15 ms·

Boeing and Airbus, the new ‘super duopoly’

84 points by montrose 8y ago

dingaling 8y ago
Twas ever thus, but it's cyclical. In the 60s and 70s mainline airlines bought jets of 90 seats up from either Boeing or Douglas. Only nationalised airlines bought Vickers or Dassault, and pinko commies had to make do with Ilyushins and Tupolevs. There was a brief period of competition in the late 70s / 80s when Airbus and Lockheed were trying to be different. Order was soon restored, then came the 90s with the regional jet fad and the rise of Embraer and Bombardier. But now we're back to a big duopoly. Ilyushin are still around but only Cuba still buys from them. The next shake-up will come from China; once their civil aviation designs reach the sophistication of their military aircraft they'll start earning orders across Asia, then Europe..
- rdlecler1 8y ago
  And then maybe India will follow in China’s footsteps.
  - noddy1 8y ago
    currently in china, was in bangalore last week.. China feels almost like a first world nation at this point (albeit a weird one). India, even in the most prosperous/developed city is still essentially a crappy 3rd world place. I don't think India will naturally follow the progress China has made, and I definitely don't think amazing manufacturing will suddenly spring up from nowhere in India.
    - robjan 8y ago
      It really depends on which part of China you are visiting. The first tier cities are superficially way more developed than most countries in the world (although not so much in terms of quality of life and access to opportunities). As you move down the tiers you see the opposite end of the spectrum and some of the poorest and least developed parts of the world.
      - fireattack 8y ago
        I think his points is in India, even tier one cities are still feel like 3rd world. (Just paraphrased what he said, I've never been in India).
    - rootusrootus 8y ago
      I am in Hyderabad right now and I agree. Hitec City has a veneer of modern but it is thin and already showing wear after only a few years. And I don’t have to travel out of this area to see plenty of people living a third-world existence. Having friends here now I want to see them succeed but at this point most of them that can figure out how to leave here, do.
      - ausvisaissues 8y ago
        In China, the poor living in rural areas cannot easily move to cities (https://en.m.wikipedia.org/wiki/Hukou_system https://en.m.wikipedia.org/wiki/Hukou_system). In India the poor can move to cities.
    - kamaal 8y ago
      >>India, even in the most prosperous/developed city is still essentially a crappy 3rd world place. As an Indian, I would say you are right. India is attempting to skip several cycles of progress and arrive at the end result. There are also deep socio-economic problems to solve. A more important problem is that quality of Human resources. Things like infrastructure are easier to fix compared to building a educated, civilized and highly trained workforce. >>I don't think India will naturally follow the progress China has made The Chinese kind of politics is impossible in a country as diverse as India. If you force through you only end up breaking the country. So we will never have a single party, single flavor rule in India.
      - dghughes 8y ago
        There is a man living in China who makes YouTube videos from a Western perspective the channel name is ADVChina. In one video he visited India and said the big difference between India and China the obvious being India's ethnic diversity and religions. In China Communism pretty much wiped out religion and the people are more homogeneous than India. And as mentioned in a comment above the first-world sections are mainly the large cities, the countryside is still essentially third-world conditions. Plus recently it seems China has become very increasingly anti-Western, this man has lived there 12 years and has said recently a strong anti-Western vibe has begun to be noticeable.
      - youpassbutter 8y ago
        > There are also deep socio-economic problems to solve. The biggest problem is that india has a mindset problem. They, especially their leaders, academics, etc do not see themselves as a major nation. It's why india is still part of the british commonwealth. > The Chinese kind of politics is impossible in a country as diverse as India. If you force through you only end up breaking the country. That's the mindset I was speaking of. Indians themselves see progress as impossible. Also, China is a diverse nation as well, that hasn't prevent them from organizing and progressing. What india needs is a healthy dose of nationalism and learn to stand on her own. But that will never happen as long as india is subservient to britain. India has a world of potential and none of the execution. All because of the mindset of the leadership and the people. It's tragic.
- paxys 8y ago
  Interestingly, SpaceX is one of the very few companies that does rocket launches but not commercial or military aircraft. And they have recently released concept videos of Earth-to-Earth transport. How long before they make a real jump into commercial aviation?
  - et2o 8y ago
    They have already announced this as an eventual goal.
  - deleted 8y ago
    [deleted]
  - Robotbeat 8y ago
    I don't know if SpaceX will do aviation other than the long-haul Mach 20 BFR type, but Elon Musk has expressed interest in high speed electric aviation as well. If Tesla and/or SpaceX end up being too successful, he'll probably guide one of them to that space.
- hcarvalhoalves 8y ago
  Embraer has potential to destabilize this duopoly with the E-Jet (https://en.wikipedia.org/wiki/Embraer_E-Jet_E2_family https://en.wikipedia.org/wiki/Embraer_E-Jet_E2_family) before China. Last month they just delivered the first units to a Norway airline. Boeing made an strategic offer to acquire Embraer this year, before Embraer makes a dent on their market, but since it's a government controlled company there's a good chance it won't take the offer.
  - personlurking 8y ago
    > but since it's a government controlled company there's a good chance it won't take the offer. Though the most recent news on this says the deal is in advanced stages (according to Estadão). Apparently, it's likely to happen, given the appointment of a government representative to the board of the newly-formed company.
    - hcarvalhoalves 8y ago
      Sad. If the deal doesn't include a clause for local operation or project continuity, they might just dismantle the local commercial jet division to kill competition and keep selling revised 737s :(
- mrtksn 8y ago
  Actually, Russia is back in business with Sukhoi Superjet 100[0]. They Already produced and sold quite a few aircraft despite the crash during the demonstration to clients[1] [0]:https://en.wikipedia.org/wiki/Sukhoi_Superjet_100 https://en.wikipedia.org/wiki/Sukhoi_Superjet_100 [1]: https://en.wikipedia.org/wiki/2012_Mount_Salak_Sukhoi_Superjet_crash https://en.wikipedia.org/wiki/2012_Mount_Salak_Sukhoi_Superj...
  - gbuk2013 8y ago
    There is also the Irkut MC-21 which will be a direct competitor to the A320. It is currently going through testing and certification process. https://en.m.wikipedia.org/wiki/Irkut_MC-21 https://en.m.wikipedia.org/wiki/Irkut_MC-21
- ubernostrum 8y ago
  Russia and China are both in the small mainline-jet market. Russia with the Sukhoi SuperJet, China with the Comac C919. China's AICC is also buying the rights to produce An-225s, including the tooling and training, supposedly in order to jump forward a bit more on engine tech (the C919 will use CFM Leap engines built overseas.
  - pouetpouet 8y ago
    Japan will also have the Mitsubishi Regional Jet with 90 seats.
    - ubernostrum 8y ago
      They're developing it, yes. But I'm not expecting it to be much of a success, assuming it ever properly goes on the market at all. Russia and China have a bit more leverage to get their airlines to buy home-grown aircraft.
montrose 8y ago
This is a non-paywalled version of the Washington Post article.
- dang 8y ago
  OK, we'll merge that thread (https://news.ycombinator.com/item?id=16924617 https://news.ycombinator.com/item?id=16924617) hither.
tuna-piano 8y ago
A different way to think about this, which isn't presented in the article. For every new airplane manufacturer, there are huge additional fixed costs. Why does the world need two very similar planes, such as the Boeing 737 and the Airbus A320? If there was only one plane manufacturer, the plane development costs would roughly halve. And of course, if there is to be a third manufacturer that produced a 737/A320 competitor, the worldwide total plane development costs would increase by 50%! To put some example numbers here: say there is a total demand for 100 planes to be bought, and it costs $1000 for Boeing and Airbus each to develop their own plane. That means the total fixed development costs per plane are $1000 * 2 / 100 = $20. Now let's say a third manufacturer enters the market, and each company will get 33.3 of the 100 plane orders. Now fixed development costs per plane are $1000 * 3 / 100 = $30. The fixed cost per plane actually increased 50% with a new competitor! I'm not saying that we should only have one airplane company - as market forces usually not work well with monopolies. I'm only saying that increasing competition is not always good for consumers. More info: https://www.investopedia.com/terms/n/natural_monopoly.asp https://www.investopedia.com/terms/n/natural_monopoly.asp
- JumpCrisscross 8y ago
  This is (the person) J.P. Morgan’s “ruinous competition” hypothesis. It is not borne out by the literature. Competition attracts investment while reducing volumes; it works because through a combination of innovation and accepting lower returns, prices are reduced.
- tysonzni 8y ago
  Increasing returns to scale isn't the only way unit costs can go down. Competitive forces typically incentivize companies to come up with new ways to increase productivity and reduce cost. Having even one competitor is enough to meaningfully reshape the incentives of a monopolist. But you may well be right about the negative utility of having 4 vs 3 companies in this particular industry.
- raquo 8y ago
  That argument doesn't really hold water when applied to aircraft manufacturing. Commercial jets are not indistinguishable commodities, there is a ton of variation in design and mission ideologies (control systems, materials, hub-and-spoke vs point-to-point, etc.) The type of goods and barriers to entry are more similar to e.g. car manufacturing than to utilities like ISPs. If Boeing and Airbus weren't artificially inflating administrative barriers to entry we'd definitely have more competition, and consumers would benefit, not suffer.
shmerl 8y ago
> Antitrust laws, of course, are meant to prevent mergers that substantially reduce competition, particularly in industries such as this one where there are already only a few competitors and high barriers for any new players to enter. What's missing in this case, as so many others, are regulators or judges willing to aggressively enforce those laws and adapt them to a globalized high-tech economy where winner-take-all competition is now more the rule than the exception. What is the reason for it, corruption or incompetence?
- rukittenme 8y ago
  Most likely neither. Anti-trust is a matter of political opportunism. Because Boeing sells to multi-national corporations the government has little political incentive to target them. After all, those corporations are wealthy enough and sophisticated enough to take care of themselves (or so the thinking might go).
  - shmerl 8y ago
    How exactly can those corporations prevent monopolization of airplane manufacturers (which will likely result in higher prices and lower quality for them)? Anti-trust laws are there to prevent exactly such kind of outcomes, yet they seem to be mostly broken.
    - rukittenme 8y ago
      I have limited knowledge of the industry but I know of at least four commercial airplane sellers: Bombardier, Embraer, Airbus, and Boeing. Between (at least) those four (and buying used planes), airlines have drastically cut the cost of domestic flights. The state of the airplane market seems to be "okay". I do know that the US government did side with Bombardier (CA) from a Boeing (US) lawsuit: https://www.cnbc.com/2018/01/26/boeing-loses-trade-case-over-bombardier-passenger-jets.html https://www.cnbc.com/2018/01/26/boeing-loses-trade-case-over... So it seems anti-trust is at least a "threat-in-being".
      - 8y ago
niftich 8y ago
Well yeah, both the US and the EU conveniently ignore antitrust concerns when it's their golden geese on the line. Simply put, to each respective party, having the domestic aircraft company have a leg up over the other is paramount, while they waffle over the other's grocery stores [1] or delivery companies [2]. [1] https://www.ftc.gov/enforcement/cases-proceedings/151-0175/koninklijke-ahold-delhaize-group https://www.ftc.gov/enforcement/cases-proceedings/151-0175/k... [2] https://www.nytimes.com/2018/02/26/business/dealbook/ups-tnt-eu.html https://www.nytimes.com/2018/02/26/business/dealbook/ups-tnt...
- ubernostrum 8y ago
  Both companies also have military divisions, which makes it a matter of security.
- bhnmmhmd 8y ago
  * Unrelated to the Parent Comment * I don't know about you guys, but when I opened the link it started "uploading" a lot. I'm with Chrome and it was too weird that I had to close it ASAP.
_Codemonkeyism 8y ago
It will get tighter, Dassault and Airbus plan the next European fighter together - might be a merger coming.
- detritus 8y ago
  Unlikely - the current Eurofighter was the fruit a similar situation, but with BAe in place of Dassault. It's more a case of resource distribution and inter-national bridge-building.
  - _Codemonkeyism 8y ago
    Yes, but Germany-UK is not France-Germany. With the merger of French Nexter with German KWM to build the next MBT I do think the situation is different.
    - kingjayy 8y ago
      You know i have a question about Germany and SEPA payments how easy is it to make them from German accounts?
nottorp 8y ago
Wtf is that video auto playing and jumping around the page? I could only read the first 1/3 of the article then gave up.
pontifier 8y ago
I strongly dislike Boeing.

84 points by montrose 8y ago

Twas ever thus, but it's cyclical. In the 60s and 70s mainline airlines bought jets of 90 seats up from either Boeing or Douglas. Only nationalised airlines bought Vickers or Dassault, and pinko commies had to make do with Ilyushins and Tupolevs. There was a brief period of competition in the late 70s / 80s when Airbus and Lockheed were trying to be different. Order was soon restored, then came the 90s with the regional jet fad and the rise of Embraer and Bombardier. But now we're back to a big duopoly. Ilyushin are still around but only Cuba still buys from them. The next shake-up will come from China; once their civil aviation designs reach the sophistication of their military aircraft they'll start earning orders across Asia, then Europe..

rdlecler1 8y ago
And then maybe India will follow in China’s footsteps.
- noddy1 8y ago
  currently in china, was in bangalore last week.. China feels almost like a first world nation at this point (albeit a weird one). India, even in the most prosperous/developed city is still essentially a crappy 3rd world place. I don't think India will naturally follow the progress China has made, and I definitely don't think amazing manufacturing will suddenly spring up from nowhere in India.
  - robjan 8y ago
    It really depends on which part of China you are visiting. The first tier cities are superficially way more developed than most countries in the world (although not so much in terms of quality of life and access to opportunities). As you move down the tiers you see the opposite end of the spectrum and some of the poorest and least developed parts of the world.
    - fireattack 8y ago
      I think his points is in India, even tier one cities are still feel like 3rd world. (Just paraphrased what he said, I've never been in India).
  - rootusrootus 8y ago
    I am in Hyderabad right now and I agree. Hitec City has a veneer of modern but it is thin and already showing wear after only a few years. And I don’t have to travel out of this area to see plenty of people living a third-world existence. Having friends here now I want to see them succeed but at this point most of them that can figure out how to leave here, do.
    - ausvisaissues 8y ago
      In China, the poor living in rural areas cannot easily move to cities (https://en.m.wikipedia.org/wiki/Hukou_system https://en.m.wikipedia.org/wiki/Hukou_system). In India the poor can move to cities.
  - kamaal 8y ago
    >>India, even in the most prosperous/developed city is still essentially a crappy 3rd world place. As an Indian, I would say you are right. India is attempting to skip several cycles of progress and arrive at the end result. There are also deep socio-economic problems to solve. A more important problem is that quality of Human resources. Things like infrastructure are easier to fix compared to building a educated, civilized and highly trained workforce. >>I don't think India will naturally follow the progress China has made The Chinese kind of politics is impossible in a country as diverse as India. If you force through you only end up breaking the country. So we will never have a single party, single flavor rule in India.
    - dghughes 8y ago
      There is a man living in China who makes YouTube videos from a Western perspective the channel name is ADVChina. In one video he visited India and said the big difference between India and China the obvious being India's ethnic diversity and religions. In China Communism pretty much wiped out religion and the people are more homogeneous than India. And as mentioned in a comment above the first-world sections are mainly the large cities, the countryside is still essentially third-world conditions. Plus recently it seems China has become very increasingly anti-Western, this man has lived there 12 years and has said recently a strong anti-Western vibe has begun to be noticeable.
    - youpassbutter 8y ago
      > There are also deep socio-economic problems to solve. The biggest problem is that india has a mindset problem. They, especially their leaders, academics, etc do not see themselves as a major nation. It's why india is still part of the british commonwealth. > The Chinese kind of politics is impossible in a country as diverse as India. If you force through you only end up breaking the country. That's the mindset I was speaking of. Indians themselves see progress as impossible. Also, China is a diverse nation as well, that hasn't prevent them from organizing and progressing. What india needs is a healthy dose of nationalism and learn to stand on her own. But that will never happen as long as india is subservient to britain. India has a world of potential and none of the execution. All because of the mindset of the leadership and the people. It's tragic.
paxys 8y ago
Interestingly, SpaceX is one of the very few companies that does rocket launches but not commercial or military aircraft. And they have recently released concept videos of Earth-to-Earth transport. How long before they make a real jump into commercial aviation?
- et2o 8y ago
  They have already announced this as an eventual goal.
- deleted 8y ago
  [deleted]
- Robotbeat 8y ago
  I don't know if SpaceX will do aviation other than the long-haul Mach 20 BFR type, but Elon Musk has expressed interest in high speed electric aviation as well. If Tesla and/or SpaceX end up being too successful, he'll probably guide one of them to that space.
hcarvalhoalves 8y ago
Embraer has potential to destabilize this duopoly with the E-Jet (https://en.wikipedia.org/wiki/Embraer_E-Jet_E2_family https://en.wikipedia.org/wiki/Embraer_E-Jet_E2_family) before China. Last month they just delivered the first units to a Norway airline. Boeing made an strategic offer to acquire Embraer this year, before Embraer makes a dent on their market, but since it's a government controlled company there's a good chance it won't take the offer.
- personlurking 8y ago
  > but since it's a government controlled company there's a good chance it won't take the offer. Though the most recent news on this says the deal is in advanced stages (according to Estadão). Apparently, it's likely to happen, given the appointment of a government representative to the board of the newly-formed company.
  - hcarvalhoalves 8y ago
    Sad. If the deal doesn't include a clause for local operation or project continuity, they might just dismantle the local commercial jet division to kill competition and keep selling revised 737s :(
mrtksn 8y ago
Actually, Russia is back in business with Sukhoi Superjet 100[0]. They Already produced and sold quite a few aircraft despite the crash during the demonstration to clients[1] [0]:https://en.wikipedia.org/wiki/Sukhoi_Superjet_100 https://en.wikipedia.org/wiki/Sukhoi_Superjet_100 [1]: https://en.wikipedia.org/wiki/2012_Mount_Salak_Sukhoi_Superjet_crash https://en.wikipedia.org/wiki/2012_Mount_Salak_Sukhoi_Superj...
- gbuk2013 8y ago
  There is also the Irkut MC-21 which will be a direct competitor to the A320. It is currently going through testing and certification process. https://en.m.wikipedia.org/wiki/Irkut_MC-21 https://en.m.wikipedia.org/wiki/Irkut_MC-21
ubernostrum 8y ago
Russia and China are both in the small mainline-jet market. Russia with the Sukhoi SuperJet, China with the Comac C919. China's AICC is also buying the rights to produce An-225s, including the tooling and training, supposedly in order to jump forward a bit more on engine tech (the C919 will use CFM Leap engines built overseas.
- pouetpouet 8y ago
  Japan will also have the Mitsubishi Regional Jet with 90 seats.
  - ubernostrum 8y ago
    They're developing it, yes. But I'm not expecting it to be much of a success, assuming it ever properly goes on the market at all. Russia and China have a bit more leverage to get their airlines to buy home-grown aircraft.

montrose 8y ago

This is a non-paywalled version of the Washington Post article.

dang 8y ago
OK, we'll merge that thread (https://news.ycombinator.com/item?id=16924617 https://news.ycombinator.com/item?id=16924617) hither.

tuna-piano 8y ago

A different way to think about this, which isn't presented in the article. For every new airplane manufacturer, there are huge additional fixed costs. Why does the world need two very similar planes, such as the Boeing 737 and the Airbus A320? If there was only one plane manufacturer, the plane development costs would roughly halve. And of course, if there is to be a third manufacturer that produced a 737/A320 competitor, the worldwide total plane development costs would increase by 50%! To put some example numbers here: say there is a total demand for 100 planes to be bought, and it costs $1000 for Boeing and Airbus each to develop their own plane. That means the total fixed development costs per plane are $1000 * 2 / 100 = $20. Now let's say a third manufacturer enters the market, and each company will get 33.3 of the 100 plane orders. Now fixed development costs per plane are $1000 * 3 / 100 = $30. The fixed cost per plane actually increased 50% with a new competitor! I'm not saying that we should only have one airplane company - as market forces usually not work well with monopolies. I'm only saying that increasing competition is not always good for consumers. More info: https://www.investopedia.com/terms/n/natural_monopoly.asp https://www.investopedia.com/terms/n/natural_monopoly.asp

JumpCrisscross 8y ago
This is (the person) J.P. Morgan’s “ruinous competition” hypothesis. It is not borne out by the literature. Competition attracts investment while reducing volumes; it works because through a combination of innovation and accepting lower returns, prices are reduced.
tysonzni 8y ago
Increasing returns to scale isn't the only way unit costs can go down. Competitive forces typically incentivize companies to come up with new ways to increase productivity and reduce cost. Having even one competitor is enough to meaningfully reshape the incentives of a monopolist. But you may well be right about the negative utility of having 4 vs 3 companies in this particular industry.
raquo 8y ago
That argument doesn't really hold water when applied to aircraft manufacturing. Commercial jets are not indistinguishable commodities, there is a ton of variation in design and mission ideologies (control systems, materials, hub-and-spoke vs point-to-point, etc.) The type of goods and barriers to entry are more similar to e.g. car manufacturing than to utilities like ISPs. If Boeing and Airbus weren't artificially inflating administrative barriers to entry we'd definitely have more competition, and consumers would benefit, not suffer.

shmerl 8y ago

> Antitrust laws, of course, are meant to prevent mergers that substantially reduce competition, particularly in industries such as this one where there are already only a few competitors and high barriers for any new players to enter. What's missing in this case, as so many others, are regulators or judges willing to aggressively enforce those laws and adapt them to a globalized high-tech economy where winner-take-all competition is now more the rule than the exception. What is the reason for it, corruption or incompetence?

rukittenme 8y ago
Most likely neither. Anti-trust is a matter of political opportunism. Because Boeing sells to multi-national corporations the government has little political incentive to target them. After all, those corporations are wealthy enough and sophisticated enough to take care of themselves (or so the thinking might go).
- shmerl 8y ago
  How exactly can those corporations prevent monopolization of airplane manufacturers (which will likely result in higher prices and lower quality for them)? Anti-trust laws are there to prevent exactly such kind of outcomes, yet they seem to be mostly broken.
  - rukittenme 8y ago
    I have limited knowledge of the industry but I know of at least four commercial airplane sellers: Bombardier, Embraer, Airbus, and Boeing. Between (at least) those four (and buying used planes), airlines have drastically cut the cost of domestic flights. The state of the airplane market seems to be "okay". I do know that the US government did side with Bombardier (CA) from a Boeing (US) lawsuit: https://www.cnbc.com/2018/01/26/boeing-loses-trade-case-over-bombardier-passenger-jets.html https://www.cnbc.com/2018/01/26/boeing-loses-trade-case-over... So it seems anti-trust is at least a "threat-in-being".
    - 8y ago

niftich 8y ago

Well yeah, both the US and the EU conveniently ignore antitrust concerns when it's their golden geese on the line. Simply put, to each respective party, having the domestic aircraft company have a leg up over the other is paramount, while they waffle over the other's grocery stores [1] or delivery companies [2]. [1] https://www.ftc.gov/enforcement/cases-proceedings/151-0175/koninklijke-ahold-delhaize-group https://www.ftc.gov/enforcement/cases-proceedings/151-0175/k... [2] https://www.nytimes.com/2018/02/26/business/dealbook/ups-tnt-eu.html https://www.nytimes.com/2018/02/26/business/dealbook/ups-tnt...

ubernostrum 8y ago
Both companies also have military divisions, which makes it a matter of security.
bhnmmhmd 8y ago
* Unrelated to the Parent Comment * I don't know about you guys, but when I opened the link it started "uploading" a lot. I'm with Chrome and it was too weird that I had to close it ASAP.

_Codemonkeyism 8y ago

It will get tighter, Dassault and Airbus plan the next European fighter together - might be a merger coming.

detritus 8y ago
Unlikely - the current Eurofighter was the fruit a similar situation, but with BAe in place of Dassault. It's more a case of resource distribution and inter-national bridge-building.
- _Codemonkeyism 8y ago
  Yes, but Germany-UK is not France-Germany. With the merger of French Nexter with German KWM to build the next MBT I do think the situation is different.
  - kingjayy 8y ago
    You know i have a question about Germany and SEPA payments how easy is it to make them from German accounts?

nottorp 8y ago

Wtf is that video auto playing and jumping around the page? I could only read the first 1/3 of the article then gave up.

pontifier 8y ago

I strongly dislike Boeing.