Boeing and Airbus must rethink their short-term strategy

Over the course of its history, the aerospace industry has weathered many storms, some of which were the magnitude of a Category V hurricane.

However, hard work and some pride always brought the aerospace companies back to the forefront. The competition between Boeing and Airbus has made both aerospace manufacturers stronger over the years. Not long ago, Airbus was considered superior to Boeing. Yet, in recent years, Boeing turned things around and appears to be in the forefront.

How long Boeing remains in this position is the question of the day. It appears that the global leadership position is going to be determined by China. As things heat up in the Chinese aerospace industry, Boeing, which entered the Chinese market nearly 15 years ahead of Airbus, now appears to be running neck-and-neck with its main competitor.

The European company has targeted 50% of the Chinese planes in service by 2013. According to the Airbus project manager who oversees work at the Chinese aircraft factory, the Chinese have said to Airbus, "Give us some of your technology, and we guarantee we will purchase some of your aircraft." Early last month, the first Airbus A320 jet assembled outside of Europe made its maiden flight after being assembled in a new plant in the Chinese city of Tianjin. The plant is now gearing up to produce four A320s per month by 2011 and a total of 300 A320 planes by 2016.

"The A320 assembled in China unquestionably demonstrated the same quality and performance as those assembled in Hamburg or Toulouse," said Fernando Alonso, senior vice president for Flight and Integration Tests at Airbus. This is an interesting comment, considering that it would be difficult for a senior executive at Airbus to say anything to the contrary.

Now I don't mean to read too much into this statement but it could also be taken to mean the quality in Germany and France has decreased. Should this be the case, Airbus should consider fixing its quality problem at home. In fact, both Airbus and Boeing need to consider the long-term effects of having a manufacturing and assembly presence in mainland China.

Both companies are being pitted against each other and the only winner will be China. It appears that both aircraft manufacturers are betting that the more design, manufacturing and assembly they provide to China's aviation industry, the more chance they have of dominating the market.

Unfortunately, it doesn't work that way. The Chinese make no secret of wanting to build a domestic aerospace industry that will compete globally. Both Boeing and Airbus are thinking in terms of short-term profit. This strategy will come back to haunt them in the long-term.

Both Boeing and Airbus must realize that they are nurturing a new competitor that will grow to be a dominant, global player within the next 10 years. And when that happens, both Airbus and Boeing will be left in the cold when it comes to gaining market share in China as well as other parts of the world.

Every company needs to make a profit or they will not be around very long. The concern is how they go about making that profit. To trade technology and know-how that took generations to develop for short-term profits will not make either Boeing or Airbus a stronger aerospace company in the future. And in the long run, this strategy will deteriorate a strong manufacturing sector in both the U.S. and Europe.