EU objects to Boeing move

THE European Union's executive body has formally notified Boeing that it objects to the aerospace giant's proposed acquisition of rival McDonnell Douglas.

Boeing said in a Statement it remained confident the planned $14 billion (£9.27 billion) merger would be completed this summer despite the objections from the European Commission. The 40 page "statement of objections" came as no surprise after European Competition Commissioner, Mr Karel Van Miert repeatedly declared his opposition to the merger, citing recent exclusive sales deals negotiated by Boeing that have shut out Europe's Air bus Industrie consortium.

Boeing chairman, Mr Phil Condit said the company would continue working with EU officials but reiterated Boeing's position that the US Federal Trade Commission should have the main authority over whether the merger should be allowed.

"While the merger has raised a number of issues in the European Union, there is one fundamental antitrust issue: "Does the combination of Boeing with McDonnell Douglas commercial airplane unit have a restrictive effect on competition," he said in a statement.

He said the answer was no because McDonnell Douglas's share of the commercial airplane market had fallen to 4 per cent, while Europe's Airbus Industrie had seen its share rise to more than 30 per cent.

In its statement, Boeing also responded to concern that its commercial aircraft operations benefitted from the "spillover" of government funded defence and space operations.

Mr Condit said Boeing complied with a 1992 treaty between the United States and European Union that covers such subsidies. A Boeing spokeswoman said the company would prepare a response to be delivered to the European Commission at a hearing on June 12th and 13th. The Commission is expected to issue a final ruling on the merger by the end of July.

The European move came the same day a published report said Continental Airlines was poised to become the third major airline to sign an exclusive supplier arrangement with Boeing following similar deals with AMR Corp's American Airlines and Delta Air Lines.