Airbus (OTC: EADSY) stock rose strongly on Thursday to close the day up 3.7%, on some disturbing news for a competitor. Over in England, the British Competition and Markets Authority is reportedly looking into Boeing‘s plan to (re-)acquire Spirit AeroSystems… with an eye to forbidding it.
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Boeing + Spirit = bad news for Airbus?
Once upon a time, Spirit was part of Boeing. But in 2005, Boeing spun off Spirit in a move designed to boost profits. That didn’t work out as planned, however, so roughly one year ago, Boeing announced it would buy back its former fuselage manufacturing subsidiary for $4.7 billion.
Spirit, however, has in the meantime become a supplier to both Boeing and Airbus. If reintegrated into Boeing, this would necessarily affect Airbus, and perhaps negatively so, by requiring Airbus to effectively subsidize a rival anytime it buys plane parts from Spirit.
So while the Competition and Markets Authority hasn’t started an official investigation yet, nor made 100% clear what it would look into if it does, that’s probably part of its concern. For now, all the Authority is doing is inviting comments from “interested parties” on whether it should or shouldn’t open a formal review.
The deadline for submitting such comments is July 15.
Is Airbus stock a buy?
Meantime of course, Boeing has sunk time and money (and attorney’s fees) into preparing for an acquisition that might not be allowed to proceed. It will presumably suffer even further distraction (and fees) if forced to fight a U.K. enforcement action forbidding or putting conditions on its purchase of Spirit.
And all of these things will weaken its position relative to Airbus.
Meanwhile, Airbus stock is profitable, and Boeing still isn’t. Advantage: Airbus.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
