US regulators yesterday approved the Federal Trade Commission (ETC) nodded through the tenth largest US merger without conditions after concluding that McDonnell Douglas had ceased to be competitive in the international commercial jet market.
However, the commission found Boeing's 20-year exclusive contracts with Delta, American and Continental airlines "potentially troubling" and warned it intended to monitor "the potential anti-competitive effects of these, and any future long-term exclusive contracts".
The European Commission, which has threatened to declare the merger illegal, is also concerned about the contracts. The Commission is due to give its verdict on July 23rd.
Mr Karel Van Miert, the EU Competition Commissioner, is concerned about the impact on the market for commercial aircraft and is expected to demand substantial alterations. Brussels is concerned that the merged company's access to military technology and funding could spill over to Boeing's commercial activities.
On Monday, the Commission received Boeing's proposed remedies. It will respond next Friday to an advisory committee of competition experts.
The FTC said it had agreed to the merger after interviewing more than 40 airlines and other industry participants and concluding that "there is no economically plausible strategy that McDonnell Douglas could follow, either as a stand-alone concern or part of another concern".
Plans for the merger were announced in December after McDonnell Douglas lost a bid to build the next generation of military jets and American Airlines announced it would replace its McDonnell Douglas jets with Boeing aircraft. However, it is expected to dominate jet sales to the US navy and demand is strong for, its C-17 transport planes and fighter jets, helicopters and rocket launchers.
