Aviation, Economy, Microeconomy

Airbus and Boeing: would a monopoly be more efficient?

Airbus and Boeing are two tough rivals in competition for the world aircraft market. But, would that market benefit from a single player?

Polititians, of course, would say no. That’s why Airbus gets billions in development loans/funds from a few European governments. That’s the first thing that archrival and more experienced Boeing would say about Airbus. But what about NASA contracts and tax deferments on export from the US government? Looks like no one is playing fair.

But does the fairness always benefit efficiency? From a microeconomic point of view it seems clear that without all that covert financing neither company would survive. At least from the figures I have. And that would mean a monopoly in the aircraft market. Probably for Boeing, but that’s not the question. And probably that would also mean a better use of public money: no use at all.

The market of aircraft parts has benefited a lot from this anew competition. New players are entering the providers competition, i.e. chinese providers or eastern Europe providers. They wouldn’t stand a chance, or maybe not? Would that be a bad thing?

The fact that the parts market is increasingly efficient means that less efficiency is on the upper scale, hence the need for public money. Public money that derives into good externalities for third parties. Maybe even for third parties that are not giving away the public money needed. A form of development? Spreading knowledge that will strengthen the market? What about learning by doing?

What about future value? Air transportation market has been growing steadyly (qith one exception, you know). New environmental regulations mean more aircraft need to be renewed. Globalization means more competition, and at the same time, airline specialization means that aircrafts need to be increasingly personalized and adapted to all sort of profiles (i.e. low-cost profiles).

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So it could be said that in fact governments are only financing discounting on future growth and positive externalities. That what today, in the name of market efficiency, would be a monopoly, won’t be when growth arrives, and wouldn’t need to be taking externalities into account. Maybe even this duopoly public-driven situation is helping growth by itself, creating a new market, and making it easier for airlines to grow. For the governmens implied, of course it means allocating resources from other areas but, even being those more efficient, could airplane making have more future? The “infant industry” justification.

As long as fuel doesn’t get more expensive, of course. But governments could also help with that. Would that make it different from an economic point of view?

I don’t really have an answer, just some thoughts. But when politics mix with economy, the figures are increasingly blurred and it gets harder to be a liberal. I’ll have to think more about it.

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One thought on “Airbus and Boeing: would a monopoly be more efficient?

  1. Pingback: singlepilot.net » Airbus and Boeing: would a monopoly be more efficient?

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