At the Air Force Association symposium this week in Orlando, Boeing finally confirmed that it was breaking off its putative alliance in Jacksonville with Alenia Aeronautica . Boeing and Alenia had been negotiating for some time over establishing a joint venture for the assembly of C-27Js for the US Joint Cargo Aircraft (JCA) program. Boeing, however, seems recently to have soured a bit on the long-term outlook for light transport sales worldwide. Alenia will now build the aircraft on its own, as it does already in Torino.
This minor breakup, though, is neither deleterious to the two company’s relationship, nor all that surprising. Consider the inability to come to agreement in terms of the methodology for analyzing alliances that I expounded in Arms and Innovation:
Is there considerable change underway in the light cargo turboprop business with respect to processes and goals?
No: only modest change. Boeing and Alenia both know a great deal about building airplanes, and the USAF and the US Army, the current customers for the JCA, know pretty much what they want. As with the C-130 and the C-27A (G.222), it’s possible that several special-purpose versions of the aircraft will be built. If that happens, Boeing’s participation in the aircraft assembly would be less helpful in responding to requests for a product line extension than help from armaments, avionics, and electronic warfare systems suppliers.
Are the intellectual assets involved in the design and construction of light cargo turboprops moderately appropriable?
Yes, but it probably doesn’t matter. Had Boeing assisted Alenia in building C-27Js in Jacksonville, Boeing would have learned something from Alenia. Of course, that’s already occurring to some extent about 200 miles up the coast, at Global Aeronautica, their airframe integration joint venture in Charleston. Establishing a second center for cooperation in airframing and aircraft assembly would have increased the rate of knowledge transfer, but not in a thoroughly novel or overwhelming way.
In this line of business, are there moderately expropriable quasi-rents from specific assets?
No: there’s very little potential for a shakedown. L3 may hold the prime contract, but the C-27J is clearly Alenia’s airplane, and the USAF, the US Army, and Special Operations Command—all distinct buyers—are each individually enthused about the aircraft’s potential as a light transport and gunship. Boeing wasn’t going to muscle Alenia out of the deal.
Even without Boeing, Alenia and L3 say that the line will be running by next spring. Given Alenia’s long experience with building the C-27 and its forerunner, that seems a reasonable goal. It’s just that Boeing’s involvement wasn’t critical to the process, particularly as an alliance or joint venture partner.
Comments