'The Inside Story of the Greatest International Competition
This book is full of intrigue, passion, and surprise.
But this is not a romance novel! It is a very
readable account of the competition between Boeing and
written myself about
Boeing's ebbs and flows of fortune, and each year brings new
twists to the ongoing battle for market share between Airbus and
This new book - Boeing versus
Airbus - by author John Newhouse is as interesting for the
information he reveals about how inept both Boeing and Airbus
are in their competitive struggles as for the more expected
information about their strengths and successes. Is it
putting words in his mouth to suggest that the respective wins
on the part of each company are as much due to the other
company's failings as to the strengths of the successful
Although Newhouse still
doesn't completely explain the question that is surely in all
our minds - how can such large companies sometimes be so stupid
- he does give a lot of fascinating information about their
actions, making his book a compelling read on a fascinating subject.
About the Book
The hardcover book
measures 9 1/2" x 6 1/2", and is
almost exactly one inch in
thickness. It has 229 pages of text, plus 12 pages of
notes and citations and a further 12 pages of index.
Unfortunately there are no illustrations or photos or tables or
other things to leaven the verbiage, although there is a photo
of the author on the back flap of the dust jacket.
The book was published in
January 2007, and is reasonably up to date as of that time, containing some material that was clearly written as recently as
September of 2006.
The book lists for $26.95
can be purchased on Amazon for a discounted price, currently $17.79.
The book has nine
chapters, plus a Prologue, and is published by the Knopf imprint
of leading publisher Random House. The chapters have
delightful titles such as 'Folly and Hypocrisy', 'Meltdown and
Merger' and 'Muddling Through, More or Less'. The chapter
titles give the first clue that this is both a very approachable
and also very straight forward book that pulls no punches.
About the Author, John Newhouse
This is John Newhouse's
second book on the aircraft manufacturing industry. His
first book -
The Sporty Game - was written in 1982 and has long
been viewed as an excellent exposition on a complex topic.
However, as good as this book was, it is now 25 years out of
date, and in those last 25 years there have been enormous
changes. In 1982 the effects of deregulation were just
starting to spread across the US, and Airbus was offering only a single
airplane type (the A300). Lockheed was still making L1011s, and
McDonnell Douglas was selling DC9s and DC10s. The 767
debuted, and the 757 had yet to be flown commercially.
Clearly, there was a need
for a new book on the industry, and John Newhouse brings
excellent credentials to the task. He wrote on foreign
policy issues for The New Yorker during the 1980s and early
1990s. He has been the assistant director of the US Arms
Control and Disarmament Agency and was senior policy adviser for
European affairs in the State Department during the latter half
of the Clinton administration. Currently he is a senior
fellow at the World Security Institute and has published eight
Researching the Book
A book is only as good as
the research that underpins it. Newhouse has extensively researched his book, and he provides ample citations
and supporting references to the material he provides. He
conducted hundreds of hours of interviews with industry
insiders, all the way up to CEO level at both Boeing and Airbus,
and also liberally refers to other published analysis and
This is a solidly based book
that usually, but unfortunately not always cites its major sources and
'proves' its claims. For example, here's a wonderful
Still, GE people describe Boeing as indifferent to costs
(indeed, extravagant), mired in layers of bureaucracy, and
insensitive to customers' needs.
that begs for attribution,
but which receives none.
There's one area of research
and attribution which could have been strengthened.
It would be fascinating to get more perspectives on the
two aircraft manufacturing companies from their airline
customers - to get more insight into
why the airlines have bought one brand of plane instead of the
other, and how they - the customers - view the two competing
Some Errors and Assumptions
Unfortunately, even Newhouse
accepts some things without question or research, including most
regrettably his comment about how the demise of Concorde
'proved' that airlines can't make money offering high speed
clearly shown to the contrary, Concorde was actually both
very successful and very profitable, and its demise had nothing
to do with either of these two issues.
Another example is his
description of Herb Kelleher as being the founder of Southwest
Airlines. Although Herb Kelleher has for a long time been
the public face of Southwest, he was not its founder. That
title belongs primarily to another charismatic airline leader,
Herb took over from Lamar
some years after Southwest first started flying, and largely
continued Lamar's innovative ideas, making them his own in the
process. Herb deserves a lot of credit for Southwest's
current position in the industry, but a careful and
knowledgeable writer would know better than to refer to him as
Okay, so these are two small
quibbles. But, like the saying about rats ('If you see one
rat in your house, you know you've got an entire family living
there') these careless statements make one worry about what else
might also be incompletely researched or incorrectly stated.
Another example - Newhouse
arguably falls into the trap
of viewing the A380 and the 787 as competing planes. They
are not competing planes. They are very different planes,
each providing solutions to very different types of airline
Not only are they very
different and non-competing planes, but both manufacturers ended
up with new plane types for both the very large aircraft (Airbus
first with the A380, Boeing subsequently with the less
revolutionary 747-8) and the medium sized aircraft (Boeing first
with the 787, Airbus subsequently with the A350). The only
element of competition is perhaps in the sense that Airbus has
committed so much resource to the A380 project that it may now
find it difficult to successfully develop the A350 at the same
time as it is completing development on the several times
Finally, at the end of several
pages of discussion on these two planes (pp 29 - 31) Newhouse then
'has his cake and eats it too' by making the very true statement
'In the end, both new ventures may succeed' - a statement which
is almost certainly true, and which belies much of his
'either/or' commentary that precedes it.
He revisits the topic of the
A380 development in Chapter Seven. This chapter gives some
fascinating insights into the evolution of the concept, and the
various public and private actions by both Boeing and Airbus
that eventually resulted in Boeing turning away from the concept
and Airbus proceeding with the A380. Newhouse does provide
some of the oft cited pluses and minuses about the A380, but
uncritically parrots some ridiculous criticisms of the A380
plane (such as airports couldn't handle the extra car traffic
with more passengers arriving and leaving the airport) without
fairly analyzing such comments and exposing them for the canards
This is a very straight
shooting book. The author hasn't even got out of his
Prologue before he starts offering statements such as
Mac [James McDonnell] foolishly tried to bend Douglas to his
ways of making and selling a very dissimilar product line.
His ignorance, judgment, and timing - all three - took the
venture straight downhill.
And, two pages further on
(still in the Prologue)
Airbus' central problem, and the crippling one, is a herry-built
corporate structure that is aimed at satisfying the narrowly
focused political interests of the company's French and
German stakeholders. ... Not surprisingly, this dual
management arrangement has over the years become steadily
less functional and less competent.
The book is full of
revelations and claims. For example, the author claims
that Airbus has a much leaner bureaucracy than other aerospace
companies. Who would have thought this of a company that
currently seems crippled by its competing French and German
operations and hampered by political considerations.
And he comes up with some
simple and easily understandable observations, for example, he
talks about a seachange at Boeing -
the company started putting shareholder interests first rather than customer and
product interests. Guess who the two largest shareholders
were at the time this switch occured? As Newhouse reveals
on page 17, none other than the Chairman and CEO.....
Not all is quite such
concentrated value. Chapter Four - 'Market Share
- the Airlines' Enemy' (an intriguing but largely unsubstantiated statement
that not everyone would agree with) is
almost completely off topic. The chapter
is a short compressed history of the US airline industry over
the last 25 or so years, and offers little insight into the
issue of the battle between Boeing and Airbus. The
author's opinion as to why the US carriers have been in such
strife? He says
The woes of America's airlines were largely self-inflicted,
decades in the making, and are worsening. Much of what
has gone wrong can be traced to 1978, when the Airline
Deregulation Act was adopted.
Is he suggesting that the
problems of the US airlines are not their own fault, and is he
suggesting that a regulated industry would be 'better'?
One desperately hopes he is not making these claims.
The chapter doesn't add any
insights into the competition between Boeing and Airbus, and
neither does it really add much new to an understanding of the
US airline industry. But to see one's glass as half full
rather than half empty, it provides some interesting extra
background on part of the marketplace in which Airbus and Boeing
Similarly, a large section
of Chapter Five discusses engines and the engine manufacturers
rather than Boeing and Airbus. Newhouse provides some
interesting insight into how airplane engines are sold, and
gives some interesting examples where engine manufacturers side
with one or other of the airplane builders. Like the
previous chapter, although there is little in this section that
contributes to the core topic of Airbus competing with Boeing,
it adds to one's overall appreciation of the various issues
within the industry.
The Subsidy Arguments
Many followers of the
aircraft building industry will be familiar with Boeing's oft
cited allegations about Airbus getting unfair subsidies from the
EU and member governments, while Boeing proudly claims to not
receive a penny of government subsidy itself.
This is a subject Newhouse
covers inconclusively - but fascinatingly - in his chapter
titled 'Folly and Hypocrisy'. He never clearly chooses as
to which company is the greater beneficiary of subsidies, but he
makes some surprising points that suggest that Boeing receives
massive subsidies, not so much from the US government as from
the Japanese government, and then points out how Airbus and the
EU have strangely chosen not to push this point in their
defensive responses to US and Boeing allegations about unfair
subsidies to Airbus.
In particular, on page 63 he
claims that Boeing's assistance through its Japanese contractors
is more generous than what Airbus receives, and the amounts are
larger. He also points out that there are potential
violations of WTO rules if there are indeed offsetting
agreements between Boeing and Japanese airlines of the nature
that Boeing's placement of business with Japanese manufacturing
companies is reciprocated by airplane sales to Japanese
And on page 66 he puts the
cat among the pigeons when he reveals that Boeing's biggest 747
customer, Japan Airlines, received among the smallest of
discounts off the list price of the planes it purchased in the
1980s and 1990s.
He also points out that the
occasionally cited figure of Airbus having received $26 billion
in subsidies is wrong, with the real number being thought to be
closer to $13 billion.
Newhouse only touches very
lightly on another source of subsidy for Boeing - the billions
in assistance it is receiving from the state of Washington in
return for assembling the 787 in that state.
There's one final reference
to this issue, in the final chapter of the book, when Newhouse
observes sardonically that a lot of Boeing's capabilities for
working with the new carbon fiber materials in the 787 came as a
result of Boeing's work on the B-1 and B-2 bomber projects.
This general concept - that Boeing is able to transfer
technology 'for free' from its military projects (funded by the
US Government) has always been one of the standard responses by
Airbus to Boeing's accusations of Airbus receiving EU handouts,
and it is interesting to see one such specific issue mentioned.
So although Newhouse
carefully doesn't point out who the greater villain may be in
terms of unfairly benefiting from subsidies, he does reveal
enough to suggest that the situation is far from as simple as
Boeing claims, and indeed it may be that Boeing is at least as
large a beneficiary of subsidies as is Airbus.
Predictions for the Future
Newhouse seems to believe
Boeing will be the more successful company for the foreseeable
future. He discounts the value to Airbus of its A380
super-jumbo (and points out that Boeing has a partial answer to
that in its new stretched 747-8), and rates the Boeing 787 as
being superior to the only just now being finalized design for
an Airbus competitor, the A350.
He also looks to the next
generation of smaller planes - the 737 series for Boeing and the
A320 series for Airbus, and predicts that Boeing is in a better
position to be the first to replace their 737 series, thereby
giving Boeing the better product range for some years prior to
Airbus being able to respond with its own A320 series successor.
But his ultimate conclusion
is that both companies will survive on more or less equal terms
because the marketplace desires and needs two viable
One of the bizarre
contradictory forces in the marketplace seems to be that at the
same time customers are demanding more individualistic solutions
to their needs, the companies that supply such needs are
dwindling in number. We see this at all levels - in the
'big iron' industries such as the auto industry, as well as in
the new economy such as software and computer companies.
And we've also seen it in
the airplane manufacturing industry. The US, until
recently, had three major passenger airplane manufacturers.
These days Lockheed has withdrawn from making passenger planes,
and probably will never return, and McDonnell Douglas has merged
into Boeing, leaving only one.
Elsewhere in the world, the
number of major airplane manufacturers has also reduced.
For a while it seemed that the Russian manufacturers might
survive and even prosper in the newly independent country and
its free market, but that no longer seems to be so likely, and
the various threats of new manufacturers appearing in Japan or
China have yet to eventuate.
Amazingly, there are now
only two major airplane manufacturers in the world. This
book - Boeing versus Airbus - details some of the struggles
between these two companies as they take turns in being top dog
and underdog in the market. The book brings some
interesting insights and reveals some new insider information
about the inner workings of how both companies operate, and
seems to conclude that both companies will continue to survive
into the future, if for no other reason than their clients, the
airlines, are desperate to preserve some remaining competition
in the industry.
This is an interesting and
well written book. It does leave much material out, and
does make some assumptions, and most of all, leaves unanswered
the question we surely all must wonder - 'How can such resource
rich companies sometimes act so stupidly?', but perhaps that is
a question to which there is no answer.
The book is very readable
and you are sure to enjoy it. It can be found in major
bookstores (retail price $26.95) or can be
purchased online through Amazon for a discounted price
(currently $17.79). Recommended.
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12 January 2007, last update
28 May 2011
You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.