Parity within the Aviation Trade: A Study of Civil and Defense Contracting
The civil and defense fixed-wing aviation markets are as fiercely competitive as they are regulated. This thesis will examine parity between foreign and domestic competitors within the civil and defense aviation markets. This thesis will further examine the technical and commercial parity of Boeing and Airbus vying globally in the civil aviation industry. A variety of agreements and organizations liberalize, regulate, and manage the international civil aviation industry including the Open Skies Agreement, the 1992 E.U.-U.S. Agreement on the Trade in Large Civil Aircraft (LCA), International Civil Aviation Organization, and the World Trade Organization. Given the profit and technology duopoly that Boeing and Airbus share in the international civil aviation market, parity exists among the competitors with the products, resources, and capital to compete.This thesis will also examine whether the democratic values of capitalism are being upheld in the aviation trade. Given that in a free market the prices of goods and services are determined by supply and demand, the civil aviation operates as a free market while defense aviation does not. However, fair competition, which is based on price, quality, and service, exists within both the civil and defense aviation trade.The companies that this thesis will focus on in the defense market include three American companies: Lockheed Martin, Boeing, and Northrop Grumman; and three European companies: EADS N.V., BAE Systems, and Finmeccanica. Although none of the hurdles that the foreign companies face in the defense aviation industry are insurmountable, these otherwise successful foreign companies have not yet fully penetrated the U.S. defense aviation market.Foreign companies navigate the U.S. defense market by establishing U.S. subsidiaries, understanding the Buy American Act, and contributing to campaign and lobby initiatives. The Federal Acquisition Regulation System and Government Accountability Office regulate the standards and disputes of the U.S. defense aviation market.The Boeing and Airbus aerial refueling competition touches aspects of competition within the defense aviation industry, including the issues of political influences and government subsidies, which complicate the process for foreign competitors. The obstacles of the defense aviation market can be surmounted by foreign companies. Nonetheless, government regulations and political influences exist that perpetuate a certain level of disparities in the industry.
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