Newspaper article THE JOURNAL RECORD

Boeing Emerges Triumphantly from Merger Dispute

Newspaper article THE JOURNAL RECORD

Boeing Emerges Triumphantly from Merger Dispute

Article excerpt

SEATTLE - Boeing came away a winner in its dispute with the European Union by making concessions to win approval of its $16 billion buyout of rival McDonnell Douglas, analysts and investors said.

The world's biggest jetliner maker agreed to forgo being exclusive supplier of planes to three major U.S. airlines, satisfying the EU's concern that the contracts would hurt sales of the Europe's Airbus Industrie.

This concession won't stop AMR's American Airlines, Delta Air Lines and Continental Airlines from buying Boeing planes, analysts said. Meantime, Boeing overcame a regulatory hurdle to its desired expansion into McDonnell Douglas's defense aircraft business. "To get this resolved with Boeing's earnings power intact is very positive," said Peter Musser, senior portfolio manager at Rainier Investment Management in Seattle, which owns 650,000 Boeing shares. Settling the seven-month dispute frees the Seattle company's stock from a weight that caused it to underperform the U.S. stock market this year, even as its business was booming. While the EU couldn't have blocked Boeing's purchase outright, it could have levied billions of dollars in fines if it went ahead without EU approval, and made doing business in Europe difficult for Boeing. At the last minute, Boeing agreed to four key concessions demanded by the EU: * The planemaker will drop the exclusivity clause it has in multi- billion sales agreements with AMR Corp.'s American Airlines, Delta Air Lines Inc. and Continental Airlines Inc. Under it, the airlines agreed to buy only Boeing planes for 20 years. * It will make McDonnell Douglas's commercial jetliner business a separate legal entity so that the EU can easily monitor parts prices and sales. While McDonnell Douglas had only 4 percent of new airline sales last year, about 1 in 4 jetliners flying today is a Douglas plane. The EU was afraid Boeing would use contacts and information gained from selling parts for Douglas planes to increase its jetliner sales. * Boeing will sell patents obtained under government-funded defense contracts to rival planemakers, notably Europe's Airbus Industrie. Airbus, which has about 30 percent of the world jetliner market, wants to buy U.S. technology rather than develop itself at greater cost. * Boeing will submit an annual report to the EU on its government- funding research projects. The EU was concerned Boeing would use technology obtained through McDonnell Douglas defense contracts to improve its jetliners. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.