Is the Airline Industry Finally Taking Flight?

In Paris this week, all eyes are pointed upward, as the Paris Air Show, the world’s largest celebration of the airline and air defense industry, roars through the sky.

 The big guns, Boeing, Airbus, and Rolls-Royce, are seeing good numbers in orders–especially from airlines in India and China, where new spending on planes represents billions of dollars.

 Since 9/11, industry experts have had their fingers crossed in the hopes of a recovery from the worst recession in airlines in history. Could these strong sales signal that the long-ailing airline industry is finally taking flight again?

 Not exactly. There are still a few issues to contend with before the industry can stay on its recovery course.

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 The biggest hurdle these days is the ongoing trade dispute between Boeing (in the United States) and Airbus (in the EU, under parent company EADS).

 Boeing contends that “launch aid” (government loans) to EADS has caused the company “serious injury.” Boeing’s market share has shrunk in the past few years from 68% to 48%, and company executives feel that Airbus was able to win bids unfairly because of lower costs thanks to government loans.

 Airbus’ defense is that the tax cuts and other incentives that Boeing has been able to take advantage of put the two companies on equal footing in the highly competitive marketplace.

 On Monday of this week, the United States called for a dispute settlement panel to be established in the World Trade Organization to arbitrate the dispute, which seems to be going nowhere on its own.

 One industry representative, who wishes to remain anonymous, said, “Everyone is subsidized and everyone knows it, but no one is talking about it. Do they want to jump of the cliff together? The answer’s no. But both might be stubborn enough to do it.”

 Just like any other industry, the airline market is a hotbed of politics. Even though Airbus has repeatedly said that it would freely give up any financial aid to end the dispute, Boeing just won’t drop it. This isn’t surprising, since Boeing is the one that allegedly has already lost out on contracts and revenues.

 The trade dispute puts a damper on the growth that we could otherwise be seeing in an industry that clearly needs the boost. Some worry that the ongoing Boeing/Airbus debate will turn into an all-out trade war. Airline suppliers, airline service companies, and passengers could ultimately be affected.

Keep your eyes on this story–it’s an interesting one for anyone who likes to see behind the scenes of big business or travel. If one thing’s for sure at this point, it looks like the airline industry had better keep its landing gear on the ground for the time being–the sky’s looking a little stormy ahead.

A few final words from Michael

Please read my column tomorrow. I’d like to share some important thoughts with you on the slowing global economy and how it will eventually affect us here at home.