Who earns more from defense sales - A or B?
In absolute terms, Boeing is a much bigger company than EADS - about twice as big in terms of revenue.
Just looking at 2002 results, Boeing gets about 52% of its revenue from the Commercial Aircraft business. The rest comes from military aircraft, weapons, communications (Connexion), and space systems.
EADS is about 69% Airbus, and the rest is the same mix of military, space and other systems.
Note that there is a bit of a problem comparing apples and oranges. Boeing uses GAAP in its accounting and conforms to SEC disclosure rules. EADS does not, and European accounting usually allows stuff to remain undisclosed. A good example is when Mercedes and Chrysler merged. Mercedes (sorry - Daimler Benz) reported under German accounting standards, a substantial profit, but had to restate into US GAAP, and it became a billion dollar loss.
Also, the last full year info we have on EADS on their web site is from 2001.
About the topic, it is a plain and indisputable fact that Airbus (EADS) benefited from billions of dollars of taxpayer funds as forgivable loans. Whether or not they actually pay back those loans is not the question - the issue is that they have access to capital funds which are unavailable to any normal business, free of risk. As any beginning business student will know, the function of cost/risk/benefit is the driving force behind business. So that loan structure is definitely anti-competitive, as it allows Airbus to make investments which it might not be willing to make if it had to rely on the public equity and debt markets like everyone else (debt and equity holders want a payback for the risks you take with their money).
There are things known as risk-sharing partners in a venture, where the project's cost is diluted among several companies. The 7E7 project uses this. But the company that has accepted to become a risk-sharing partner will also want a substantial share of the overall profits, in return for that risk.
For example, Kawasaki (who I believe will be making most of the 7E7's wing), could take the project in a non-risk-sharing mode. This means that Boeing would pay them for all research and development and tooling required to build the wing. Kawasaki would then charge Boeing, say, $1 million per wing delivered. Whether Boeing buys 100 wings or 1,000 wings makes little difference to Kawasaki, as they have lost nothing.
If Kawasaki were in risk-sharing mode, they would pay for all their R&D and other costs, but will charge Boeing $2 million per wing. Of course now Kawasaki would definitely be interested in how many 7E7s Boeing manages to sell, as they may see that they only make back the money they spent on development once they've sold, say, 500 wings. For Boeing, if they sell very few aircraft, they will have lost less money, as Kawasaki would have assumed some of the losses.
What the "forgivable" loan does is a combination of risk and non-risk behavior that would be completely impossible in the public market. The EU is taking 1/3rd of the development costs at its risk. If the project fails (or does not perform very well), they lose all that money ($3.6 billion Euros, as I recall). But if the project succeeds, Airbus will pay back the loan but only with an interest rate that just barely is within reach of commercial institutions - i.e. a risk-free rate. It's as if, in the earlier example, Kawasaki paid for all the development, but only sold the wings at the non-risk price of $1 million. Clearly, Kawasaki would never agree to such a deal.
You MIGHT be able to find a bank willing to give you a forgivable loan, but they would certainly ask for a big risk premium on the interest rate which would take into account the possibility that the project does not meet payback conditions. Risk premium is the part of the interest rate over and above the risk-free rate, which is defined as the interest rate you would get if you put your money in a security with absolute safety and assurance, such as U.S. Treasury Bills. If the risk-free rate on the Euro is 4% (let's say), the risk premium for a forgivable loan should be at least 10% or more, if I were a banker. In fact, I would probably ask for something like 15-20% overall.
Of course, interests rates this high can easily kill a project. This is why large projects are often risk-sharing, and many, like the Sonic Cruiser, are dropped as uneconomical.
And this is why the EU loans to Airbus for the A380 project are effectively a subsidy, because even in the best case (A380 sells like crazy and Airbus makes a ton of money), the returns on the governments' investment would not be commensurate with the risk that was involved. If I were an EU citizen, I'd be pretty pissed about the government investing MY
money like that. If a bank made this kind of loan, it would be guilty of negligent fraud, at best.
Now, maybe the A380 program has a very high expected rate of return, and the risk of default is very low. But the default risk would have to be completely non-existant (which it cannot be, by definition) to justify the rates that were given.
Projects must also be profitable on their own merits. If the 7E7 program did not carry a very strong probability of profitability, Boeing simply would not build it (as was decided for the Sonic Cruiser). They wouldn't use any profits (subsidies, some call it) made from military contracts to shore it up - that makes no sense. It would be better simply not to build it.
The only thing you should feel when shooting a terrorist: Recoil.