The Airbus/Boeing rivalry has been in the news lately, providing needed fodder for my posting needs (
regarding Airbus' travails and likely future. I find the article overly alarmist. The author clearly has access to sources willing to describe internal disputes--and settle scores, but she offers no real insight into future plans.
notes that Airbus' controlling shareholders will not sign off on the midsize A350 until September at the earliest.
I've excerpted much of the article as I find it a microcosm of much of what is wrong with Europe at the moment: Nations willing to jeopardize an industry in order to play politics, and the meddling that is part and parcel of such politicizing; grand projects designed to awe rather than grounded in reality; petty protection of perogatives placed before commercial interests; and the inability to wean industry off the public teat.
After years of losing market share to its European rival, Boeing is now quickly making up ground. Its new Dreamliner looks to be a hit and Airbus seems to prefer squabbling to strategizing. Delays in manufacturing their super-jumbo A380 could turn the prestige project into the company's biggest-ever flop.
Until recently, it seemed as though Airbus had clearly taken the lead over its competitor from faraway Seattle.
But Boeing's executives have recently made enormous gains -- and not just as a result of a jump in orders for their aircraft. They have also been able to take advantage of the internal quarrels that have preoccupied their main competitor for months. While Boeing is practically fighting off demand for its new 787, which consumes significantly less jet fuel than earlier models, Airbus's managers are seemingly ripping each other apart in internal power struggles and intrigues -- and increasingly neglecting their company's daily business. The internal trench warfare at Airbus reached a high point last Wednesday when, contrary to expectations, the company's sparring executives were unable to come to an agreement, even after a third round of talks, over the composition of the future management team at Airbus and its parent company, EADS.
In the wake of the failed EU referendum, the French, in an effort to bolster the position of fellow Frenchman Forgeard, surprisingly called for the insertion of an additional executive tier between the two companies. Under the French plan, Forgeard would also head the important helicopter division, Eurocopter, in the future, despite the fact that, under the strict German-French distribution of power within the group, this would actually be Enders's job. But the Germans -- once again -- used their veto, and in doing so also blocked the long-overdue appointment of their candidate of choice, Humbert.
The Americans, in turn, cleverly took advantage of the power vacuum among the Europeans to deal their main competitor yet another sensitive blow. To the dismay of Airbus and EADS executives, the US government decided last week to take its case to the court of arbitration at the World Trade Organization (WTO) in the dispute over illegal subsidies for new aircraft that has been smoldering for months. The European Commission, which had only recently been pushing for a compromise, countered by filing a complaint of its own.
Industry insiders were initially puzzled as to why Boeing would even make such a risky move. But the answer could lie in a major Pentagon contract for some 500 tanker aircraft, for which the two companies are competing. The Americans were at first excluded from the bidding process, because a high-ranking government official, hoping to later land a lucrative job at Boeing, had deliberately given the company preferential treatment during earlier public bidding procedures.
In May the United States House of Representatives, responding to pressure from beleaguered Boeing executives, surprisingly decided to give the offending company another chance and, without further ado, enacted legislation to exclude subsidized foreign companies from the bidding process. In the wake of the WTO suit, the Europeans' chances of selling their newly developed A400 M military jet to the US government are rapidly approaching zero. The Airbus executive and their CEO-designate Humbert would be better able to overcome this sharp setback if business were booming elsewhere. But at present, this is far from the case.
Whereas Boeing has raked in 266 orders and purchase commitments for its new 787 -- to be constructed entirely of light, synthetic materials -- the European have thus far managed to come up with only ten orders for their competing model, the A350. Now the Airbus executives are hoping, once again, for major orders from wealthy sheiks. Middle Eastern carriers like Qatar and Emirates supposedly plan to place orders for several dozen A350s in Paris.
But Airbus management faces even bigger worries with its new flagship, the A380 superjet. Last week the company was forced to confirm, for the first time, that delivery of the mega-transporter to initial customers like Singapore Airlines and Qantas will likely be delayed by up to six months. As a result, Airbus may be liable for penalty payments in the tens of millions of euros.
Should customers have to wait too long for final delivery -- a scenario insiders see as likely -- then the prestigious project could quickly turn into the biggest flop in Airbus history. Because development costs are already Â?1.5 billion over budget, the Europeans will likely be forced to substantially raise their prices for the 250 jets originally planned if they hope to turn a profit. And the company only has 154 orders on its books so far. As long as it remains unclear how quickly the Europeans will be able to overcome their timeline problems, additional orders are not likely to flood in.
The confident Airbus CEO Forgeard -- exceedingly effective at shining the spotlight on himself and his pet project in recent years but remiss in making important strategic and business decisions -- is now likely to pay a steep price for his inattentiveness. In recent years, the ambitious Frenchman instructed his engineers to focus their efforts on the company's two showcase models, the A380 and the A400 M. As a result, Airbus now lacks successors for aging models like its short-range and mid-range jets, the A300, A310 and A320. Even the new Airbus A350 is unlikely to be a major seller. Because the Europeans lacked the available personnel for a complete redevelopment and apparently wanted to save money, they simply freshened up their existing model, the A330, to the annoyance of many customers. Moreover, even the new A350 won't come onto the market until two years after the 787's debut.
Boeing, for its part, is already in the process of transferring the innovative features of its super-light jet to the 737. The next generation of the ever-popular model is scheduled to be flying by the end of the decade. Unless Airbus manages to likewise spruce up its aging fleet, arch-rival Boeing could once again pull ahead in the coming years and deprive the Europeans of some of their most loyal customers. For these reasons, a position that Humbert may until recently have perceived as the ultimate dream job could soon turn into a nightmare for Airbus's new chief executive. The man who is in fact responsible for many of the company's problems, current CEO Forgeard, will by then have moved up a level -- into senior management at parent company EADS.
From there, Forgeard will be supervising his former and new subordinate, Humbert, as stipulated under the group's by-laws.
But it could also take a while longer before that happens. Late last week, the French made it known that they will definitely demand more power for Forgeard in his new position.
They also indicated that the newly erupted personnel dispute with the Germans could continue -- until well into the Paris Air Show.