Wednesday, March 5, 2008

Boeing vs Airbus

In a contraversial decision the Air Force awarded a $40 billion contract to Northrup Grumman and Airbus rather than to Boeing. The contract is for refueling planes.

A number of issues have been brought up in defense of Boeing, some legitimate, some not. The jobs issue should not be on the table. Awarding contracts for the purpose of job creation is counter-productive and a disincentive to excellence. Ultimately the contract should go to the better product. Then there is the issue of subsidies. The case may be made that the EU is taking money from taxpayers in order to make a sweet deal to the US. That may be, but they're taking money from European taxpayers, and if the European taxpayers are okay with that, so be it. I'm no fan of government subsidized anything, but the best way to demonstrate that it's a bad way to go is to defeat it in the marketplace.

Boeing may have a case based on a couple of other issues. First, they claim they were the victims of a bait and switch in that the Air Force requested a smaller craft, then selected the larger one. Boeing also claims that, despite claims to the contrary, when you factor in maintenance and upkeep, their bid was actually lower. Another valid point brought up by some in Congress is that we may wind up having military equipment manufactured in countries that do not necessarily look favorably on the US.

The contract has been awarded, but it's not over. There will be hearings and Congress does have the power to nix the deal. I would like to see Boeing beat out Airbus, but I'd like to see them do it based on criteria consistent with free market principals. It's tough to know what factors actually were used in awarding this contract, since it's a government venture, there's always politics involved. I look forward to the debate. Ultimately I look forward to private, not subsidized companies outperforming "corporate/government partnerships" in the long run. Which I'm confident they will do, given the opportunity.

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