe’s long history of democratic socialism? I think that the subsidies and soft loans provided to Airbus are unfair and provide them with an unfair competitive advantage. Airbus is given aid from Britain, Spain, France, Germany, and the European Union.

These countries’ governments are responsible not only for providing the funding that created Airbus, but also for funding its ongoing success. In fact, government aid is responsible for the creation of all their aircraft models. With this kind of support, it is nearly impossible for Airbus to fail. I feel as if these European governments have gone too far in helping Airbus succeed. It’s one thing to help a company start up, but continually infusing money into a company guaranteeing its success provides unfair advantages over other companies, such as Boeing, that have been able to sustain without such drastic help.

The extensive financial assistance has allowed Airbus to quickly gain market share and outsell Boeing. Thus, Airbus has been able to grow and profit while Boeing has had no other choice but to sit back and watch Airbus take over the commercial aircraft industry—the industry Boeing had led for decades. Airbus gains substantially from receiving free financial support. The subsidies given to Airbus provide for research and development which results in reduced costs of production and increased knowledge of the industry. The free support allows Airbus to reap profits much sooner than a business not given subsides would be able to.

Along with the grants (money that does not have to be paid back) the loans given to Airbus are referred to as “soft loans”, which means that Airbus incurs no risk if the business fails. The loans only have to be repaid if Airbus achieves profitability. The fact that Airbus has taken on virtually no debt in the past few decades dramatically improves the outlook of the company and provides more potential for long term success. Having little or no debt improves their financial statements and makes Airbus a more attractive investment option for other investors.

The complaints about the EU government intervention are still fair even after taking into consideration Europe’s long history of democratic socialism. In Europe, the governments play a large role directing the national economy and it’s very common for the governments to intervene. Normally I would agree that government intervention that supports the well being of the public is a good thing, but it’s a different story when the intervention of one country’s government benefits the local economy at the expense of foreign economies.

It’s understandable that European countries are more susceptible to government intervention, but that does not provide them with a valid excuse for allowing their intervention practices to affect firms on a global scale. While the actions of the EU were most likely intended to achieve economic objectives that would enhance Europe’s airline industry and more importantly the well being of European citizens, the intervention ultimately provided Airbus with a favorable competitive position and an unfair advantage in conducting business. Such a result is unjust for competing firms like Boeing.

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