An imminent trans-Atlantic trade war was averted yesterday as the European Commission signalled its in-principle approval for the $14 billion merger between Boeing and McDonnell Douglas, the US aircraft manufacturers. The approval came after Boeing came out with a last-minute concession on Tuesday. Boeing offered to drop the exclusivity clauses in supply deals it has signed with three US airlines American, Continental and Delta.
One Commissioner told me that there was an agreement in principle and that the formal decision will be taken next week, A European Union source said.
The climate of negotiations was transformed on Tuesday when Boeing sent a fax to European Union competition commissioner Karel Van Miert. It came as political leaders on both sides of the Atlantic sought frantically to prevent the Commission from outlawing the merged company in Europe - a move which would have triggered quick retaliation from the US President Bill Clinton said Boeing had offered a good faith resolution to the deadlock.
Boeings offer: A win for EU
The offer by Boeing to scrap the exclusivity clauses of 20-year supply deals signed with American, Continental and Delta airlines, met the last of three critical competition concerns set out by Van Miert during his five-month investigation of the tie-up. He was worried that the contracts closed off too much of the market for too long to rival aircraft manufacturer Airbus Industrie, the European consortium. He had rejected Boeings earlier offer to cut the length of the deals to 13 years. Boeings refusal to improve its concessions prompted a preliminary decision from Van Miert to ban the merger - a move which would have allowed the Commission to impose fines of up to 10 per cent of Boeings revenues. In spite of reservations from member states, national anti-trust experts twice backed Van Miert unanimously.
He had already persuaded Boeing to yield on two other points. It had agreed to limit defence technology spillovers into the merged groups commercial operations and to publish separate accounts for the Douglas civil aircraft business. Boeing had also offered to shorten the exclusive supply agreements to 13 years, and to sign no more for a decade.
