Introduction
For years the commercial aircraft industry has been an American success story. Until 1980, U.S. manufacturers held a virtual monopoly. Despite the rise of the European-based Airbus Industrie, this persisted through the mid-1990s, when two U.S. firms, Boeing and McDonnell Douglas, accounted for over two-thirds of world market share. In late 1996, many analysts thought that U.S. dominance in this industry would be further strengthened when Boeing announced a decision to acquire Mc-Donnell Douglas for $13.3 billion, creating an aerospace behemoth nearly twice the size of its nearest competitor.
The industry is routinely the largest net contributor to the U.S. balance of trade, and Boeing is the largest
U.S. exporter. In the 1990s, the U.S. commercial air-craft industry regularly ran a substantial positive trade balance with the rest of the world of $12 billion to $15 billion per year. The impact of the industry on U.S. employment is also enormous. In 2000, Boeing directly employed over 120,000 people in the Seattle area and another 100,000 elsewhere in the nation. The company also indirectly supported a further 600,000 jobs nation-wide in related industries (e.g., subcontractors) and through the impact of Boeing wages on the general level of economic activity.
Despite Boeing’s formidable reach, since the mid-1980s U.S. dominance in the commercial aerospace industry has been threatened by the rise of Airbus Industrie. Airbus is a consortium of four European aircraft manufacturers: one British (20.0 percent ownership stake), one French (37.9 percent ownership), one German (37.9 per-cent ownership), and one Spanish (4.2 percent owner-ship). Founded in 1970, Airbus was initially a marginal competitor and was regarded as unlikely to challenge ...