The Case of Airbus and Boeing - Essay Example

As such, the government of France indicated that for any firm to challenge Boeing’s dominance and supremacy, government subsidies must be engaged so that any potential competition for Boeing could present below-market costs to the end consumers. This was engaged and Airbus began to be heavily subsidized by the French government. This trend has continued, to varying degrees, up until the present time. However, Boeing soon began to feel the impact of these government subsidies and could not continue to compete within the industry that was not only turning a massive profit but was also heavily subsidized. As such, Boeing lobbied and effectively garnered a high degree of promissory loans, research and development grants, and a litany of other subsidies from the United States government. What this has created is an unnatural form of competition between Airbus and Boeing through which the governments of these respective firms are ultimately in a proxy war of subsidized nations. Naturally, this is not only unhealthy for the firms, it is unhealthy for the consumer and the overall level of product that exist within the market. The case itself references the fact that in all likelihood, Boeing and Airbus will continue to produce aircraft at a rather alarming rate; creating a glut of commuter aircraft within the market in the next several years. Naturally, this evidence points to the fact that government subsidies with regards to an otherwise competitive environment oftentimes make the situation worse for the end consumer.