The Airbus-Boeing Duopoly Looks Extremely Unbalanced

Whenever it’s seemed like Airbus SE might steal a march on Boeing Co., something has come along to throw a spanner in the works. A decade ago Airbus was consistently delivering more planes than its arch-rival but its competitiveness was eroded by the strong euro and the nightmare of building the ill-fated A380 superjumbo.

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Until the two recent fatal crashes involving the Boeing 737 Max, it seemed like a similar story. While both companies had brimming order books, Boeing’s cash flow was going through the roof and Airbus was bedeviled by production difficulties on new commercial aircraft and technical troubles involving the A400m military transporter. A long-running World Trade Organization dispute with Boeing tilted in the Americans’ favor. Worst of all, Airbus found itself under investigation by U.K., French and U.S. authorities over allegations it paid bribes to win aircraft orders and violated arms export laws.

Tuesday’s news that Airbus has reached tentative agreement about a settlement of those cases ends a big management distraction and a cloud over the company’s investment case. The alleged payments to middlemen are a stain on Airbus’s history. The good news is that following a management clear-out, the manufacturer is well positioned to move on from this dark period.

There’s no clarity yet on the fines Airbus will end up paying; investors have long assumed they’ll run into the billions. But with almost 18 billion euros ($19.8 billion) of gross cash at the end of October, and a big cash inflow expected in the fourth quarter, Airbus will have no trouble paying the bill.

The A400m continues to be a burden on cash flow and Airbus is still having production difficulties, this time involving the A321 passenger jet. Even so, with the 737 Max still grounded and Boeing facing a backlash from regulators and customers, the duopoly is starting to look very unbalanced.

Airbus trounced Boeing last year on orders and deliveries, and 2020 isn’t shaping up any better for the Americans. Reports that Boeing’s new boss Dave Calhoun wants to rethink his company’s plans for a new mid-market aircraft should allow Airbus’s long-range A321XLR to lock up more orders.

To be sure, a wounded rival is dangerous thing. Boeing could yet decide that the best way to leave behind the 737 Max ignominy is to build a completely new single-aisle aircraft, which would oblige Airbus to follow suit. Yet the almost 50% increase in Airbus’s share price since the start of 2019, reflects hopes it will be able finally to press home its advantage and lift cash returns to shareholders. The shares rose another 3% on Tuesday, valuing the company at 107 billion euros ($118 billion).

A decade ago Airbus was worth just 11 billion euros. While it’s long been Boeing’s equal in technical innovation, in profitability and cash terms the European plane-maker seemed a tortoise to Boeing’s hare. After the 737 Max disasters we can see the corners Boeing cut to engineer that success, from squeezing suppliers to browbeating regulators. Airbus can afford to reward shareholders without being so aggressive.

Paying bribes to win business is deplorable; selling a fundamentally unsafe aircraft is worse. Both companies have lessons to learn but Airbus’s wounds are closer to healing.