Economics of Industry - "Market structure in the aircraft manufacturing industry"

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Introduction The market structure of commercial passenger aircraft is oligopolistic, primarily dominated by Boeing and Airbus. Boeing has a 70 year heritage and has been a leader in the industry for a long time. However, since the advent of Airbus, a European consortium, Boeing has faced tough competition and the market has developed and grown due to the presence of now two strong companies.


(Boeing, 2011) Boeing, then expanded by acquiring Vertol Aircraft Corporation in 1960. (The Boeing Company, 2011) In 1996, Boeing took over Rockwell’s aerospace and defense units. Then in August 1997, Boeing merged with McDonnell Douglas. This merger allowed Boeing's leadership to increase as it joined with the line of Douglas airplanes. (The Boeing Company, 2011) The tax breaks given to Boeing by the US government have also helped in the expansion of the firm. It is believed that subsidies for the defense wing of Boeing have also helped with the commercial side of aircraft manufacturing. (Irwin & Pavcnik, 2003) In 2002, Boeing’s market share was 54%, however it is now struggling to maintain it. (Taylor & tillman, 2002) Airbus Airbus is a subsidiary of EADS, European Aeronautic Defense and Space Company. (Airbus, 2011) It was a government initiative by France, Germany and UK in 1967. It started off as a consortium of aerospace manufacturers, Airbus Industry. The combination of the European defense and aerospace companies in 2000 led to a company being established in 2001. BAE Systems and EADS transferred their assets to Airbus SAS, for ownership in that company. EADS owned 80% and BAE Systems 20%. (BBC News, 2000) In October 2006, BAE sold its ownership to EADS. ...
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