Silence is Golden

   

7^th March 2008

The Malta Independent - Friday Wisdom

 

Especially after a five-week noisy election campaign, silence is truly golden. For voters who have already decided how to cast their vote, this may be a wasted day. But for the few who are still not completely sure whether to vote or how to vote, then the silence of this day may help them find the serenity to perform their democratic right with fortitude and courage.

Now they have heard it all. It is up to voters to focus on what really is important for their own benefit, that of their family but most of all for the benefit of their country to ensure that they do their bit for this country to get the government it deserves. This is the only day, once every legislature, where our politicians have to bow their heads and show that the people’s will is supreme.

Use silence productively and let your mind and your heart lead to answer Kennedy’s call: “ask not what the country can do for you; ask what you can do for your country.”

Properly conducted elections are a victory for democracy. And in the proper execution of democracy there are only winners, no losers. Even those who do not reach their objectives this time, they still have a very important function to perform in a true democracy and those who fail this time are certain winners sooner than they can think while they swallow the bitter temporary rejection by the electorate.

But not everyone agrees that silence is golden. Chief among these is the US aircraft maker Boeing who together with European Consortium Airbus dominates the world civilian aircraft market. When you travel by air the chances are that you are travelling either on a Boeing or an Airbus outfit. Other players like McDonnell Douglas gave up competing in the civilian aircraft sector and smaller suppliers like Bombardier only have a negligible presence at the small end of the market.

Boeing and Airbus fight fiercely to win civilian airline contracts from the world’s major airlines and regularly accuse each other with unfair competition which quite often escalates to political tirades between USA and EU that finish even in front of the WTO. Airbus accuse Boeing that they are subsidised by the US government through the military contract they regularly get. Funding research through military contracts gives Boeing a great advantage over Airbus. Boeing in turn accuses Airbus that research which is funded by EU governments and which is only repaid if it leads to regular production by means of an allowance per unit produced represents unfair subsidies which break WTO rules.

Both companies have embarked on very aggressive ambitious programmes to produce newer fuel-efficient jumbo jets to replace and add to the highly successful Boeing 747 fleets which are now nearing the end of their economic life. Airbus has already started delivery of its A380 plane which will be the biggest aircraft to fly the skies. Boeing is working on its Dreamliner, smaller than the A380 but bigger than the 747. Both companies suffered delays in delivery of these mega projects but while Airbus seemed to have turned things around, Boeing is still struggling.

One of the things Airbus is suffering from is the strength of the euro and the weaknesses of the US dollar. Boeing costs are dollar-based whereas Airbus’ costs are euro-based. So by the mere virtue of the fortunes of the foreign exchange markets, Boeing is much more competitive than Airbus. Airbus has to respond by moving parts of its production out of Europe to the US and Asia so as to switch part of the euro-based cost to a dollar-denominated or dollar-linked economy.

So what are Boeing and Airbus shouting about now that is so much out of the ordinary?

Who’d have imagined that a foreign-built military tanker would be flying under American colours? That is super globalisation.

The plane is a refuelling tanker based on the Airbus A330, which is produced by Airbus. The contract could be worth $40 billion. The big loser, in more ways than one, is the Boeing Co. The principal is the US Defence Ministry.

The big question is whether this means foreign manufacturers can assume they have cracked the huge US market for other military planes. A harder question is whether anyone can imagine France, for example, buying a US military plane if a French product were even remotely competitive.

Some US politicians are enraged by the Pentagon’s surprise decision. Boeing, by far the favourite in this competition, now has the odds stacked against it. For one thing, the Airbus might have a European heritage, but the tanker version would be assembled in Mobile, Alabama and would have engines made by General Electric. According to Los Angeles-based Northrop Grumman, which is in partnership with Airbus to build the tanker, the programme would support 25,000 jobs across the United States.

Under the contract, Northrop and Airbus will assemble up to 179 Airbus tankers to replace Boeing-built KC-135s that, on average, are 47 years old. In all, there are more than 500 tankers in service, and replacement orders could continue for many years.

Where did Boeing go wrong? It’s harder to say where it did well. The company had the tanker programme almost in hand when a Boeing executive and an Air Force acquisition official went to federal prison for illegal job negotiations. The company paid a big fine and eventually managed to get back in the game, only to come up with a bid that was a loser. The Airbus offer outperformed Boeing’s in four out of five important measures: mission capability, past performance, price and an integrated fleet assessment.
US politicians are bothered by the idea of a European plane flying missions for the US Air Force, and would love to see this decision turned around.

Airbus has reason to be proud and Boeing has reason to worry beyond the contract itself. The base it will establish in the US will give Airbus production facilities for its normal civil programme helping it to dollarise its cost and thus become more competitive also in the civil aviation market.

The US is beating Europe in technology with its Microsoft, Google, Oracle, Cisco and Ebay. EU is starting to hit back in aviation which the US used to dominate. For Airbus, silence is golden!