Competition between Airbus and Boeing

Modes of competition

Outsourcing

Because many of the world's airlines are wholly or partially government-owned, aircraft procurement decisions are often taken according to political criteria in addition to commercial ones. Boeing and Airbus seek to exploit this by subcontracting the production of aircraft components or assemblies to manufacturers in countries of strategic importance in order to gain a competitive advantage overall.

For example, Boeing has maintained longstanding relationships since 1974 with Japanese suppliers including Mitsubishi Heavy Industries and Kawasaki Heavy Industries by which these companies have had increasing involvement on successive Boeing jet programs, a process which has helped Boeing achieve almost total dominance of the Japanese market for commercial jets. Outsourcing was extended on the 787 to the extent that Boeing's own involvement was reduced to little more than project management, design, assembly, and test operation, outsourcing most of the actual manufacturing all around the world. Boeing has since stated that it "outsourced too much" and that future airplane projects will depend far more on its own engineering and production personnel.

Partly because of its origins as a consortium of European companies, Airbus has had fewer opportunities to outsource significant parts of its production beyond its own European plants. However, in 2009 Airbus opened an assembly plant in Tianjin, China for production of its A320 series airliners, and opened a similar assembly plant in Mobile, Alabama, United States in 2015.

Technology

Airbus sought to compete with the well-established Boeing in the 1970s through its introduction of advanced technology. For example, the A300 made the most extensive use of composite materials yet seen in an aircraft of that era, and by automating the flight engineer's functions, was the first widebody jet to have a two-person flight crew. In the 1980s Airbus was the first to introduce digital fly-by-wire controls into an airliner (the A320).

With Airbus now an established competitor to Boeing, both companies use advanced technology to seek performance advantages in their products. Many of these improvements are about weight reduction and fuel efficiency. For example, the Boeing 787 Dreamliner is the first large airliner to use 50% composites for its construction. The Airbus A350 XWB features 53% composites.

Engine choices

The competitive strength in the market of any airliner is considerably influenced by the choice of engine available. In general, airlines prefer to have a choice of at least two engines from the major manufacturers General Electric, Rolls-Royce and Pratt & Whitney. However, engine manufacturers prefer to be a single source and often succeed in striking commercial deals with Boeing and Airbus to achieve this.

In 2008, the competition was developing between two sides as Airbus selected the Rolls-Royce Trent XWB alone for the Airbus A350, while GE avoided a $1 billion development competing with its Boeing 777HGW exclusive GE90. In 2013, Boeing rejected a Rolls-Royce engine for the 777X to favor General Electric's GE9X. In 2014, Rolls-Royce secured its exclusivity to power the A330neo with the Trent 7000.

Other aircraft providing a single engine-type offering include the Boeing 737 MAX (CFM LEAP) or the Airbus A220 (P&W GTF); while those with multiple sources include the Boeing 787 (GEnx/Trent 1000) or the Airbus A320neo (P&W GTF/CFM LEAP).

Currency and exchange rates

Boeing's production costs are mostly in United States dollars, whereas Airbus's production costs are mostly in euro. When the dollar appreciates against the euro the cost of producing a Boeing aircraft rises relatively to the cost of producing an Airbus aircraft, and conversely when the dollar falls relative to the euro it is an advantage for Boeing. There are also possible currency risks and benefits involved in the way aircraft are sold. Boeing typically prices its aircraft only in dollars, while Airbus, although pricing most aircraft sales in dollars, has been known to be more flexible and has priced some aircraft sales in Asia and the Middle East in multiple currencies. Depending on currency fluctuations between the acceptance of the order and the delivery of the aircraft this can result in an extra profit or extra expense—or, if Airbus has purchased insurance against such fluctuations, an additional cost regardless.

Safety and quality

Most aircraft dominating the companies' current sales, the Boeing 737-NG and Airbus A320 families and both companies' wide-body offerings, have good safety records. Older model aircraft such as the Boeing 707, Boeing 727, Boeing 737-100/-200, Boeing 747-100/SP/200/300, Airbus A300, and Airbus A310, which were first flown during the 1960s, 1970s, and 1980s, have had higher rates of fatal accidents. Both companies tend to avoid safety comparisons when selling their aircraft to airlines or comparisons on product quality. According to Airbus's John Leahy in 2013, the Boeing 787 Dreamliner battery problems would not cause customers to switch airplane suppliers. The grounding of the Boeing 737 MAX following two high-profile crashes is also unlikely to significantly benefit Airbus at least short-term, as both the 737 MAX and A320neo production lines have backlogs of several years and changing manufacturers requires significant crew training.

Production planning

Former Airbus executive John Leahy indicated that Airbus has overbooked orders in its backlog, just as Boeing does, and uses internal algorithms to anticipate defections in order to maintain steady production.

Effect of competition on product plans

As of December 2008, the A320 was selected by 222 operators, including several low-cost operators, gaining ground against the previously well established 737 in this sector; it has also been selected as a replacement for 727s and aging 737s by many full-service airlines such as Star Alliance members United Airlines, Air Canada, and Lufthansa. After dominating the very large aircraft market for four decades, the Boeing 747 faced a challenge from the A380. In response, Boeing offered the stretched and updated 747-8, with greater capacity, fuel efficiency, and range. Frequent delays to the Airbus A380 program caused several customers to consider cancelling their orders in favour of the refreshed 747-8. In February 2019 Airbus announced the end of the A380 production after the remaining orders would be delivered. By June 2019, 154 Boeing 747-8 were ordered and 134 delivered, while 290 Airbus A380 were ordered and 238 delivered.

Boeing pursued and then cancelled several projects, including the Sonic Cruiser. Boeing's current platform for fleet rejuvenation is the Boeing 787 Dreamliner, which uses technology from the Sonic Cruiser concept.

Boeing initially ruled out producing a re-engined version of its 737 to compete with the Airbus A320neo family launch planned for 2015, believing airlines would be looking towards the Boeing Y1 and a 30% fuel saving, instead of paying 10% more for fuel-efficiency gains of only a few percents. Industry sources believe that the 737's design makes re-engining considerably more expensive for Boeing than it was for the Airbus A320. However, there was considerable demand. Southwest Airlines, which uses the 737 for its entire fleet (680 in service or on order), said it was not prepared to wait 20 years or more for a new 737 model and threatened to convert to Airbus. Boeing eventually bowed to airline pressure and in 2011 approved the 737 MAX project, scheduled for first delivery in 2017.

Orders and deliveries

It took Boeing 42 years and 1 month to deliver its 10,000th 7series aircraft (October 1958 – November 2000), and 42 years and 5 months for Airbus to achieve the same milestone (May 1974 – October 2016). Boeing deliveries considerably exceeded that of Airbus throughout the 1980s. In the 1990s, this lead narrowed significantly but Boeing remained ahead of Airbus. In the 2000s, Airbus assumed the lead in narrow-body aircraft. By 2010, little difference remained between Airbus and Boeing in both the wide-body or narrow-body categories or the range on offer.

Except for the years 2012 and 2018, Airbus orders have significantly outpaced Boeing's, to the extent that the European rival will soon surpass all commercial Boeing orders from the inception of the company, despite having a much shorter history. By July 2021, Airbus had a 62% share of the airliner backlog compared to 38% for Boeing. This roughly 60/40 split of the existing backlog, is still the case when analysing the latest Orders & Deliveries statistics from the companies (valid per Nov 2024).

Orders and deliveries by year

The significant orders in a year were +2,094 Airbus aircraft in 2023 and respectively −1026 Boeing aircraft in 2020, while the significant deliveries in a year were 863 Airbus aircraft in 2019 and 4 aircraft in 1974 respectively.

The former McDonnell Douglas MD-80, the MD-90 and the MD-11 are included in Boeing deliveries since MD's August 1997 merger with Boeing.

As of January 2024, the manufactures plan to increase the production of their models:

• Airbus A220 to 168 per year
• Airbus A320neo family to 900 per year and Boeing 737MAX to 600 per year
• Airbus A330 to 48 per year and Boeing 777 to 48 per year
• Airbus A350 to 108 per year and Boeing 787 to 120 per year

Backlog over time

This table shows the backlog (regarding past years on December 31):

Figures in blue indicate a lead for Airbus. Figures in red indicate a lead for Boeing.

Airliners in service

Controversies

Subsidies

Boeing has continually protested over launch aid in the form of credits to Airbus, while Airbus has argued that Boeing receives illegal subsidies through military and research contracts and tax breaks.

In July 2004, Harry Stonecipher (then CEO of Boeing) accused Airbus of abusing a 1992 bilateral EU-US agreement regarding large civil aircraft support from governments. Airbus is given reimbursable launch investment (RLI, called "launch aid" by the US) from European governments with the money being paid back with interest, plus indefinite royalties if the aircraft is a commercial success. Airbus contends that this system is fully compliant with the 1992 agreement and WTO rules. The agreement allows up to 33 percent of the program cost to be met through government loans which are to be fully repaid within 17 years with interest and royalties. These loans are held at a minimum interest rate equal to the cost of government borrowing plus 0.25%, which would be below market rates available to Airbus without government support. Airbus claims that since the signing of the EU-US agreement in 1992, it has repaid European governments more than US$6.7 billion and that this is 40% more than it has received.

Airbus argues that pork barrel military contracts awarded to Boeing (the second largest US defense contractor) are in effect a form of subsidy (see the KC-X program). The US government support of technology development via NASA also provides support to Boeing. In its recent products such as the 787, Boeing has also received support from local and state governments. Airbus's parent, EADS, is itself a military contractor, paid to develop and build projects such as the Airbus A400M transport and various other military aircraft.

In January 2005, European Union and United States trade representatives Peter Mandelson and Robert Zoellick agreed to talks aimed at resolving increasing tensions. The talks were unsuccessful; the parties did not reach a settlement and the dispute became more acrimonious.

World Trade Organization litigation

On 31 May 2005, the United States filed a case against the European Union for providing allegedly illegal subsidies to Airbus. Twenty-four hours later, the European Union filed a complaint against the United States, protesting support for Boeing.

Increased tensions, due to support for the Airbus A380, escalated toward a potential trade war as the launch of the Airbus A350 neared. Airbus preferred launching the A350 program with the help of state loans covering a third of the development costs, although stated that it would launch without these loans if required. The A350 competes with Boeing's most successful project in recent years, the 787 Dreamliner. EU trade officials questioned the nature of the funding provided by NASA, the Department of Defense, and in particular the form of R&D contracts that benefit Boeing; as well as funding from US states such as Washington, Kansas, and Illinois, for the development and launch of Boeing aircraft, in particular, the 787. An interim report of the WTO investigation into the claims made by both sides was made in September 2009.

In March 2010, the WTO ruled that European governments unfairly financed Airbus. In September 2010, a preliminary report of the WTO found unfair Boeing payments broke WTO rules and should be withdrawn. In two separate findings issued in May 2011, the WTO found, firstly, that the US defence budget and NASA research grants could not be used as vehicles to subsidise the civilian aerospace industry and that Boeing must repay $5.3 billion of illegal subsidies. Secondly, the WTO Appellate Body partly overturned an earlier ruling that European Government launch aid constituted unfair subsidy, agreeing with the point of principle that the support was not aimed at boosting exports and some forms of public-private partnership could continue. Part of the $18bn in low interest loans received would have to be repaid eventually; however, there was no immediate need for it to be repaid and the exact value to be repaid would be set at a future date. Both parties claimed victory in what was the world's largest trade dispute.

On 1 December 2011, Airbus reported that it had fulfilled its obligations under the WTO findings and called upon Boeing to do likewise in the coming year. The United States did not agree and had already begun complaint procedures prior to December, stating the EU had failed to comply with the DSB's recommendations and rulings, and requesting authorisation by the DSB to take countermeasures under Article 22 of the DSU and Article 7.9 of the SCM Agreement. The European Union requested the matter be referred to arbitration under Article 22.6 of the DSU. The DSB agreed that the matter raised by the European Union in its statement at that meeting be referred to arbitration as required by Article 22.6 of the DSU however on 19 January 2012 the US and EU jointly agreed to withdraw their request for arbitration.

On 12 March 2012, the appellate body of the WTO released its findings confirming the illegality of subsidies to Boeing whilst confirming the legality of repayable loans made to Airbus. The WTO stated that Boeing had received at least $5.3 billion in illegal cash subsidies at an estimated cost to Airbus of $45 billion. A further $2 billion in state and local subsidies that Boeing is set to receive have also been declared illegal. Boeing and the US government were given six months to change the way government support for Boeing is handled. At the DSB meeting on 13 April 2012, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and within the time-frame established in Article 7.9 of the SCM Agreement. The European Union welcomed the US intention and noted that the 6-month period stipulated in Article 7.9 of the SCM Agreement would expire on 23 September 2012. On 24 April 2012, the European Union and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU and Article 7 of the SCM Agreement.

On 25 September 2012, the EU requested discussions with the US, because of the alleged non-compliance of the US and Boeing with the WTO ruling of 12 March 2012. On 27 September 2012, the EU requested the WTO to approve EU countermeasures against the USA's subsidy of Boeing. The WTO approved the creation of a panel to rule on the dispute; this ruling was originally scheduled for 2014 but, because of the complexity of the case, was deferred to be decided not before 2016. The EU wanted permission to place trade sanctions of up to 12 billion US$ annually against the USA. The EU believed this amount represents the damage the illegal subsidies of Boeing cause to the EU.

On 19 December 2014, the EU requested WTO mediated consultations with the US over the tax incentives given by the state of Washington to large civil aircraft manufacturers which they believed violated the earlier WTO ruling, on 22 April 2015 at the request of the EU a WTO panel was set up to rule on the complaint. The tax incentives given by the state of Washington and believed to be the largest in US history surpassing the previous record of $5.6bn over 30 years awarded by the state of New York to the aluminum producer Alcoa in 2007. The $8.7bn over 40 years incentive to Boeing to manufacture the 777X in the state includes $4.2bn from a 40% reduction in business taxes, £3.5bn in tax credits for the firm, a $562m tax credit on property and buildings belonging to Boeing, a $242m sales tax exemption for buying computers and $8m to train 1000 workers, Airbus alleges this is larger than the budgeted cost of Boeing's 777X development program and the EU argues amounts to an entire publicly funded free aircraft program for Boeing, the legislation was an extension of the duration of a tax break program given to Boeing for Dreamliner development that had already been ruled illegal by the WTO in 2012. Boeing defends the allegation by arguing the subsidies are available to anyone however for an aircraft to qualify for the tax breaks a company must manufacture aircraft wings and perform all final assembly for an aircraft model or variant exclusively in the state.

In September 2016, the WTO found that Airbus did not remedy the harm to Boeing from illegal subsidies, and the EU immediately appealed for a final decision in late spring 2018. Boeing expected the 2016 decision would largely be upheld with sanctions of $10 to $15 billion, possibly levied by punitive US government tariffs, but that the EU would retaliate strongly. The EU case against Boeing filed as a countersuit lags the US case and the decision on Boeing's appeal will not come out until late in 2018 or even in 2019. Both are exposed with a backlog of 644 Boeing orders in the EU and 1,340 Airbus orders in the US, but this is mitigated as many are from lessors, to be delivered elsewhere, and as Airbus has an assembly line in Alabama.

On 15 May 2018, in its EU appeal ruling, the WTO concluded that the A380 and A350 received improper subsidies through repayable launch aids or low interest rates, like previous airliners, which could have been avoided. Boeing claimed victory but Airbus countered it is thin with 94% of the complaints rejected, as launch aids are legal but at market interest rates, not lower: violations will be corrected. US tariffs, probably on other industries, may take up to 18 months to get WTO approval, but EU could retaliate over Washington State 787 subsidies and tax breaks for the 777X. The US will pursue penalties if an agreement cannot be reached but is willing to reach a settlement with the European Union.

Tariffs

On 9 April 2019, the US Government announced that it would pursue penalties by placing tariffs on Airbus and other European Union goods over Airbus' improper subsidies, in an apparent act of retaliation. In response, Bruno Le Maire, France's financial minister, said that a "friendly" solution should be made. On 1 July, the US Government proposed more tariffs for the same reason.

On 24 September the same year, it was announced that the WTO would authorize the US to place the tariffs. The WTO stated that the $8 billion USD of EU goods could be affected by the tariffs.

The WTO announced the allowed level of punitive tariffs on 30 September, around $5-10 billion down from the $25 billion asked for, then the USTR should issue a list of products to be taxed from year-end. By mid-2020, the WTO is slated to determine the allowed EU punitive tariffs, as the EU claims $20 billion in damages. It would damage both sides, with Boeing having the most to lose as US Aerospace and defense exports to Europe totals $30.5 billion, while imports are $23.6 billion.

On 2 October 2019, the WTO approved US tariffs on $7.5 billion worth of European goods, and officially authorized them on 14 October, despite the European Union urging for a negotiated settlement. After midnight on 18 October, the US tariffs went into effect. The tariffs target Airbus, wine, and other European goods.

On 15 February 2020, the US government announced that it would increase tariffs on Airbus aircraft from 10% to 15%. Airbus expressed regret at the statement. The increased tariffs went into effect on 17 February. In an attempt to reduce the threat of retaliatory tariffs by the European Union on exports from Washington state, Boeing requested on 19 February that the Washington State Legislature suspend its preferential business-and-occupation tax rate, which saves Boeing around $100 million annually. The WTO ruled in March of the previous year that the tax breaks for Boeing by the state of Washington constituted illegal US subsidies, but determined that, except for the tax break which Boeing requested suspension of, the European Union had no grounds to seek damages.

On 30 September 2020, the WTO approved the European Union's retaliatory tariffs on $4.1 billion worth of US goods, this is in addition to the previous unimplemented sanction allowing the EU the right to impose tariffs of up to $8.2 billion on US goods and services. On 11 October, acting European Commissioner for Trade Valdis Dombrovskis urged the US to withdraw its tariffs, reiterating retaliatory action. Two days later, on 13 October, the WTO authorized the EU's tariffs. The next day, on 14 October, the US finally offered to remove their tariffs if Airbus would refinance the state loans at a level of interest that assumed a 50% product failure rate. The EU criticized the deal as "unacceptable" due to its cost estimated to be around $10 billion along with the impact of the COVID-19 pandemic on the aviation industry. The US argued that European tariffs on US goods were unnecessary as the local tax subsidies for Boeing had ended while Airbus countered that the US was still applying import tariffs even though the A380 was no longer in production. Further talks with the WTO regarding the tariffs are scheduled for 26 October, however, the tariffs may only go into effect depending on the results on the 2020 United States presidential election. On 9 November the WTO announced that the EU's tariffs would still go into effect, though the EU indicated it was hopeful a settlement could be reached with the new US administration in 2021. On 13 November Bruno Le Maire said a settlement could potentially be reached in several weeks. Both sides resumed negotiations on 2 December. In an attempt to reduce tensions, the United Kingdom dropped its own tariffs on US goods on 8 December.

On 30 December 2020, the US government announced that it would widen its current tariffs on EU goods, it said it was unfair that the duties for the EU sanctions upon the US were calculated during the COVID-19 outbreak when US exports were smaller than usual increasing the number of US goods to which tariffs needed to be applied to reach the WTO's approved sanction value. The widening took effect on 12 January 2021.

On 4 March 2021, the US government suspended its tariffs on UK goods as part of resolving the dispute. The next day, on 5 March, the US and EU both suspended their tariffs on their respective goods for the same reason. On 22 March, US trade representative Katherine Tai held a meeting with EU trade commissioner Valdis Dombrovskis and UK trade secretary Liz Truss to begin negotiations to end the dispute.

On 15 June 2021, the US and EU reached a truce, suspending the tariffs for five years. The two sides agreed that future research and development funding would be given out transparently and without advantaging domestic producers.